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.

RELATED TERMS
  1. Lease

    A lease is a legal document outlining the terms under which one ...
  2. Tenancy at Sufferance

    Tenancy at sufferance is a legal circumstance when a property ...
  3. Tenancy at Will

    Tenancy at will is a property tenure — without a lease or written ...
  4. Ground Lease

    A ground lease is an agreement that allows a tenant to develop ...
  5. Rent Guarantee Insurance

    Insurance bought by a tenant that pays the monthly rent for a ...
  6. Net Lease

    Net lease refers to a provision that requires a tenant to pay ...
Related Articles
  1. Managing Wealth

    4 Things Landlords Aren't Allowed To Do

    Whether you're a landlord or a tenant, you need to know the rules.
  2. Investing

    8 Lease Clauses You Need To Know

    If you're renting an apartment this year, beware of signing contracts with these tricky clauses.
  3. Investing

    5 Tips For Finding A Good Landlord

    A bad landlord can ruin the best rental property. Find out how to find an honest landlord that you can rely on.
  4. Investing

    Top 6 Tips for Turning Your Home Into a Rental Property

    Learn what you need to do to turn your property into a rental property.
  5. Investing

    Becoming a landlord: More trouble than it's worth?

    On the surface, being a landlord seems likes like a surefire bet, but could it be more of a headache than its worth? Find out if being a landlord is the right investment for you.
  6. Insurance

    A Quick Guide To Landlord Insurance

    ...And why landlords need it, even if they also have homeowners insurance.
RELATED FAQS
  1. Do landlords set up escrow accounts for their tenants' security deposits?

    Learn when and why landlords place rental property security deposits in separate escrow accounts to make sure the money is ... Read Answer >>
  2. Single, double and triple net leases

    Learn the ins and outs of net lease agreements, including the key differences between single net, double net and triple net ... Read Answer >>
  3. What determines the interest rate on my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
Trading Center