Key money is a payment made by a prospective tenant to a landlord in an attempt to secure a specific unit.
This is a down payment that should be paid in the form of a security deposit. However, key money is typically considered a bribe that persuades the landlord into reserving a spot on the property for the payer.
How Much is Key Money?
Legally, a landlord is not allowed to charge key money, even though it happens often. A landlord may only charge key money if they are also charging letting fees (the cost of moving a tenant in) or an option fee (money paid by the tenant to hold the unit until they decide whether to rent or not). Keep in mind that a landlord can only charge one week’s worth of rent if they are charging letting fees. For more information on fees, visit this page.
Key money is generally paid by the prospective tenant in the amount of 1-2 months’ rent. Note that this should only be paid once and it is illegal for landlords to charge for key money randomly and repeatedly.
Where Does it Go?
Usually, key money is refunded to the tenant upon a lease’s conclusion, unless there are damages to the property that must be paid. It is actually illegal for a landlord to hold on to the money or refuse to refund it if there are no outstanding fees. Although this is true, it is quite common and easy for a landlord to keep the key money. Since key money is paid “unofficially” most of the time, it is generally not outlined in leases. And, if it’s not in the lease, it can’t be enforced, meaning tenants rarely see their key money again.
It’s a good idea to stay away from key money. A landlord shouldn’t charge it, so renters should beware. Paying key money is completely up to the potential tenant. However, knowing the risks is essential.