What You Should Know About "Cash-For-Keys" Tenant Buyouts

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In California, a "tenant buyout" or "cash for keys" agreement occurs when a landlord offers a tenant a sum of money to vacate the rental unit by a specific date.

In places like San Francisco or Los Angeles, no-fault evictions have strict legal requirements, such as providing relocation assistance and allowing tenants to move back under certain conditions. A tenant buyout, however, allows landlords to bypass these restrictions, such as those under the Ellis Act (which removes rental units from the market) or owner move-in evictions, which limit rent increases for re-rented units post-eviction.

These agreements are frequently used as an alternative to formal evictions, offering financial advantages to landlords, especially in rent-controlled areas where market rents far exceed controlled ones. Landlords are often willing to pay thousands of dollars to remove rent-controlled tenants, knowing they can quickly recoup that investment through market-rate rents from new tenants.

Tenant Buyouts Can Also Benefit Tenants if Tenants Are Properly Informed

Many tenant rights attorneys assume tenant buyout agreements unfairly disadvantage tenants and advise against them. For uninformed tenants, that's generally sound advice. However, I have a different and broader perspective. While these agreements often favor landlords, they can also greatly benefit tenants if properly assessed and negotiated. Depending on the circumstances, cash-for-keys buyout agreements can be mutually advantageous. While these agreements may lead to legal disputes or allegations of unfair practices, especially in areas with specific tenant protection laws, they are not inherently harmful or illegal. And after all, we're in America where tenants should be free to enter into these agreements if they so choose. When the terms are fair, and tenants are well-informed about their rights, a cash-for-keys buyout agreement can make sense for tenants.

​Beware of Harassment by Landlords

Landlords often use high-pressure tactics or intimidation to push tenants into accepting buyout offers, which can lead to claims of harassment or retaliation. That alone could be grounds for a lawsuit.

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Beware of Fraud

In addition to harassment, landlords may make false statements to induce you to accept a tenant buyout offer. For example, landlords who are selling the property will often falsely lead tenants to believe that the sale of property means tenants must vacate (which is not true). Or a landlord may falsely claim he intends to do an owner move-in and legally evict a tenant leaving a tenant to believe there's no other choice. Again, these are grounds for a lawsuit. 

Beware of Procedural Mistakes by Landlords

In certain jurisdictions, landlords must comply with specific procedural rules when offering tenant buyouts. For example, in Los Angeles, landlords must provide tenants with a disclosure of their rights before presenting a buyout offer. A landlord's failure to follow the rules should leveraged in buyout negotiations.

The Potential of a Lawsuit Strengthens a Tenant's Position in Negotiations

When I provide a free consultation to tenants considering a cash-for-keys buyout offer, I often hear about how landlords also engaged in acts that would justify suing the landlord for wrongful eviction as well as other common tenant rights claims. In other words, my consultations regarding cash-for-keys buyouts routinely cover more than simply how much cash is appropriate to move out. When lawyers get involved in negotiations and introduce the possibility of a lawsuit, landlords tend to become more motivated to complete the buyout agreement and avoid a lawsuit. Therefore, assuming there's validity in your claims, the value of your buyout can significantly increase when it becomes clear the landlord violated the law before or during the buyout attempt.

For instance, if the landlord harassed you by frequently asking if you’d accept their offer, each incident could constitute harassment under California Civil Code section 1940.2. This law carries penalties of up to $2,000 per harassment incident. Additionally, many local rent ordinances include anti-harassment protections that increase the potential penalties.)  By outlining the potential liability of a landlord, you elevate a cash-for-keys buyout negotiation to a further negotiation addressing additional compensation for a tenant to not to file a lawsuit.

Do NOT Agree or Sign Anything Without First Talking to Lawyer

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The potential to assert other claims and maximize leverage is why it's critical to schedule a consultation with me (or another cash-for-keys lawyer) before negotiating or accepting any buyout. I can assess your options and determine whether the landlord has violated the law so you can make an informed decision. Again, my initial consultation is completely free.

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