With inflation at a seemingly all-time high and interest rates for homeowners through the roof, landlords have been weighing their options more than ever before.
And that’s why one method in particular is coming in hot and causing all sorts of commotion: Cash for keys.
WHAT DOES IT MEAN?
By definition, cash for keys is a way for a landlord to convince a tenant to vacate a property in exchange for an agreed-upon sum of money, according to RentPrep.
It’s also best known for being a cheaper (and legal) way to get your home back and avoid a long eviction process that could take months.
However, the term has quickly become a dirty phrase to some landlords.
Last week, CBC News profiled landlords and law professionals who claimed the method was a form of “extortion” that has increasingly become a lose-lose situation for homeowners.
“We deal with a lot of small landlords [who] come to us in tears. There’s huge significant financial losses for landlords, especially the smaller landlords” a paralegal told the news outlet.
EXTORTION IS ILLEGAL, CASH FOR KEYS ISN’T
A Toronto housing lawyer says the dialogue surrounding cash for keys underscores a “lack of awareness among small landlords and, perhaps by extension, among some of their representatives.”
“The slightest dip in profitability – whether due to higher mortgage rates on renewal or a little slump in home prices – has some of these landlords throwing a childish tantrum in the media about how expensive it is to buy out their tenants,” Executive Director of South Etobicoke Community Legal Services Benjamin Ries told Now Toronto.
“These are generally the same landlords who have opposed rent control and who have profited from rapidly increasing rents. Now they complain that their own tenants can do basic math.”
Ries believes that tenants in Ontario would most likely move out for free or cheap if the rent they could pay elsewhere was similar to the amount they’ve been paying already.
“That would be one of the benefits of full rent control. But our current system of asking rents going up by 8%+ each year makes moving very expensive for tenants. It is absurd to think of landlords as the victims of this system,” he continued.
He also points out that historically, landlords and tenants have reached agreements to terminate tenancies on agreed-upon dates in exchange for one side paying the other side money.
And that the term cash for keys just started picking up steam over the past few years.
“There is no evidence that these deals are increasing. How could there be? These sorts of agreements are private, and just as there is no central record of a residential tenancy being formed in the first place, there is also no central record of a negotiated agreement to terminate.”
The bottom line, according to Ries, is that if an Ontario tenant is paying their rent and obeying the law, they generally have the right to remain in their tenancy indefinitely.
“There is nothing illegal or unusual or even noteworthy about a landlord offering to pay them to move out,” he shared.
WHAT IF A LANDLORD SOLD THE PROPERTY?
According to Douglas Kwan, director of Advocacy and Legal Services at the Advocacy Centre for Tenants Ontario, just because a property is sold doesn’t mean tenants have to leave, under Ontario law.
“Any landlord or potential landlord should know how the law works. If a property has existing tenants, the purchaser inherits those tenants and becomes their new landlord.”
Kwan echoes Ries’ sentiments that long delays at the Landlord and Tenant Board might push landlords to offer deals to their tenants to get them out faster.
“Landlords have many legal options to evict tenants where the tenant is at fault (most evictions are for rental arrears). If the tenant is not at fault and the landlord just wants them to leave, then there is a difference between what a landlord wants and what the law allows.”
He also agrees that framing tenants as scammers because they want compensation for packing up and moving out with zero guarantee that they’ll find affordable housing is “very misleading.”
“After all, it is the tenants who bear the ultimate burden and cost of leaving their home, sometimes even their community. There are long-term ramifications for their finances, their well-being, and dignity. They also do not benefit from the gains made to the landlord’s investment, even though tenants are the ones paying their landlord’s mortgage and bills.”
THE REAL ENEMY
Both Kwan and Ries agree that the root of the problem that’s caused so much strain and distrust between landlords and tenants is the extreme housing crisis.
They believe the blame should go towards government bodies, rather than tenants, for pretty much abandoning the rental market to the private sector decades ago which by extension weakened rent control protections.
“Any discussion of cash-for-keys without contextualizing the failing rental market as the result of these decisions is irresponsible. At present, the rental housing market still largely works in the favour of landlords at the expense of renters. If it wasn’t profitable, there wouldn’t be landlords,” Kwan said.
