Getting to know key money
What exactly is a key money agreement?
Key money, also known as a security deposit, is a common term in real estate like residential and rental properties. Tenants give this amount to the landlord, managers, current tenants, or whoever is in charge of collecting payments for a property to secure a lease or rent.
Understanding key money
People address key money differently from one state or city to another. The term may incur a different meaning in other parts of the world, especially in the US. Sometimes, it is a gratuity, and sometimes, it is a bribe.
Key money as a security deposit
People call key money a security deposit when a tenant pays the sum of money worth one or two months' rent to the landlord when signing a lease before taking a rental unit. If the landlords write the key money on the property's lease in commercial real estate agreements, it is legal and acceptable. Usually, this payment is like a bond that the landlord returns to the leaseholder, including interests after the lease expiration. The landlords will return these under certain conditions, such as there should be no property damages, and the leaseholder should thoroughly follow the lease agreement.
Security deposits as protection for landlords and owners
The security deposits protect the landlord from people who create massive damage to the property or stop paying suddenly, leading to a long and expensive eviction process, hence the other term damage deposit. Usually, this is refundable except for Nevada's state that uses this money to clean the unit after the tenant moves out.
Should there be any damages, the landlord may take money some or all of the money from the security deposit for repairs. If this situation arises, the landlord should give the tenant a detailed list of repairs and the receipts of the costs. There are some issues that landlords can't use as reasons for regular maintenance, such as faded paint, carpet wears after a long lease, minor dents, and faulty appliances if there is no abuse or misuse. Again, this depends from one state to another.
Solving security deposit disputes
A landlord and a tenant may go to small claims court to settle security deposit or key money dispute deductions. Understanding the state's law on security deposits then comparing it to the documents and actions made is a sure way to win these dispute cases.
Key money as a bribe
While gratuity is more
acceptable and formal, why do other people call it a bribe sometimes? In some
cases, it may not be legal to charge key money. For example, a potential tenant
is eager to secure a rental contract. So, he gives key money to the owner,
manager, or whoever is responsible for collecting payments to ensure that his
application is first before the others. This practice is common in cities with minimal but expensive
vacancies. In these circumstances, key money becomes an under-the-table
agreement. The only way to make it legal is to put it in the lease contract.
