When a landlord wants to recover possession of a rental unit without waiting months to get a hearing, such an agreement can be used … or abused.
Cash for keys? That’s one way around getting a tenant to vacate.
Is it time for the Ontario government to make cash-for-keys agreements illegal?
When a landlord wants to recover possession of a rental unit from a tenant without waiting months to get a hearing at the Landlord and Tenant Board, a cash-for-keys agreement can be used as a practical solution.
Sometimes, however, this option can be abused.
It happened last month to a Star reader who I will call Ricky. He leased his Toronto condo to a tenant in mid-2020. It was a month-to-month tenancy, without a lease.
In May, Ricky signed an agreement to sell the unit to a buyer who intended to move into it. He then delivered an N12 termination notice to the tenant requiring her to move out so the new owner could move in.
The agreement of purchase and sale required Ricky to deliver vacant possession of the condo on closing. The buyer authorized the seller to give notice to the tenant requiring vacant possession, but the real estate agent who drafted the sale agreement failed to set out what would happen if the tenant did not move out.
Based on what had been a good relationship between the parties, the tenant asked for and received reference letters from the landlord. Two weeks before closing last month, the tenant emailed the landlord saying, “we were shocked when you and your real estate agent attempted to force us into an unjust and illegal end to our tenancy after finding a buyer for your property.”
She added, “You can either give us $20,000 for us to leave by the 15th of July, or you can cost yourself a lot more by blowing up your deal with your current buyers.”
This is what’s known as a cash-for-keys demand.
Faced with paying $20,000 for what he felt was extortion, or being sued by the buyer for failure to give vacant possession, Ricky reluctantly paid the money so his lawyer could close the sale last week.
Ricky’s situation is not unusual in landlord-tenant relationships.
Cash-for-keys agreements in Ontario are not illegal. While landlords cannot demand more than one month’s prepaid rent, or cash deposits for damages or keys at the beginning of a tenancy, there is no law prohibiting tenants from demanding or receiving huge amounts to vacate a property.
Owners cannot look to the Landlord and Tenant Board to secure legal vacant possession of a tenanted property on a timely basis because hearings are backed up as much as a year.
I point the finger of blame here at the Ontario government for its failure to staff and fund the board adequately so that landlords and tenants can have timely adjudication of their tenancy issues.
The government gets a failing grade on the issue of access to justice in this.
It might be time to make cash-for-keys agreements illegal in Ontario, or to place a reasonable cap on the amounts tenants can receive in exchange for moving out of a rental unit.