What is the Cash for Keys Option?

If you’ve been renting out a property for a while, you may have found yourself in the uncomfortable position of evicting a tenant. Failure to pay rent, unauthorized subletting, and illegal activity on property are the most common reasons for pursuing eviction. However, that legal process is expensive and time-consuming. But is eviction your only option if your tenant has violated the lease agreement and you’ve exhausted all other options? It may actually be more cost-effective, monetarily and timewise, to consider a cash for keys deal instead. 

What is Cash for Keys?

The cash for keys option uses a cash payment to incentivize a tenant to move out in lieu of eviction. On its surface, this may seem like a lose-lose option. Why offer compensation to a tenant who is no longer paying rent? However, many landlords find that cash for keys actually saves money compared to the cost of eviction. 

Additionally, a payment upon relinquishing the property in good condition may help prevent additional property damage from disgruntled tenants. Though counterintuitive, paying a tenant to leave voluntarily and peacefully may actually cost you less money in the long run.

Costs of Legal Eviction

While weighing your options, understanding the cost of pursuing eviction will help you make the best decision for your property. Both time and money may factor into your decision. Eviction isn’t as easy as going to court, paying the filing fee, and then moving forward with the order. In Oregon, after calculating legal fees and expenses, the average cost of evictions range from $4,000 to $7,000.  

Some of the costs broken out are:

1. Time: Oregon’s eviction process has two phases, each of which can take weeks to months. You can’t use that lost time to refurbish and rent the property to a new tenant. These phases are: 
   • Court Proceedings – the court reviews the claim and decides whether the tenant is legally entitled to remain on the property.
   • Execution – If the court decides for eviction, it will designate a sheriff to remove the tenant from the property.
2. Money: Legal fees, court costs, hiring a sheriff, lost rent, repair bills, and any other miscellaneous expenses can quickly add up to thousands of dollars. 

There may be situations where pursuing legal eviction may be the best option. However, one can understand how a cash for keys agreement can be a win-win for both tenant and landlord.

Costs of Cash for Keys 

The amount of cash a tenant receives to vacate a property varies in Oregon, but landlords normally pay between $1,000 and $3,000 — the typical court fee for filing an eviction notice. While handing over a large sum of money may not feel great, the ability to move on from the costs of stress, time, ongoing fees, and lost rental income may make the most sense. 

The Process for Cash for Keys

So, after weighing the benefits of both options, you’ve decided to offer your tenant a cash for keys option. What do you do next? There are three steps to make the process simple, fast, and efficient.

• Step 1: Talk with your tenant. Take the time to explain the cash for keys option to your tenant and how this agreement will save them from eviction costs and consequences. A formal eviction stays on the public record for five years in Oregon and can make it difficult to find housing in the future. As an alternative to the eviction process, you can explain that they could have cash in hand if they agree to completely vacate the premises by a certain date and without additional property damage.
• Step 2: Give them the cash for keys agreement form. This form should include how much money the tenant will receive, how the payment will be made, and the date the tenant will vacate the property. It is essential to have a written record of the agreement with both parties’ signatures. Be sure to keep this form for your records. You can find a sample of a cash for keys form here.
• Step 3: Create a transaction record. Provide a receipt of the transaction for yourself and the tenant for your records. Remember, you should not make the payment until the tenant has relinquished the keys. 

The Legality of Cash for Keys

Cash for keys agreements are a legal way to move a tenant out of your property while also bypassing the long eviction process. However, it is important to make sure that you follow all Fair Housing laws and that an attorney has drafted or reviewed your cash for keys agreement so that it is legally binding should you run into resistance after the agreement has been signed.

Things to Avoid

While a cash for keys agreement is legal, there are still things you’ll want to avoid for clean legal purposes. 

• Make sure you are complying with all Fair Housing Laws.
• Do not attempt to “incentivize” your tenant by taking illegal actions like turning off the hot water, changing locks, or removing belongings.
• You’re still required to return a security deposit even in a cash for keys situation. You may still document damages and repair costs and deduct them from the security deposit. After you’ve made your repairs, send your standard written notice about the details with any remaining deposit to your former tenant.

Get Support

Implementing a good screening process will help you avoid evictions or cash for keys scenarios, but it is not a guarantee. Fortunately, experts like Rent Portland Homes by Darla Andrew can help you navigate the complexities surrounding rental properties, lessen your stress levels, and increase the value of your properties. Call or text Darla today at 503.515.3170 to learn more about how we provide the support you need to confidently enjoy the rental process.