Cash for Keys Agreement: A Faster, Cheaper Alternative to Eviction 

Cash for Keys Agreement: A Faster, Cheaper Alternative to Eviction 

A cash for keys agreement is a legal contract between a landlord and a tenant, where the tenant agrees to vacate the property by a set date in exchange for a cash payment from the landlord. When done correctly, it’s a mutually beneficial arrangement to end a tenancy early. 

In this article, we’ll explain how a cash for keys agreement works, why it’s a good alternative to eviction, and tips for a smooth cash for keys process. 

Ready to customize a voluntary move-out agreement? Visit ezLandlordForms to find all the move-out forms you need. 

What Cash for Keys Is and Why Landlords Use It 

Cash for Keys Agreements are a strategy used by landlords to get rid of tenants without the time and expense of an eviction. Property owners use this strategy when they want a tenant to voluntarily leave a unit before the end of the lease term. 

It’s a voluntary agreement between parties to terminate a tenancy. The agreement should always be in writing and signed by both parties. 

What Should a Cash for Keys Agreement Include? 

The cash for keys agreement is a contract between a landlord and tenant that should include: 

• The parties 
• The rental unit address 
• The move-out date and time
• Specific instructions about the property condition at move-out
• All conditions the tenant must meet to get the move-out payment
• The amount of the move-out payment 
• Specific instructions about when the tenant will receive the payment
• Instructions about what happens if the tenant does not comply with the terms of the agreement
• A mutual release of liability and a waiver of future claims

Landlords can use a cash for keys template or have an attorney draft the contract. It’s important for it to be clear, specific, and include all required terms. 

What Are the Benefits of an Early Surrender Agreement

Early surrender agreements save landlords time and money. The key benefits of these arrangements are: 

1. They’re faster than evictions. 
2. They’re less expensive than evictions.
3. There is a reduced risk of property damage. 
4. They offer an amicable resolution to end a tenancy.
5. They mean less time and stress for landlords. 

When Are Buyout Agreements Used by Landlords 

Landlords use a buyout agreement when they want to cooperatively end a tenancy before the end of the lease term. Some common scenarios for early termination agreements are: 

• Tenants are behind on rent or have stopped paying rent
• The Tenant has experienced hardship and is no longer able to afford the rent.
• There are serious or ongoing lease violations.
• The owner wants to renovate or sell the property. 
• The landlord wants to regain possession to move into the unit or have a family member move into the unit. 
• Problem tenants who the landlord wants to get rid of but will be difficult to evict. 
• When there are concerns that the tenant will intentionally damage the rental unit. 

While buyout agreements are legal in all 50 states, some states and cities have specific regulations about required notice periods and restrictions on the payment amounts. Landlords should review applicable laws or consult with a local attorney before drafting an early termination agreement. 

How Much Should You Offer for Cash for Keys?  

There is no “right number” when it comes to a moving assistance payment, but a general principle to follow is offering a number that is lower than the cost of eviction and high enough to motivate a tenant to move voluntarily. 

When calculating a fair cash for keys offer: 

1. Estimate the cost of an eviction. This includes expenses for court costs, filing fees, attorney fees, and lost rent. It’s also fair to include an estimate of property damage, as evictions often result in angry tenants who damage the property, remove fixtures, and leave the unit in bad condition. 
2. Come up with a target offer that is lower than the cost of eviction but high enough to motivate the tenant to leave voluntarily, remove all personal belongings, and leave the unit in good condition. 

A common offer is 1 to 2 months’ rent or ½ of a month’s rent plus the full return of the security deposit. It’s important to note that the offer should be contingent upon the tenant: 

1. Vacating the property by a specific date. 
2. Returning all keys. 
3. Leaving the property “broom clean.” 
4. Removing all personal property. 

When Should the Cash for Keys Payment Be Made? 

The timing of the move-out payment is important to protect both parties. A best practice for the cash-for-keys process is: 

1. Have both the landlord and tenant sign a written agreement with clear terms, including move-out date, move-out instructions, and payment amount. 
2. Schedule an inspection for the move-out day to confirm the tenant has complied with all move-out terms. 
3. After the inspection, the tenant hands over the keys in exchange for the moving payment. It’s effectively a simultaneous exchange that protects both parties. 

Cash for Keys Tax Implications for Landlords and Tenants 

In most situations, cash-for-keys payments are treated as taxable income. This means the tenant needs to report it as income, and the landlord may need to issue a Form-1099. Usually, the payment is considered a business expense that the landlord may deduct. 

It’s important to note that an early termination payment should be treated differently than the security deposit, and all security deposit funds should be kept separately and handled in accordance with state security deposit regulations. 

Landlords should consult with a local accountant or tax expert to ensure compliance with all local, state, and federal laws. 

Frequently Asked Questions About Cash for Keys Agreements 

What is a cash for keys agreement? 

A cash for keys agreement is a contract between a landlord and a tenant where the tenant agrees to voluntarily vacate a rental unit by a set date in return for a cash payment from the landlord. The agreement includes a move-out date, instructions about how the property should be left, and the amount of the cash payment. 

Is cash for keys cheaper than an eviction? 

Yes, in most situations, a cash-for-keys payment is cheaper than an eviction. The average cost of evictions ranges from $3,000 to $5,000 and usually takes between one and three months. In contrast, the cash for keys process can be completed in just a few weeks. Generally, in a cash for keys vs. eviction analysis, cash for keys is cheaper, faster, and less stressful. 

What should a cash for keys agreement include? 

The agreement should state that it’s a voluntary move-out agreement and include the parties, the move-out date, the amount of the payment, the expectations for property condition at move-out, and the timing of the payment. Both parties should sign the contract. 

Is a cash for keys payment legal? 

Yes, cash for keys arrangements are legal. It must be a voluntary agreement that is in writing and signed by both parties. It’s important to note that some states and cities have regulations about the amount of payments and the timing of payments. Landlords should review their local laws to ensure their buyout agreement is compliant. 

Is a cash for keys payment taxable? 

Yes, usually cash for keys payments are taxable income that should be reported by tenants. Landlords generally can deduct the payment as a business expense. 

Next Steps: Get the Landlord Forms You Need

A strong cash for keys agreement can help landlords avoid the time, stress, and expense of evictions. If a voluntary move-out agreement is right for you, make sure you draft a detailed contract with clear terms that follow your state’s laws. 

Whether you need state-specific eviction notices or a customizable cash for keys agreement, ezLandlordForms has you covered. Create a free account today to access our library of over 500 property management forms.