Despite sounding like what you would see in a scene from The Godfather, a cash-for-keys agreement is a perfectly legal, often superior solution to vacating tenants than traditional eviction.
That said, it’s not for everyone or all situations, and there are some things to watch out for to make sure you do it legally and effectively.
Keep reading for everything you need to know about cash-for-keys agreements in Ontario.
If a landlord decides they need their property back from renters, a cash-for-keys agreement is one way to incentivize tenants to agree to move out. This agreement typically involves the signing of a consent form (ideally drafted by a legal professional), an N11 form, and money from the landlord to help tenants cover the costs of moving out and finding a new place to live.
Property owners will often do cash-for-keys in the following scenarios:
When a property owner, their family, or someone who takes care of their family plans to move into a rental property, the landlord can offer a cash-for-keys deal with the tenants currently living there. Typically the tenant is offered a cash amount covering one to two months of rent and, sometimes, moving costs.
This is often preferred over evicting the tenant using the N12 form, which can be a more time-consuming, stressful, expensive, and unpredictable process.
There are pros and cons of selling tenanted property. One big con is that existing tenants bring with them additional risk factors, which can put off some potential buyers—or at least decrease the amount they’re willing to pay for your property. With this in mind, vacating a property quickly and without conflict through a cash-for-keys agreement can potentially boost property value.
Another situation when cash-for-keys happens is when a tenant isn’t paying their rent. In some unfortunate situations, the landlord is losing so much money that they’re better off paying the renter to leave. cash-for-keys is usually quicker—and therefore cuts down on further losses—than going through the Landlord and Tenant Board.
Cash-for-keys agreements can vary 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, how much rent the tenant pays, the personal relationship between tenant and landlord, negotiating power, and many other factors.
In Toronto, for example, there are reports of cash-for-keys agreements covering one month’s rent to six month’s rent or more, totaling $2,000 to as high as several tens of thousands of dollars.
Cash-for-keys 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 the 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 that 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.
|
Approach |
Pros |
Cons |
|
cash-for-keys |
- More control over the money, time (60-90 days), and effort spent - More predictable outcome |
- Legally murky if not handled properly - More room for tenant complaints if not handled properly |
|
Eviction |
- Assurance that you’re going through proper legal channels - Have the support of a governing body on your side (if you’re in the right) |
- More unpredictable outcome and amount of time (9-12 months) and resources required - Legally enforceable in fewer situations |
If you want fast results, want to save money and time, and trust yourself (or a third party) to properly and legally navigate a cash-for-keys agreement, then it’s the path for you.
If you want the peace of mind of going through legal channels, don’t mind spending more time and money, and are dealing with a legally evictable situation, then eviction may be a better option.
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.
In most cases, you’ll want to have a lawyer or paralegal draft the consent agreement and walk you through the process (realtors usually don’t get involved in these types of processes).
This will save you from potential problems down the road and give you peace of mind knowing that the legal aspect of the cash-for-keys process has been properly handled by a legal expert.
Knowing what they are, when to use them, and best practices when drafting and proposing them, you can now more confidently decide if cash-for-keys agreements belong in your toolkit.
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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.
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