A Cash for Keys agreement is a contract where landlords offer tenants money in exchange of leaving the unit. The dollar amount is left up to the parties – landlord and tenant. Cash 4 keys provides a legal way for landlords to vacate tenants from the property. These agreements are popular especially for rent controlled tenants, who can often cash in for large amounts. As property value soared in recent years, cash for keys agreements became popular as well. In 2021, a total of 23 buyout agreements were reached in the Santa Monica.
Cash for keys could be beneficial for both parties. Landlords are able to increase the rent price to reflect the current market rate. As the market rises, landlords can make a greater profit on new potential tenants. On the other hand, renters can receive cash for vacating the property if they find it difficult to pay rent, or if they were already thinking about moving anyway.
in 2021 the average buyout for a tenant in Santa Monica was $38,037. In 2020 it was $35,693.
Santa Monica regulates all cash buyouts of tenants in Santa Monica. Before an offer is made, landlords have to provide tenant disclosures about rights, and after an agreement is reached, submit the agreement to the city.
The agreement has to be in writing, has to include the tenant’s rights under the law, and the landlord has to provide the tenant a copy of the agreement. Tenant have a right to consult with an attorney and participation has to be 100% voluntary.
A lawyer is highly recommended but not required. Tenants run the risk of not asking the right buyout amount, and landlords run the risk of not fully complying with the regulatory requirements.
Tenants have 30 days in Santa Monica to rescind the agreement and get back to the unit (and pay back the buyout). Landlords cannot change their minds after signing the agreement, and have to leave the unit vacant in case the tenants wants to come back.
Why Would Property Owners Offer Cash for Vacating a Unit?
Property owners are able to adjust the rent to the current market rate for new tenants. With market rent in place, property value increases as well. In situation where tenants are protected by a Rent Stabilization ordinance, like in Santa Monica or Los Angeles, occupants can only be evicted for cause. This means that renters can stay in the apartment indefinitely, paying very little rent.
There’s little alternative to property owners to vacate units. Ellis Act evictions are expensive and long, and once invoked the unit can no longer be rented again to tenants. In addition, once the tenant is paid and vacates the premises, a higher rent can mean higher property value.
Why Should Tenants Consider Cash for Keys buyouts?
When properly negotiated, cash for keys buyouts can be substantial. It is not unusual for some tenants to get over $20,000 in buyouts, sometimes even more.
Tenants who already want to leave or are having difficulty paying the current rent can take the cash and more somewhere more affordable, pay bills, or satisfy credit card debt.
What is the Legal Process in Santa Monica?
- Before a buyout offer is made – the landlord needs to provide the tenant with a special written notice to the tenant. You can find the notice on the Santa Monica Website.
- Second, the tenant and landlord will negotiate a buyout agreement. Both parties must sign a written agreement.
- Third the agreement should be sent to the City Counsel of Santa Monica for filing. Buyout agreements must be filed 31 days to 60 days from the agreement date.
Who can Qualify for a Cash 4 Keys Agreement?
Tenants and landlords qualify for cash for keys agreements. Also, banks and homeowners can execute buyouts.
What Rights Tenants and Landlords have under the Cash 4 Keys Laws?
City rules provide the tenant with strong protections in cash buyouts.
- The right to refuse a cash for keys agreements (all buyouts have to be voluntary).
- Right to cancel the agreement and return to the unit within 30 days after signing a cash for keys agreement.
- Tenants have a right to consult an attorney or the rent control board.
Do You Need a Lawyer to Draft and Sign a Cash for Keys Agreement?
A lawyer is not required but highly recommended for cash 4 keys agreements. Tenants should not only know the full extent of their rights but have someone on their side to negotiate a payment that is fair. Landlords should always hire an attorney to coordinate the cash for keys process to make sure they are legally protected from any liability.
Cash for keys buyouts are especially common right after, or before a commercial property transaction.
Why is it important to hire a lawyer to negotiate a cash for keys agreement?
Moving out of your home is already strenuous enough. Hiring a lawyer will ensure you get the most value for your property. Tenants may not realize the leverage they have with their unit. Having a lawyer on your side will decrease your troubles in obtaining the best deal possible.
For landlords, most of the compliance falls on the landlords when it comes to cash for keys agreements. The legal framework in Los Angeles and Santa Monica place strict requirements on the property owner alone to follow. Failure to follow the rules can subject you to fines and cancellation of the buyout agreement. Hiring an experienced attorney can mitigate this risk.
Steps you should take before getting into an agreement
Whether you are a tenant or landlord, negotiation can be difficult between the two parties. Before getting into an agreement, it is crucial to contact a lawyer to walk you through the process. If you want to go through the process yourself, make sure to follow the local rules in your city for cash for keys agreements. In Santa Monica, you will have to comply with:
- Regulation 9011
- Santa Monica Municipal Code 4.56.050(b)
Contacting the team at Sinai Law will ensure an easy process.
What Provisions Must be Included in a Cash for Keys Agreement in Santa Monica?
- The agreement must be in writing.
- The contract must include a statement of the tenant’s rights similar to the rights mentioned in the form provided by the city before the negotiations begin.
- If the agreement does not have these mandatory requirements – the buyout is not enforceable and the tenant can rescind it at any time.
What is the Average buyout for a Tenant in Santa Monica?
Buyout for Cash for Keys will vary in respect to the area and makeup of the home. A large factor is the difference between market rent and the current rent for the unit. Buyout agreements can range from as low as $1,500 to as high as $75,000 (or more in extreme cases).
The Rent Control Board in the City of Santa Monica provides data on Cash 4 Keys buyouts. In 2021, the average buyout in Santa Monica was a $38,037. While in 2020, 22 buyout agreements averaged to $35,693.
If your Landlord Offered you a Buyout what should you do?
If a landlord approaches you, you should first contact an attorney. Our team at Sinai Law offers counsel for Cash 4 Keys buyouts from start to finish. Contact us as soon as you receive a buyout notice from your landlord. It is important that you consult with an experienced attorney since you only have one shot to get the maximum value for your buyout.
If you are a Landlord that Wants to Offer a Cash for Keys Agreement what should you do?
The important thing to understand in cash for keys agreements – it is a legal process that in effect is only enforced against the property owner. Therefore, it is imperative that the process is followed to ensure minimum legal liability. There are civil fines for violating the city ordinance, and tenants have a right of redemption as well. Always consult an attorney when you are about to make an offer to a tenant for a buyout.
If you are a Landlord, How Much Should you Offer to a Tenant to Leave?
The amount your should offer a tenant is a mixture of factor that need to be taken into account, among others:
- The difference between current rent and market rent
- How much value will be created if the rent is increased
- Cost of renovations to the unit to get the extra rent
- Capital available to the property owner
- Tenant’s willingness to vacate the unit.
Who We Represent
At Sinai Law, we represent both tenants and landlords to ensure an equitable agreement.
Tenants reserve the right to know what they are owed. Many tenants don’t realize their leverage in the negotiation process. Landlords may try to persuade tenants into unfair agreements. Our lawyers can help you understand if a deal is just.
We also represent landlords in Cash 4 Keys negotiations. Buyout agreements can be stressful for landlords as well. Our firm offers assistance in the negotiation process, and ensure full compliance with city law.