Cash for keys agreement draft?

[Patrick Eddy]

Hi there,

My wife and I are first time buyers. We're in contract for a condo in Honolulu that we're going to turn into an STR after a year. It's currently occupied by a tenant who is currently unemployed and not paying rent due to losing his job during COVID. The moratorium here ends in August, but we've talked with the tenant and we'd prefer not to go the eviction route if we can avoid it and so we've opted for the cash-for-keys method. He likes the idea and is candid about his situation. We genuinely want to help him make this transition easy since he has lived there for 25 years.

My next question is how have you all gone about this? Do you have some drafts for getting our agreement in writing before approaching a lawyer?

Thanks for the help!

Patrick

[Joe Splitrock]

@Patrick Eddy 

You should never offer cash for keys until you have exhausted other options. The first step is serving notice of non-renewal and asking them to leave by X date. The majority of the time people just leave.  The eviction moratorium does not protect tenants from non-renewal in a situation where an owner is occupying the property. A local attorney will know how to approach this as far as contacting the tenant. If they don't leave by X date, you serve them legal notice that they have overstayed their lease (not lack of payment). The notice gives them usually 3 or 5 days to leave before court action is taken. Threat of eviction is usually plenty of incentive to get people to leave. I would only use cash for keys if you are unable to get a reasonable court date or if the case proves problematic in court. Since you are trying to owner occupy, I don't see why it would be a problem to get them out. 

Keep in mind that a "cash for keys agreement" is no more or less legally binding then sending the tenant a non-renewal on their lease. Neither is enforceable without going to court. In that manner, it kind of doesn't even matter what the agreement says. It is more important that you get them out and keep them out. There have been cases on BP where the tenant left, then entered the property later (broke in). They kept the cash and the landlord was stuck evicting regardless. Police don't enforce agreements and they will just refer it as a civil matter. The only way to forcibly recover your property is through eviction order, which is why I usually recommend avoiding cash for keys. Good/honest people will leave when they are asked to leave. If you have to bribe someone to leave, they are not to be trusted. 

This situation is strange because unemployed tenants would qualify for unemployment, stimulus and rent assistance. There is no reason that tenant should be behind on rent, which leads me to believe you only have partial truth here. 

My advice to a first time buyer is do not close on a property with a tenant in place that is behind on rent. Ask to have it delivered vacant or find a different place. It is just too much risk for a first time investor. Don't take this wrong, but you already mishandled the situation by offering someone money before you even have the place under contract. Only an attorney should be dealing with this or experienced investors. You could make a real mess here.