Cash for Keys in Ontario

A Comprehensive Guide to Cash for Keys in Ontario: What Landlords and Tenants Need to Know

In Ontario’s rental market, the term “cash for keys” refers to a negotiation between a landlord and a tenant, where the landlord offers a financial incentive to the tenant in exchange for vacating the rental property voluntarily. This arrangement is often used as an alternative to legal eviction, especially when landlords want to regain possession of the property for renovations, sale, or personal use. While it can benefit both parties by avoiding lengthy eviction processes, it’s important to understand how cash for keys fits into Ontario’s legal framework.

This guide will explore the cash for keys process, the reasons landlords and tenants may choose this option, its legality under Ontario law, and best practices for ensuring the agreement is fair and enforceable.

What is Cash for Keys?

Cash for keys is a voluntary agreement where a landlord offers a tenant money in exchange for moving out of the rental unit, often before the end of the lease term. This approach is typically used in situations where a landlord wants to avoid formal eviction procedures through the Landlord and Tenant Board (LTB).

The amount offered by the landlord can vary, depending on factors such as the rental market, the tenant’s willingness to leave, and the urgency of regaining possession. Essentially, cash for keys is a negotiation tool that gives tenants a financial incentive to leave peacefully and on a set timeline.

Why Would Landlords Offer Cash for Keys?

There are several reasons why a landlord might choose to offer cash for keys:

1. Avoiding the Eviction Process

• The formal eviction process in Ontario can be lengthy, complex, and costly. It requires the landlord to file an eviction application with the Landlord and Tenant Board (LTB), and the tenant has the right to contest it. A cash for keys arrangement allows landlords to regain possession of their unit faster and with less hassle.

2. Renovation, Demolition, or Sale of Property

• If a landlord intends to renovate the unit, demolish the building, or sell the property, they may offer cash to tenants to vacate voluntarily rather than issuing Form N13: Notice to End a Tenancy for Demolition, Repairs, or Conversion or Form N12: Notice to End a Tenancy for Landlord’s Own Use. These notices can sometimes lead to disputes or claims of bad faith.

3. Desire to Avoid Conflict

• Formal evictions can lead to disputes and, in some cases, damage to the property. By offering cash for keys, the landlord may avoid conflict or damage by creating a mutually beneficial solution.

4. Tenants on Rent Control

• In cases where tenants are paying below-market rent due to rent control regulations, landlords may want to regain possession of the unit to rent it out at a higher rate. Offering a cash for keys agreement can be more appealing to both parties than going through the formal process.

Why Would Tenants Accept Cash for Keys?

Tenants may also find cash for keys appealing for a variety of reasons:

1. Financial Benefit

• Moving out can be costly, especially if a tenant needs to find a new place, pay a security deposit, or cover moving expenses. Receiving a cash incentive can make the transition smoother and less financially burdensome.

2. Avoiding a Lengthy Legal Process

• If the tenant suspects they may lose an eviction battle, accepting cash for keys allows them to leave on their own terms and avoid a formal eviction record, which could make it harder to rent in the future.

3. More Flexibility

• A cash for keys arrangement allows tenants to negotiate the timeline for moving out. This flexibility is often not possible in a formal eviction, where deadlines are set by the court system.

Is Cash for Keys Legal in Ontario?

Yes, cash for keys is legal in Ontario, but certain legal considerations must be followed to ensure the agreement is voluntary and enforceable. The Residential Tenancies Act (RTA) does not explicitly mention cash for keys, but as long as both parties freely agree to the terms, and the agreement complies with the law, there is nothing preventing landlords and tenants from entering into such arrangements.

Key Legal Points:

• Voluntary Agreement: The tenant must voluntarily agree to the cash for keys arrangement. The landlord cannot force or pressure the tenant into accepting the offer. If the tenant feels coerced, they can challenge the agreement.
• No Retaliation or Harassment: It is illegal for a landlord to harass or retaliate against a tenant to force them into a cash for keys deal. For example, the landlord cannot cut off utilities or threaten eviction to coerce the tenant into accepting the offer.
• Notice Requirements Still Apply: Even if a cash for keys agreement is reached, tenants are still entitled to proper notice if they do not voluntarily agree to vacate. If the landlord wishes to take possession for renovations or personal use, they must still follow proper procedures, including using Form N12 or N13, unless the tenant agrees to leave in exchange for cash.

How to Structure a Cash for Keys Agreement

To ensure that the cash for keys arrangement is fair, transparent, and enforceable, both the landlord and tenant should approach the agreement professionally. Here are the best practices for structuring a cash for keys deal:

1. Put the Agreement in Writing

• Always document the terms of the cash for keys agreement in writing. The written contract should include:
  • The amount of money being offered to the tenant.
  • The date by which the tenant must vacate the unit.
  • Any additional conditions, such as leaving the property in good condition.
• Both parties should sign and date the agreement. This protects both the landlord and the tenant if there is a dispute later on.

2. Negotiating the Amount

• There is no standard amount for cash for keys in Ontario, so it’s up to the tenant and landlord to negotiate. Factors influencing the amount include:
  • The rental market and how difficult it will be for the tenant to find a new place.
  • The urgency of the landlord needing the unit vacated.
  • The length of tenancy and any rent control that keeps the rent below market value.
• A common starting point for negotiation might be the equivalent of one or two months’ rent, but some landlords offer more, depending on their needs.

3. Timing of the Payment

• The payment should typically be made once the tenant has vacated the unit and returned the keys. Some agreements include a partial payment upfront, with the balance paid after the tenant leaves.

4. Avoid Coercion

• The landlord should avoid any actions that might be seen as coercion. Pressuring a tenant to accept cash for keys could result in the tenant challenging the agreement at the Landlord and Tenant Board or filing a complaint.

5. Seek Legal Advice

• Both the landlord and tenant may wish to seek legal advice or consult with a paralegal to ensure the cash for keys agreement is fair and lawful. This can prevent misunderstandings and ensure both parties are protected.

Pros and Cons of Cash for Keys

Pros for Landlords:

• Quicker possession of the property compared to formal eviction.
• Avoids the costs and stress of the legal eviction process.
• Reduces the risk of tenant damage or disputes during the eviction process.

Cons for Landlords:

• The landlord must offer financial compensation, which could be substantial in certain cases.
• There is no guarantee the tenant will agree to the deal.

Pros for Tenants:

• Can provide a financial boost to cover moving expenses or security deposits.
• Allows tenants to avoid eviction and protect their rental history.
• Offers flexibility to negotiate a timeline that works for them.

Cons for Tenants:

• The tenant must leave the unit, which may be difficult if housing options are limited.
• Some tenants may feel pressured, even if the agreement is voluntary.

Understanding Cash for Keys in Ontario

Cash for keys can be a win-win solution for both landlords and tenants in Ontario. For landlords, it offers a way to regain possession of a rental unit without going through a lengthy legal process, while tenants can benefit financially and avoid the stress of formal eviction. However, it’s important that both parties approach the process carefully, ensuring that the agreement is voluntary, fair, and well-documented.

By following Ontario’s laws and understanding the rights and obligations of both parties, cash for keys can be a practical and effective tool in managing rental property transitions. Always consider seeking legal advice before finalizing any agreement to ensure that the arrangement complies with the Residential Tenancies Act (RTA) and protects everyone involved.