Cash for Keys Agreements: What Are They?
In addition to its role in the foreclosure process, a cash for keys agreement is also sometimes used by landlords to remove tenants from a rental property. In exchange for vacating the rental property and not contesting the move-out process, a landlord may agree to forgo a portion of unpaid rent and/or costs related to eviction in exchange for the tenant’s agreement to leave. Depending on the state you live in, a landlord can enter into a cash for keys agreement with a tenant at almost any time during the eviction process (or even prior to beginning the eviction process) .
If a tenant tracks the financial terms of the cash for keys agreement carefully, it can sometimes benefit them in the following ways:
A cash for keys agreement can be especially beneficial in states with strict eviction procedures, where having the sheriff carry out the actual eviction may be particularly time-consuming and expensive for both the landlord and the tenant. Either party can choose to terminate the eviction without penalty and request the other party sign a release of claims form.
How to Write a Cash for Keys Agreement Form
The first element that should be included is the parties. In other words, ask yourself who is involved? Generally, it will be the landlord and the tenant but there may be other interests as well depending on the situation so the parties need to be identified.
Secondly, you will want to have details of the transaction in the agreement itself. This will entail stating if a particular sum of money is due to the tenant. Not all cases will require payment but in the cases where it is necessary they should be outlined in detail in the conditions section of the wording.
Thirdly, the conditions must be outlined in clear language. Generally the tenant will be given a certain number of days to vacate the property. When it comes to the handing of keys these will tend to be given over in person at the property or by mail. Also, an inspection for any damages to common areas is required in order to determine the costs of any repairs. Finally, the tenant will be given a final date by which time the property must be vacated.
Advantages of a Cash for Keys Arrangement
Cash for keys agreement forms can benefit both parties in really great ways. For the landlord, decreasing the legal costs and time to evict a tenant are two benefits. The landlord could get his property back sooner as well. A cash for keys agreement enables the owner to avoid the awkwardness of bad relationships with tenants and removes a headache that land lords are happy not to have. The landlord can even collect money for minor repairs from the tenant as part of the deal. For the tenant, there is peace in knowing that he or she is leaving the property on decent terms with the landlord. This is especially true if the two parties have shared cordial relations prior to the request to leave the premises. Then, this is beneficial for the tenant as well because they can save time and money that would be spent in court. There are now lots of online resources to facilitate the creation of a cash for keys agreement, to help the landlord and tenant make the most of the arrangement. These are well worth trying out.
Legal Issues & Best Practices
When entering into a cash for keys agreement, it is crucial for both landlords and tenants to understand the legal implications. These agreements often involve significant financial transactions, and as such, landlords should be aware of state-specific laws governing rental properties as well as any additional tenant rights. The following considerations can help you navigate the legal landscape when drafting or signing a cash for keys agreement. Local Eviction Requirements: In some states, landlords may be required to include additional stipulations in a cash for keys agreement to provide adequate notice of eviction attempts. Be sure to research state-specific laws and timelines in the event of an eviction. Consideration: In exchange for vacating the rental property, tenants should provide the landlord with something of comparable value. For example, if the landlord pays $500 toward a new security deposit, the tenant should be doing enough to save the landlord the task of moving forward with an eviction in the first place. Enforceability: Parties must understand the terms of a cash for keys agreement. It is recommended that tenants ask their landlord to explain specific clauses and elements that they do not understand. Gathering the necessary information about the terms and obligations is critical to ensuring that the contract is enforceable. Signing: When it comes to contracts, it is crucial for both landlords and tenants to sign the cash for keys agreement. In California, for example, a lease that is longer than one year must be in writing to be enforceable. Typically, leases do not require notaries for signatures to be valid. Instead, the contract can be used as evidence of an existing agreement without notarization as long as both parties sign the document. Counsel: When in doubt about creating or signing a cash for keys agreement, it is advisable to consult an attorney.
Mistakes To Avoid
There are several common errors that landlords and tenants make during the cash for keys negotiation and agreement process. A landlord may be telling a tenant, "Just move your stuff out of here," as they walk out of their apartment. There are so many mistakes that occur. One purchase agreement in the commercial context had the landlord tell the tenant to "leave and let someone know if problems arise." Guess what? Problems arose. It happens at the residential level as well. For example, a tenant and landlord can agree to a release where the tenant surrenders an apartment to the landlord without a major component of the lease. Take a lease that has a renewal clause at a certain rate, and the tenant gets out of the lease but the landlord agrees not to charge the full rent to the pending tenants moving in . You can imagine that a dispute may arise from that. Or the landlord can make mistake in handing a $1,000 check to the tenants for their departure when the tenants gave them 30 days notice instead of the required 60 day notice in the lease. We all know that most people scan a contract without really reading it, but if you are in a situation where you are moving, you should 100% read that paper and have it reviewed by an attorney because you are giving up your right to sue people in the future over any disputes that could arise from the transaction and you are giving up your legal rights. The $25,000 neighborhood research project indicates that each home in the neighborhood is worth $50,000-$60,000. The difference between whether you get that or not is a signature on that piece of paper so it really is an important deal.
A Step-By-Step Guide to a Cash for Keys Strategy
When preparing to implement a cash for keys strategy, it is best to follow a systematic approach to ensure that the strategy is successful.
First, designate an employee or representative of your company to manage the cash for keys program. It is important that you identify the individual who will be responsible for collecting the keys, as well as addressing tenant concerns. To best facilitate this process, this individual should be a manager with significant experience and authority.
Next, you should carefully review the terms of any lease provisions contained in the tenant’s lease with which you need to comply – e.g., stipulations that prohibit tenants from rehousing after vacating. In the event a tenant is likely to be rehoused, you could discuss with the tenant the possibility they move into one of your other properties so as to avoid any issue regarding them being rehoused.
Then, post a formal notice on the door of the apartment advising of the amount of the payment to be received, the timing for it to be received, and instructions on how to prepare the premises for final inspection when the tenant vacates.
Next, while preparing for the anticipated vacancy, begin to negotiate the ultimate relocation option with the tenant. Politely advise tenant of the dollar value you are prepared to offer, and if the amount is accepted, have the tenant sign the agreement immediately. Once the amount has been agreed upon, you should pay the amount electronically to the tenant.
Note: A flyer stating all utility companies that will be contacted (disconnected) on behalf of the tenant should be posted on the door of the apartment several days before the tenant is scheduled to vacate.
Finally, have the tenant sign an agreement to vacate in ten days. If the apartments are small and there are not many vacant apartments available at the same time, you may be able to place another tenant in a landlord-owned apartment within 30 days. You should also arrange to do a formal move-out inspection with the tenant approximately 10 days after vacating.
Cash for Keys Agreement Form Template
You can obtain a sample cash for keys agreement form at the website of the San Francisco Tenants Union (see: www.sftu.org). This is a simple one-page, fill-in-the-blank form that can be easily copied and sent to the tenant with a letter and request for the tenant to enter into a cash for keys agreement with you. You can simply add your names and date, and amend the terms in spaces provided if you want to . It also contains all of the possible terms that you might want to obtain from a lease breaking tenant – moving requirements, phone and forwarding address requirements, rent compensation to be paid when the tenant vacates, etc. Although this is an excellent general template, you must be careful and ensure that any of your changes to the template are fully enforceable under your local fair housing and landlord/tenant laws and regulations, and do not cross any of the laws’ red lines.