Key Money
Key money is an upfront payment to secure a lease in competitive markets. Discover where key money is common and legal considerations.
Definition
Key money is an upfront payment made by a tenant to a landlord or existing tenant to secure a lease, typically in markets with high demand and limited inventory. It is prevalent in commercial leases and some residential markets, particularly in cities like New York or Tokyo. Key money may compensate a current tenant for transferring a below‑market lease or pay the landlord for granting access. Its legality varies by jurisdiction: some areas regulate or prohibit key money to prevent exploitation. Prospective tenants should understand local laws and factor key money into their leasing budgets.
Why It Matters
Key Moneycan affect financing, title, negotiations, or closing timelines. Sellers who understand it can set better expectations, while buyers can plan smarter offers and reduce surprises later.
Examples
Example 1: A seller clarifies key money in disclosures to prevent disputes.
Example 2: A buyer evaluates key money while comparing properties and loan options.
Example 3: Title or escrow highlights key money requirements to keep the deal on schedule.
Tips
Ask how key money applies in your deal before mutual acceptance.
Keep supporting documents organized and accessible.
Maximize market reach with a flat fee multiple listingservice.
Additional Context
Key Money is often linked to financing requirements, property valuation, title conditions, or contract negotiations. Address questions early and document agreements in writing for a smoother closing process.
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