How does Cash-for-Keys Agreements work in Ontario

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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. 

What is cash-for-keys?

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. 

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

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.
 

2. When a landlord is selling their property

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. 
 

3. When a tenant isn’t paying their rent

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.
 

Is there an average cash-for-keys amount?

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. 
 

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.

Hiring a legal professional to draft the agreement
 

In most cases, you’ll want to have a lawyer or paralegal draft the consent agreement and walk you through the process (realtors 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. 


For Assistance contact:   Reginald Bent 416-564-3125 (Paralegal)
Pauline 289-981-9307