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What is Cash for Keys and is it Legal?

In the world of property rentals, the relationship between landlords and tenants can often become strained, especially when it comes to issues of eviction. One tactic that landlords may use to regain possession of their property without resorting to lengthy legal battles is known as “cash for keys.”

What is Cash for Keys?

Cash for keys is an arrangement where a landlord offers a tenant a financial incentive to voluntarily vacate the rental property. In legal speak it’s termed a surrender of the tenancy. Instead of going through the formal eviction process, the landlord provides a cash payment in exchange for the tenant agreeing to leave the property by a specified date and returning the keys. This method can save both parties time, stress and the cost associated with formal eviction procedures.

How Does it Work?

1. Initial Offer: The landlord approaches the tenant with an offer of a set amount of money to leave the property. Landlords need to be particularly careful about how they approach the tenant. Failure to do so could be construed as being a breach of the Landlord’s covenant for quiet enjoyment and it is wise to take legal advice before making any offer and doing so on a without prejudice basis to avoid any breaches.

2. Negotiation: The tenant may accept the initial offer or negotiate for a higher amount or better terms.

3. Agreement: Once both parties agree, they should document the terms of surrender of the tenancy in writing to avoid disputes. This should be carried out by a qualified lawyer to avoid the pitfalls of getting it wrong.

4. Vacating: The tenant vacates the property by the agreed-upon date.

5. Exchange: The tenant hands over the keys and the landlord provides the agreed-upon cash payment.

Is it Legal in England and Wales?

Yes, cash for keys is legal in England and Wales, but certain precautions should be taken to ensure that the arrangement is fair and legally sound:

1. Documentation: Both parties should document the surrender of the tenancy agreement in writing, detailing the amount offered, the date by which the tenant will vacate, and any other relevant terms. A written agreement is essential to protect both sides from future disputes.

2. Voluntary Agreement: The tenant must agree to the arrangement voluntarily. Any form of coercion or undue pressure can render the agreement invalid and could result in legal repercussions for the landlord. This can also include approaching the tenant initially and we consider it best for Landlords to seek legal advice before making any offer.

3. Legal Advice: Tenants should consider seeking legal or professional advice before agreeing to a cash for keys arrangement, especially if they are unsure about their rights or the fairness of the offer.

4. Condition of Property: Landlords might include terms regarding the property’s condition upon vacating. Ensuring that these terms are clear can help avoid conflicts later.

Pros and Cons

Pros for Landlords:

– Faster and less costly than formal eviction.

– Avoids legal battles and potential court fees.

– Can result in a more amicable parting.

Cons for Landlords:

– Potentially high initial cash outlay along with legal costs for advice.

– Risk of tenant not vacating even after payment.

Pros for Tenants:

– Financial incentive to leave.

– Avoids the stress and stigma of formal eviction.

– Potential to negotiate terms.

Cons for Tenants:

– Possible loss of secure housing.

– May not be aware of their rights or could accept less than they are entitled to which is why legal advice is essential.

Conclusion

Cash for keys can be a mutually beneficial solution for both landlords and tenants in England and Wales when handled properly. The key to a successful cash for keys arrangement is clear communication, voluntary agreement and thorough documentation along with legal advice all of the way. Both parties should approach this option with a full understanding of their rights and responsibilities to ensure a fair and smooth transition.

If you are a Landlord or Tenant looking for advice on a cash for keys agreement why not get in touch with one of Alexander JLO’s expert landlord and tenant specialist for a free no obligation consultation. We can be contacted on 030 7537 7000 or info@london-law.co.uk. Come and see what we can do for you.

This blog was prepared by Guy Wilton on the 15th January 2025 and is correct at the time of going to press. Guy lives on The Wirral and works in Liverpool. Guy and his team will be managing all work locally and have wide experience of acting for the firm’s clients, their family and their businesses. Guy’s experience as a lawyer started in the Northern and Welsh Circuits, including the Liverpool Courts, where he represented numerous clients in Civil proceedings after being called to the Bar, before opting to join Alexander JLO in 2017 and qualifying as a solicitor in 2024.

Guy’s profile on the independent Review Solicitor website can be viewed here.