Being a residential landlord isn’t easy. Tenants are fickle creatures who do not always abide by all the provisions of their leases. When leases are violated, landlords have to determine how to respond. One option is to employ the cash for keys (CFK) strategy.
CFK is a way to get rid of problematic tenants without having to resort to litigation. It is a process that avoids eviction proceedings, lawsuits, and having to collect on court-ordered judgments. However, some landlords view CFK as nothing more than rewarding errant tenants for their bad behavior. Others see it as the best option from a financial standpoint.
When it comes to CFK, it seems that landlords either love it or hate it. If you are landlord, where do you stand? There are valid points on both sides of the debate.
How CFK Works
CFK is essentially a fast and easy way to get rid of problematic tenants. It doesn’t require any special arrangement or documentation, though drawing up a written agreement is always wise. The only thing you really need to pull off a CFK deal is a willing tenant.
Let’s say a landlord is unhappy with a tenant who is chronically late with rental payments. The landlord suspects late payments will be an ongoing issue, and he wants no part of it. He can offer the tenant a cash payment in exchange for the tenant vacating the property.
Landlords who utilize CFK arrangements have a variety of reasons for doing so:
- Rent is not being paid on time
- A property is consistently suffering damage
- The landlord wants to increase the rent
- The landlord wants to sell the property.
Experts say there are certain things to avoid when entering a CFK agreement with tenants. At the top of the list are any actions that could be later construed as violations of fair housing laws. Landlords should also avoid negotiating CFK rates and any attempts to hold on to security deposits.
CFK and Litigation Options
One of the downsides to CFK is its potential to limit litigation opportunities. This is why it is always best to document any such arrangement with a signed contract. A contract could stipulate that the landlord retains litigation rights under certain circumstances. However, CFK usually limits litigation options for the mere fact that the landlord voluntarily agreed to let the tenant off the hook.
In the absence of a CFK agreement, landlords always have the option of dealing with problematic tenants through eviction and civil lawsuits. Any violation of a lease on the tenant’s part is grounds for eviction. That includes everything from damaging the property to a failure to pay rent in a timely manner.
Pursuing Judgments Against Tenants
With or without an eviction, landlords can sue tenants for back rent, damages, and court costs. Winning the case would mean a judgment entered against the tenant. However, it would then be up to the landlord to collect on that judgment. Courts rarely get involved in judgment enforcement.
Collection is where specialized firms like Salt Lake City’s Judgment Collectors come into play. They take over collection efforts on behalf of landlords who have neither the experience nor the time to pursue errant tenants.
All things considered, CFK may be the right way to go if eviction proceedings and judgments are unlikely to result in landlord satisfaction. Then again, you may be the kind of landlord who views CFK as rewarding tenants for not abiding by their lease agreements. That is the way it goes. You either love CFK or you hate it.