How do cash for keys agreements work in Ontario?

In Ontario, a cash for keys agreement is when the landlord pays the tenant to agree to end their tenancy by signing an N11 form, vacating the unit, and handing their keys over to the landlord. To ensure the process goes smoothly and isn’t contested later on, the landlord should also have the tenant sign a consent form surrounding the cash for keys agreement. We’ll dive into that later on.

What are the common scenarios where a property owner would enter into a cash for keys agreement?

There are three common scenarios when a property owner will do cash for keys:

1. When the property owner or a family member is moving in

Sometimes the purchaser, their family, or someone who takes care of their family plans to live at the property. When this happens, the landlord can evict the tenant using the N12 form and the process attached to it, but this needs to be executed flawlessly and not contested in order for everything to be done in time. Oftentimes, to ensure a much smoother process with a guaranteed outcome, the landlord will enter into a cash for keys deal with the tenants. Typically the tenant is offered one to two months of rent and perhaps their moving costs as well.

2. When a landlord is selling their property

Cash for keys is a strategy some owners use before selling their property to ensure they can get top value for the property during the sale. Sometimes having a place tenanted can serve as a price deterrent when people are bidding. Making sure the place is vacated without conflict (through a cash for keys agreement) can help alleviate the concern that a place won’t sell for top dollar.

3. When a tenant isn’t paying their rent:

Another situation when cash for keys happens (unfortunately) is when a tenant isn’t paying their rent. In some situations the landlord is losing so much money, they are better off paying the renter to leave. Going through the Landlord and Tenant Board takes time leading to more money lost, and the outcome isn’t necessarily in the landlord’s favour.

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What are the common cash for keys agreements that are made between property owners and renters?

Cash for keys agreements can range in terms of how much the tenant is being paid. It depends on the market the property is in, how much the landlord stands to lose by not ending the tenancy, and how much rent the tenant pays. It typically ranges from one month’s rent plus moving expenses to $5,000 plus moving expenses (depending on the situation), but can go as high as $70,000.

What are the legalities around a cash for keys agreement in Ontario?

Cash for key agreements are legal in Ontario. To ensure the process goes smoothly, the tenant should sign a consent agreement that is drafted (or at least reviewed) by a legal professional followed by the signing of an N11 form, which is mutual agreement between the landlord and the tenant to end the tenancy. 

The reason you want to have a consent agreement in addition to a signed N11 is because when properly drafted, the consent form is the tenant’s signed confirmation that they were not under duress when they agreed to sign the N11, and that they were paid to leave. This makes it much harder to contest the N11 which people sometimes say they were pressured to sign.

The consent form should have an acceptance date written into the agreement which stipulates how much time the tenant has to consider the agreement and seek legal advice if they want to. Again, this makes it harder to claim that they were pressured to sign the N11 form.

What should you consider when proposing a cash for keys deal with the renter?

Consider whether you want to do a cash for keys agreement or go through the eviction process

With a cash for keys agreement, you get more control over the money, time, and effort spent and most importantly, a more predictable outcome. You can also go through the eviction process at the Landlord and Tenant Board, but risk an undetermined outcome and an amount of time and resources spent. Cash for keys agreements typically take 60-90 days versus a traditional eviction using an N11 form, which takes 9-12 months before the hearing happens (if you file the N11 flawlessly) and even then, the outcome is less certain.

If you decide to go through with the eviction process instead, it must be done for reasons that are legally accepted. For example, the person purchasing your property intends to move in or their family member or someone who cares for their family member is moving in. You should have the purchaser sign an affidavit stating this is the case (this goes beyond what is declared in the purchase agreement). Otherwise, you can be held legally responsible if it goes to court and the purchaser didn’t actually move in after the tenant was displaced. Hefty fines can be attached to this ranging from $25,000- $100,000.

Consider leaving a paper trail:

If you decide to do a cash for keys agreement, pay the tenant using a method that is traceable such as an e-transfer or cheque.

Consider hiring a legal professional to draft the agreement:

Having a lawyer or paralegal draft the consent agreement and walk you through the process can save you from potential inconveniences and give you peace of mind knowing that the legal aspect of the cash for keys process has been handled by a legal expert. Worth noting: realtors usually don’t get involved in processes like this.

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The blog posts on this website are for the purpose of general introductory information. They can’t serve as an opinion or professional advice. Speak to a professional before making decisions related to your circumstances.