What is 'Key Money'

Key money is a payment made to a building owner, manager, or landlord by a potential tenant in an attempt to secure a desired tenancy. Key money can be considered a type of deposit on a housing unit such as an apartment unit.

Key money also refers to a security deposit paid by a lessor or a lessee for a leased property.

BREAKING DOWN 'Key Money'

Key money is paid by a prospective tenant to a property owner or manager in the hopes of securing a rental contract for a particular property. In certain circumstances, key money can be considered a bribe to ensure that a property coming up for rent is secured by the payer of the key money, and as such, the transaction is conducted in an unofficial manner.

For example, if Bob wanted to rent an apartment in a popular building, he might meet the landlord for coffee to discuss upcoming vacancies in the building. If a vacancy were becoming available in the near future, Bob might pay the landlord in order to secure the soon to be vacant apartment for himself. This payment would be considered key money.

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