Sunday, April 14, 2013

What is Cash for Keys?

Please get any cash for keys agreement in writing. Banks and their agents frequently offer what appears to be a cash for keys offer and then renege when the tenants move.

The realtor who is working for my former landlord's lender came by yesterday and offered us money if we'd move out within 30 days. Should we take it?


That depends. Your first consideration should, of course, be whether you can find a new place within the 30 days. It may be that you've seen a better place 'round the corner for less rent than you're paying now. (I know, dreaming, but it can happen.) If that's true, you might want to tote up the cost of moving and your security deposit, with a percentage for the hassle of it all, and see if the lender is willing to agree to that sum. If the lender agrees to that sum, you'll need to prepare a written agreement, detailing your moving date, the amount of the payment and how that payment is to be made. In ALL circumstances, that agreement should be in writing and signed by an authorized representative of the lender. In the event that the lender reneges and, when you turn in the keys, no cash is forthcoming, you can sue the lender in Small Claims Court to recover the funds.

But if you have children or pets or are disabled, and have specific requirements, you may need the 90 days more than the money, so consider carefully whether you want to put yourself under that kind of time constraint. If you don't, you are entirely within your legal rights to reject cash for keys, and demand a 90-days' notice. And if you are protected by just cause eviction protections or a local moratorium on foreclosure evictions, you'll likely just want to stay in your present home. And no matter how much pressure the realtor or lender's agent puts on you to move quickly, you are under no legal obligation to take a cash for keys offer. And if the lender's representative becomes nasty or rude, you may ask him to leave. If you are threatened or assaulted, it's a matter for the police.

So if I were deciding whether to accept a cash for keys offer, I'd consider the following:

1. The protections afforded by state and local laws. If those don't allow eviction after foreclosure or provide a longer notice period, you should be offered more money, as you have a greater interest in staying in your home.

2.  Whether it's convenient for you to move.  It may be more convenient to move at the end of the school year, for instance, and if your 90 days would get you to July, you might rather not move at the end of April. Yes, it is okay to say that moving at the convenience of the owner is not convenient for you.

3. The amount of your deposit. If the cash for keys offer is less than your deposit, it means you're are giving up the difference. Do you want to do that? If the lender prepares the cash for keys agreement, it will most likely state that the agreement settles all claims you have on the lender, which means that you give up your right to sue the lender for return of your security deposit.

4. The cost of moving. Include in this security/pet/other deposits, the cost of movers, or the truck and pizza for your friends, utility deposits, changing your address everywhere, the time you have to take off work to deal with finding a new home etc.
Then tote all these costs up and see if the cash for keys offer is close to your costs.

Cash for keys offers should be in the mid-four figures, at least.

I received a notice from a realtor working for the lender, offering me $1000 cash for keys if I'd move in 10 days. The notice said that if I didn't take the offer, they'd begin the eviction process and the Sheriff would evict me. Is this true?

Well, what's important here is what the notice doesn't say. It doesn't say that the lender would have to serve you with a 90-days' notice to vacate and wait for the 90 days to expire before filing with the court to evict you in an unlawful detainer action. Only after the conclusion of the court action would the Sheriff be able to evict you from the property. As I've discussed elsewhere, you must move before any court eviction is filed, but that comes after your 90-days' has expired. It appears that lenders have developed a standard form notice making this offer, as many tenants don't know their rights and are rightly frightened by the very idea of a Sheriff's eviction.
And these notices may be illegal. California law requires that the notice be clear and unambiguous, and many lenders are trying to get out of doing their due diligence--finding out who lives at the property and giving them clear notice of termination. So they send an all-purpose notice, evicting either the owner (a three-days' notice), and a tenant who is protected under state and federal law (a 90-days' notice). If you don't want to accept the offer, just send a note stating that the sum is way too small, the time to vacate way too short, and that you will wait to receive the legally-required 90-days' notice to vacate.

And this bad behavior, the one where the lender tries to cheat people out of their required notice, is happening all over the country. For example, see this. If you can't figure out what the notice says, and some of them are written to be confusing, get help. And while bureaucracy is not my thing, state legislatures may have to pass laws requiring exact wording for notices to protect tenants' rights.


I have a roommate and my roommate wants to stay. I'm ready to go and want to take the cash for keys offer.

The realtor wants to empty the entire unit. This means that you and your roommate have to agree. If you and your roommate can't come to a meeting of the minds, the "default" would be the notice to vacate.

Do realtors actually threaten tenants who won't take the "cash for keys" offer?

Amazingly, yes. Indeed you will have no greater experience of your status as a second-class citizen than as a tenant dealing with a realtor. Among others, there are the realtors who deal in foreclosures who not only circle the building, but bang on the door and demand tours of the house. That's because most properties can't be examined prior to the foreclosure sale, and the realtor wants a leg up on the competition. But that still doesn't give the realtor any right to demand a tour, so you can refuse any realtor who tries this one.


My landlord called me last week and told me that I have to move by the end of the month. He wants to collect the "cash for keys" that he thinks the bank will offer.  Can he do this?

Not exactly.  In most parts of California a landlord can evict a tenant for any reason or no reason at all.  Only in jurisdictions with "just cause" eviction does the landlord have to provide notice of the allowable reasons for eviction.  But your landlord does have to give you proper notice.  He can't just tell you to move.  Assuming that you've paid the rent and haven't trashed the place, the landlord must give you 30-days' notice if you've lived in your unit for less than a year, and 60-days' notice if you've lived there more than a year.

However, if your landlord does give you the proper notice, he can evict you and collect whatever "cash for keys" the bank offers.  That's why we need statewide "just cause" eviction--to protect tenants from this kind of scum-bag behavior.