Cash for Keys

Cash for Keys

Understanding “cash for keys”

At some point in time a landlord may wish to buy-out the rights of tenure as held by a tenant; and accordingly a negotiated agreement may be established between the landlord and the tenant in what is colloquially known and referred to as a cash for keys deal.

A cash for keys agreement is lawful in Ontario.  The agreement must be signed by both parties consensually.  A landlord should propose the agreement to the tenant with an acceptance date clearly written in the agreement.  The acceptance date provides the tenant with time to consider the agreement and to seek legal advice as the tenant deems fit.  By providing the tenant with an opportunity to seek legal advice, the landlord minimizes the risk of having the tenant successfully argue at a Landlord Tenant Board hearing that the N11 was signed under duress or undue influence. 

Landlord Benefits

Cost Effective

The cash for keys agreement may be more cost effective for the landlord. The landlord controls the amount to offer to a tenant and the amount is not paid until the landlord has vacant possession of the rental unit. This guarantees that the landlord is only paying the tenant when all the agreed upon terms in the cash for keys agreement are fulfilled. The landlord avoids the expense the Landlord Tenant Board process.

Time Efficient

Further to the cash for keys agreement being cost-effective, a cash for keys it is also time-efficient.  The landlord can reduce the amount of time that the tenant is in possession of the rental unit.  If the cash for keys agreement is successful, the landlord could have vacant possession of the rental unit as quickly as agreed upon by the tenant.  The cash for keys saves the landlord the time of entire Landlord Tenant Board process including the rafting, serving, and filing of the required paperwork, the wait for a hearing date, the wait for a decision, and the wait for any request to review or appeal by the tenant (or landlord if the landlord loses at the hearing).  Accordingly, a cash for keys termination arrangement may save the landlord many months expended in the effort to evict a tenant.

Predictable Outcome

A cash for keys agreement provides the landlord with a predictable outcome.  The landlord can assume that the tenant will vacate the rental unit by the termination date as agreed to in the Form N11 - Agreement to End the Tenancy.  Further, the landlord can assume that the tenant will have left the rental unit in the condition as outlined in the agreement to will receive the incentive being offered.  The agreement allows the landlord to inspect the unit before the incentive is paid to the tenant to ensure that the tenant has satisfactorily met the terms and conditions of the agreement.

Control Over the Circumstances

Further, the cash for keys agreement provides the landlord with control over the circumstances whereas the landlord can choose the terms and conditions in the agreement and negotiate such terms with tenant rather than risking the terms and conditions that may be imposed by the Landlord Tenant Board.  This control provides the landlord with opportunity to negotiate and establish terms that are at the convenience of the landlord such as the termination date, the amount payable to the tenant, the payment date for the cleanliness incentive, the inspection right, among other benefits that would otherwise be terms beyond what the Landlord Tenant Board would grant, if any at all.

Tenant Benefits

Negotiation Opportunity

The cash for keys agreement is beneficial for the tenant because the tenant is given the ability to negotiate the terms and conditions of the agreement.  The Tenant may want a termination date that provides more time to find a suitable replacement unit or less time if the tenant is already looking for, and perhaps found, a substitute rental unit and would like to vacate sooner.  The tenant can also negotiate the amount being offered with the landlord.  Of course, the tenant should keep in mind that the agreement must be accepted by the landlord; and accordingly, the negotiations should be realistic and fair.

Cost Effective

A cash for keys agreement is usually a financial gain for the Tenant.  The Tenant should consider the option of accepting a cash for keys agreement as a cost-effective way to vacate the rental unit.  If the tenant chooses to decline the cash for keys agreement, the tenant may be responsible for the costs of moving an action to the Landlord Tenant Board.  These costs may be the cost of representation for the tenant as well as the costs incurred by the landlord for legal representation as well as the costs and fees relating to the Landlord Tenant Board hearing.

Preserves the Relationship

A cash for keys agreement may also help to preserve the relationship with the landlord and other tenants.  If the tenant declines a cash for keys offer, a Landlord Tenant Board heading may result and may involve the tenant fighting an eviction that, if granted, will be absent the compensation that the cash for keys offer contained.  Additionally, a contentious battle at the Landlord Tenant Board may harm the relationship with the landlord, among others.  The evidence that may be brought to the attention of the landlord during preparation for a hearing and at the hearing may change the opinions of the tenant as previously held by the landlord.  Further, Landlord Tenant Board proceedings may harm the relations with other tenants should such other tenants be required as witnesses at a Landlord Tenant Board hearing.

Potentially Positive Reference

The cash for keys agreement requires that the tenant provide vacant possession of the rental unit to the landlord; and accordingly, the tenant will need to relocate; often seeking to make home within a substitute rental unit.  By accepting a cash for keys arrangement, the tenant may preserve a positive relationship with the landlord and thereby receive a positive reference for review and consideration by the landlord of the substitute rental unit and perhaps a positive reference for further landlord relationships well into the future.

Summary Comment

A cash for keys arrangement between a landlord and tenant can provide for a negotiated agreement that provides significant advantages to both the landlord and tenant; and accordingly, a cash for keys deal enables opportunity for a win-win situation rather than a win-lose that will be the result, in favour of one or the other, following a contentious dispute process via the Landlord Tenant Board. 

Article courtesy of Ranger Paralegal Service