Desperate Toronto landlords are increasingly turning to a new strategy to oust reluctant tenants, offering them money to vacate their units. Known as ‘cash for keys’ this tactic is on the rise across the city, according to a recent report. 

It’s not hard to see why. Landlords have few options when it comes to clearing their unit. They can evict their tenants (but must have grounds to do so), they can move into the property themselves, they can renovate (known as a renoviction), or they can buy the tenant out.

With delays still plaguing the Landlord and Tenant Board, it could take months to evict a tenant or settle a renoviction dispute, making cash for keys even more attractive.

But what exactly does ‘cash for keys’ involve, and is it really the best option if you want an empty unit?

What is cash for keys?

There are lots of reasons a landlord might want a vacant unit. They may want to sell the property or raise the rent with a new tenant. They could even have personal reasons – perhaps their relationship with their tenant has become untenable but they don’t have a legitimate reason to start evict proceedings. 

Whatever the reason, cash for keys can be a mutually beneficial way of clearing the apartment quickly and with minimum fuss. A cash for keys agreement is legal in Ontario, as long as both parties consent.

In an ideal cash for keys situation, the landlord and tenant would agree upon a price and conditions such as date of departure. Once these are finalised in a signed document, the landlord hands over the cash and begins an N11 proceeding – Agreement to End the Tenancy.

How to handle a cash for keys situation

The first step is to talk to your tenant. You’ll both have to be onboard with the arrangement from the outset before you dive into the details. 

If your tenant is resistant to the idea, don’t push it. It’s a very competitive rental market out there and it’s understandable if your tenant isn’t willing to get back into the fray given that rents are rising across the GTA. Don’t panic and immediately jump in with a high offer. Give them time to look around and explore their options, waiting until they’re ready before negotiating a price.

Finding an acceptable figure is often the hardest part of negotiations. According to some realtors, cash for keys offers span a wide range, from as low as $2,000 all the way up to $25,000. When deciding, consider the value of your property, its estimated sale price, and how much your tenant pays in rent. You may also want to use the following calculation:

A month’s rent + moving expenses + a ‘bonus’ sum of your choosing. 

At this point, you may need to enlist third party help. Mediators with a background in real estate, realtors, and lawyers are all good options, depending on your needs, budget, and comfort level. Whatever you ultimately decide, get everything in writing – not just the final agreement but every communication between you and your tenant, from text messages to emails. This will help you protect you in the event of a dispute or legal challenge. For example, the tenant could seek to invalidate the N11 by claiming they were coerced into signing it. 

Using a lawyer or real estate professional can also help you determine what conditions to include in your agreement, such as:

• Acceptance date
• The condition or cleanliness of the unit 
• How to handle any damage
• When to collect last month’s rent
• Whether you want to carry out an inspection and when

If your budget doesn’t stretch to legal counsel, at least have a lawyer review the agreement you and your tenant create. This helps avoid any costly mistakes or misunderstandings down the road.

For advice about any aspect of property management, contact the Highgate experts. We’ve helped hundreds of GTA landlords make the most of their investment properties with professional real estate services including tenant management, property maintenance, legal guidance, and more. Contact our team today to discover how we can help you manage your unit stress-free.