What is Cash for Keys
Cash for Keys could be one of the most effective ways to remove a tenant from a property, and forego the eviction process all together.
Cash for Keys allows you to avoid the lengthy eviction process; avoid an upset tenant potentially damaging your property; side step the cost of an attorney; and remove the tenant from your property sooner, rather than later.
Never heard about Cash for Keys before? Here’s a breakdown on what Cash for Keys is, and how you can use it as a supplement to your lease agreement to get the tenant out.
By the way, you can download a sample Cash for Keys agreement at the end of this blog.
Let’s get started.
Cash For Keys Explained
Cash for Keys is used to give the tenant an incentive to leave your property when they are either no longer able to pay rent, or if you would like to sell your property, and having a tenant in place makes it difficult.
Think of it as you negotiation with tenants to get the best possible outcome.
The incentive you provide to the tenant can be monetary, i.e. you give them $500 cash, or it can be in like kind, i.e. you forego recouping any money owed for back rent.
Or it can be a combination of both.
While it may seem crazy to pay money to get rid of a tenant with a Cash for Keys agreement, it’s really not. If you look at the pros of a Cash for Keys deal, it might be in your best interest to do so.
Why Would I Want to Provide the Tenant with an Incentive to Move Out?
Avoid an Eviction and Attorney Fees
Offering a tenant Cash for Keys is a means where you can essentially entice a problemed tenant to voluntarily leave, so that you do not have to hire an attorney to start the eviction process. The eviction process takes time and money, and the outcome is not necessarily certain.
Avoid Tenant’s Destroying Property
Another reason is to avoid the tenant from taking out their frustration on your home. Evidence has shown that unhappy tenants, who are going through the eviction process, are more likely to take out there anger on rental properties.
And, despite what you may think, even if you win a judgment for damages, it may take a while to recover the amount from the tenant.
In the meantime, you still have to pay out of pocket to get your property back up to rent ready condition.
You don’t want to wait until the move-out inspection to realize you should have come up with an alternate way to get the tenant out.
Mutual Agreement That Gives You the Best Outcome
You should be in control of the Cash for Keys agreement. In such light, you should make sure that you are completely protected, and that you can obtain the most favorable outcome possible.
While you are not out to “screw over” the tenant, you have to be certain that you are completely covered.
How Much Money Do I Need to Offer for Cash for Keys?
There is no specific state law that covers Cash for Keys. Generally speaking, however, your starting point should be around $500.
By providing the tenant with an amount of at least $500, you are showing what is called actual or meaningful consideration for the tenant to move out.
A lesser amount could be viewed as shame consideration, meaning that it is not real consideration for the contract to be valid, and as a result a court may not want to enforce the agreement.
Does the Tenant Have to Take the Cash for Keys Offer?
Nope. The tenant is not under any obligation to take the Cash for Keys offer. More importantly, you cannot force the tenant to accept your Cash for Keys offer, nor should you attempt to leverage or threaten the tenant to accept.
In other words, don’t say to the tenant “if you don’t accept this money and leave, I’m going to evict you!!”
Forcing someone out, or doing things that are in violation of the law, is known as a Self-Help Eviction. This type of eviction will cause you to lose your case.
While the eviction process could be your next step to have the tenant removed from your property, you shouldn’t threaten the tenant with it.
What is the Best Strategy to Get a Tenant to Accept A Cash for Keys Offer?
We recommend that you first start with the process you would use to start the eviction proceeding, without necessarily going through the formal filing process just yet.
Start With A Notice to Quit
The eviction process starts with providing the tenant with notice of why you are considering evicting the tenant. So, the first thing you should do is provide the tenant with a Notice to Quit.
Again, your goal is not to go through the eviction process, but you should start the informal requirements so that you have them checked off in case you have to file.
Your goal is to have the tenant accept your Cash for Keys offer. And communicating with your tenant in a meaningful way is the key to success.
The Notice to Quit, in this instance, provides the tenant with notice that they must cure the defect, or you will start the eviction process.
Once the tenant has failed to comply, you can move onto the next step, approaching the tenant with a Cash for Keys Offer.
How to Approach the Tenant with a Cash for Keys Offer
Ok. So now you are at the point where you should formally approach the tenant with a Cash for Keys offer.
At this point, you have notified the tenant that the tenant is in violation of the lease agreement, and that you will being eviction proceedings if the tenant does not remedy the situation.
You should approach your tenant in a professional and business oriented manner.
We know that you are upset the tenant hasn’t paid their rent for months, or has done some other major violation of the lease agreement.
But now is not a time to let emotions run high.
Take the high road, and keep yourself focused on your objective.
Get the keys for cash!!!
Your correspondence should be written with the tenant at first. Start with summarizing the things you put in the Notice to Quit, and providing a brief overview of what you are offering the tenant.
The initial letter might look like this:
On XX date, I notified you that you were in violation of the lease agreement for failure to pay rent for 3 months. As a result, you are $3,000 past due. I notified you that I would begin the eviction process if you did not pay your rent by XX date. In exchange for not going through the eviction process, I am offering you $500 to vacate the property by XX date. If you would like to discuss this offer with me, please contact me by XX date. I will discuss the terms with you, and follow up with an agreement as soon as possible
The Follow Up to Your Correspondence to Your Tenant for Cash for Keys
Now that you have sent the tenant the first lifeline for them to take the Cash for Keys agreement, your next step is to put things in writing.
Assuming your tenant wants Cash for Keys, here are some of the things you should think about when drafting your agreement:
1. The address of the property.
2. The date the tenant should leave the property.
3. The condition the tenant should leave the property (damages, cleaning, etc.).
4. The tenant should remove all property.
5. The amount you are willing to pay the tenant.
6. The condition that you will pay the money after you have completed the move out inspection.
7. The fact that the agreement is void if the tenant does not fulfill the requirements under the agreement.
8. The tenant waives all right under state law, and waives challenges to the eviction process.
Hold on!! Didn’t You Say We Couldn’t Threaten Eviction?
Yes. We said you couldn’t threaten eviction. And hopefully you didn’t.
Threatening to evict a tenant if they don’t sign the agreement is not the same as informing the tenant that you will commence the eviction process if the agreement falls through.
You already started the formal notification required for the eviction process, when you sent the tenant the 10 day eviction notice.
What you did during the negotiation process for Cash for Keys, was inform the tenant that you would carry through with it in the event you and the tenant didn’t come to an agreement.
You see the difference?
Cash for Keys is a negotiation which seeks an alternate disposition without threats, without strong arming, and hopefully for the mutual benefit of both parties.
What Happens if the Tenant Violates the Cash for Keys Agreement and Doesn’t Move Out?
Well this is where things can get a little sticky.
Hopefully you included the right language in your Cash for Keys agreement to make it enforceable, and to place you in the best position to have the tenant removed.
You should have, laid out clearly, that the tenant waives their right to an eviction trial, and thus giving up possession of the property, in the event they fail to comply with the terms of the Cash for Keys agreement.
What this does for you, is avoiding having to go through all of the steps necessary to get a judgment for your Summary Ejectment complaint; the need to obtain a Writ of Possession, and the need for the Sheriff to forcibly remove the tenant from your property.
The eviction timeline is not set in stone, and all of these steps could take a month and a half or more.
Is Cash for Keys Legal?
Whether Cash for Keys is legal depends on your state law.
While our CEO at Linchpin Property Management is a retired military attorney, he is not licensed to practice law in every state.
What this means is that you should consult your state and local laws to determine if a Cash for Keys agreement is legal where you are.
If you are having difficulty tracking down the answer, get in contact with us, and we will help you find the answer you need.
Where Can I Get an Example of a Cash for Keys Agreement?
If you need a sample Cash for Keys agreement, you can download one at the link below.
Again, please check with your state laws to make sure you check all the relevant blocks in your state.
Wrapping Up the Cash for Keys Agreement
The Cash for Keys agreement can be anxiety producing. As a landlord, we can assure you that the process is not as difficult as it may seem.
At Linchpin Property Management, we love to help landlords who are not our clients. If you have any questions, please don’t hesitate to contact us, and we will assist you the best we can.
Don’t forget to pick up your sample Cash for Keys agreement below.
The Team at Linchpin Property Management
The Pain in The Butt Disclaimer:
As always, information on this website is not intended to constitute legal advice, or the retention of our property management services, and is for general information purposes only.
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