Cash for Keys: Avoiding the Eviction Process

The majority of landlords aim to avoid spending money unnecessarily, unless doing so will give their return on investment (ROI) a nice boost. However, there are rare instances where spending money can actually lead to greater long-term savings and benefits. For example, deciding to pay a problem tenant to leave instead of going though the time, costs, and hassle of eviction. This is called Cash for Keys.

What is Cash For Keys?

Cash for keys is a strategic option for landlords seeking to avoid the potential challenges associated with eviction. It allows landlords to regain possession of their property quickly and amicably, even when dealing with responsible tenants who might be difficult to evict.

It's particularly useful when you want to:

1. Remodel the property: Update the unit to increase its rental value.
2. Move into the property: Occupy the unit as your primary residence.
3. Sell the property: Prepare the unit for sale without catering to the current tenant's schedule.
4. Increase rent: Raise the rent to reflect market rates, especially in rent-controlled areas (referred to as a "buyout agreement").

Cash for Keys vs. Eviction

Cash for keys offers a financial incentive for tenants to move out by a specific date in exchange for a lump sum. While it might seem counterintuitive to pay a tenant to leave, it can often be more cost-effective than the legal expenses and lost income associated with eviction.

Processing an eviction can take anywhere from 5 weeks to 3 months, during which you will be incurring attorney fees, filing costs, and unpaid rent. Cash for keys helps avoid these expenses and potential property damage caused by disgruntled tenants.

Here are some scenarios where cash for keys might be the best option:

1. Rent Delinquency: Your tenant has failed to pay rent as agreed upon in the lease.
2. Lease Violations: The tenant has violated the terms of the lease, such as causing property damage or owning unauthorized pets.
3. Increasing Rent: You want to increase the rent of a rent-controlled property to market rates.
4. Foreclosure: Your rental property has gone into foreclosure.

What Are the Benefits of Cash for Keys?

Eviction is a time-consuming and expensive process that can significantly impact your rental income. Legal fees, court costs, and lost rent can easily outweigh the potential benefits. Even if you're not legally required to have an attorney, it's highly recommended to seek legal advice during the eviction process.

Evictions can take several weeks or months, resulting in continued loss of rental income. Once the tenant is evicted, you'll need to prepare the unit for a new tenant, which includes cleaning, repairs, and advertising. Though rare, it is possible that tenants who are served an eviction notice may respond with property damage, which makes cash for keys a more cost-effective option. Property damage caused by the tenant can further increase your costs and delay the rental process.

If your tenant is struggling to pay rent on time, cash for keys can be a motivating factor for them to move out. Depending on your offer, it might be enough to cover the costs of their moving expenses and next security deposit.

While tenants might not want to leave, cash for keys offers benefits for tenants, too. By accepting a Cash For Keys offer, they're avoiding an eviction judgment on their record, as well as a negative entry on their credit report. These civil judgments could have long-term effects on their ability to secure housing in the future.

Additionally, if a tenant chooses to challenge the eviction judgment in court, they risk being ruled responsible for paying the landlord's attorney and court fees on top of their own court costs.

In short, cash for keys is often the most mutually beneficial option for getting a tenant to leave your property.

How to Notify the Tenant

To move forward with a cash for keys offer, first notify your tenant in writing of their rent delinquency and the need to pay in full or vacate the property. Send a certified letter with a return receipt for proof of delivery

Once the tenant has received the notice, contact them to discuss your cash for keys offer, and everything it entails. Emphasize the point that this offer is beneficial to them, and preferable to eviction. It's best to include the following details:

1. The move-out date
2. The amount of money you are offering
3. Cleaning requirements, if any
4. Items that will remain in the rental (appliances, furniture, fixtures)

If the tenant agrees to the offer, create a written contract outlining the terms. Make your payment by check to have an official record of the transaction. If the tenant insists on receiving a cash payment, make sure the contract states the amount was paid in full and have both parties sign it.

If the renter doesn't agree to the cash for keys offer, you can move forward with an eviction.

How to Avoid Cash for Keys and Eviction

Cash for keys can be a strategic alternative to eviction, offering a potentially more amicable and cost-effective solution for both landlords and tenants. While it's true that there may always be a circumstance where you need to remove a tenant, thorough tenant screening can significantly reduce the risk of encountering problematic tenants.

CreditLink's comprehensive tenant screening tools can help you identify reliable tenants and minimize the likelihood of future issues. By investing in effective screening, you can protect your rental property and avoid the stress and expenses associated with eviction.

Sign up with CreditLink today and experience the difference.

Please note that this is not intended as legal advice, but for information purposes only. Cash for keys agreements are legal in all 50 states, however, laws may vary depending on your location.

Created on: 09/27/24

Author: CreditLink Secure Blog Team

Tags: lease violation , late rent , missed rent , eviction , evictions , cash for keys,