how to do cash for key without eviction

Question

Hi BiggerPockets folks,

My tenant is late on rent. They can't afford to pay for it. So I am negotiating with them that if they move out next month, I'll cover up the moving cost. They are willing to take it. Here's my question...I want to make sure they don't take my money and stay put at the property. They also probably don't want to take the risk of not being reimbursed. We can both meet on the moving day to make sure everyone follows the agreement, but It'd be very awkward to do this in person. What would be a good solution for this? Thank you in advance for your advice!

Nathan Gesner · Answer

I want to completely disagree with your method. They failed to pay rent, so you're rewarding them by forgiving the rent and paying their moving costs? That's a bad precedent. Your first response should have been to tell them they need to move out if they can't afford the rent, then use the deposit to cover the unpaid rent, cleaning, and repairs. If they refuse, then you start the eviction process and that will probably scare them away. Both options are cheaper, can be done quickly, and they don't reward bad behavior.

Unfortunately, the cat's already out of the bag. You definitely don't want to give them any money before they are out. If you do, make it a very small portion, maybe 25 - 50% of the moving expenses, but keep the remainder in reserve and hold onto the deposit. You should have a simple, written agreement that spells out what both parties are accepting. Use something like this below. Keep it simple, cover the different scenarios, get both parties to sign.

"Tenants are unable to pay rent. Landlord agrees to release them from their lease under the following conditions.

1. Tenant agrees to vacate the property no later than 11:59PM on [DATE]. At the time of vacating, Landlord will pay Tenant $XXX for assistance with moving expenses.

2. Landlord will complete an inspection with the Tenants to verify the rental is empty, clean, and in the same condition as they received it. If the rental passes inspection, Tenants will receive their deposit of $YYY within 24 hours. If cleaning or repairs are required, Landlord will estimate the cost, deduct that amount from the deposit, and refund the remainder within 24 hours."

Bjorn Ahlblad · Answer

@Jessie Ng  Welcome to BP! You or your 'agent' has to be there in person. Make sure they are out, you inspect along with ex tenant. There is no easy way to do this except in person. All the stuff is gone, you inspect together, they sign off, you get kets, they get money. You did not mention security deposit? Make sure you change the locks. All the best!

Robert Flowers · Answer

I agree with Nathan G., you don't reward bad behavior. However, If and only if you want to get them out in a hurry without going through the eviction process, court dates, pandemics, etc.  then move forward with cash for keys but make them clean up the property before you do cash along with the agreement or signoff. Do your inspection as well. Also, still change the locks if any copies were made by the tenant that you are unaware of. Side Note: You can start eliminating late rents in the future by obtaining your tenants through Non-Profit Organizations and let the Non-Profit pay the rent for the tenant, this will assure on time rent payments.

Hope this helps..

Mohammed Rahman · Answer

Hey @Jessie Ng - it's only awkward because you're making it awkward. This is a transaction like anything else, was it awkward for them to pay you rent while you collected it :) ?

If you want a "solution" maybe type up a document stating that you intend to give them the cash once they've moved out and have provided the keys to you (AFTER you inspect everything with them to ensure they're gone and have taken all their belongings too).

Good job on agreeing to do a cash-for-keys solution for this tenant, good luck!

Adriaan Sierra · Answer

What is exactly awkward about it?

Seems like two adults came to a reasonable outcome given the circumstances.

Michele Fischer · Answer

This is an older thread that has some new posts, I'm wondering how things ended up.

I think it is unfortunate that BP members are so quick to attack anyone using cash for keys.  In my opinion, when there is a non-paying tenant, getting possession back is the most important thing, and a cash for keys agreement can be the least expensive and most effective for everyone.  It is one tool of many in the landlord toolbox.  Props to you for finding a cheaper option than more unpaid rent and eviction proceedings in an environment where it is more and more difficult to remove non-payers.

Of course it is not fair to need to do cash for keys.  But a lot of things in this business are not fair, landlord-tenant contracts are not enforceable in many states, and getting the property ready for a paying tenant is the ultimate goal.

Bob Stevens · Answer

Just meet in person, have them, sign the docs, hand the cash and wish them well. But you should not be involved, let PM handle  .

BTW did the tenant lose their job, why are they behind? There are programs that will pay the back rent . We have received about 250k over the years from various programs,

Nicholas L. · Answer

@Jessie Ng

I'm not going to advise you on the order of events here, but to echo what @Nathan G. said, you need a contract / lease amendment to cover this that you both sign.  Otherwise, even if they leave amicably, the lease is still in effect!

how to do cash for key without eviction

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