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What is the ‘Cash for Keys’ Rental Debate in Canada Right Now?

Person holding keys in new home with moving boxed blurred in distance
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Currently, a popular real estate discussion in Canada revolves around the concept of “cash for keys,” where tenants are requesting money in exchange for returning the property to the landlord. Here, we’ll dive into the rental debate taking place across the country right now, how it differs from an eviction, why the trend is increasing, and whether tenants are actually using it to take advantage of landlords.

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Related: The Average Cost to Rent a One-Bedroom Apartment in Canada

How is ‘Cash for Keys’ Different From a Standard Eviction?

Eviction and “cash for keys” are two different but legal methods for resolving a situation where a tenant needs to vacate a property. Here are the key differences.

Eviction is a legal process initiated by a landlord to remove a tenant from a property, which typically involves going through the court system. These usually occur for cause, meaning that a tenant has violated the terms of their lease agreement, like failing to pay rent or breaching the contract terms.

Evictions are costly and time-consuming for both landlords and tenants due to legal fees, court appearances and the time it takes to complete the process. If a tenant does not vacate a property after receiving an eviction notice and court order, law enforcement could be involved to physically remove the tenant.

On the other hand, cash for keys is a voluntary agreement between a landlord and a tenant to vacate a property in exchange for a cash payment or other incentives. It’s a process that requires negotiation and mutual agreement between the landlord and the tenant. Cash-for-keys agreements are typically resolved quickly, saving time and money for both parties. You avoid going through the costly and lengthy legal eviction process.

In short, eviction is when a landlord legally removes a tenant from a property, while cash for keys is an agreement where the tenant willingly leaves in exchange for money or benefits, avoiding formal eviction.

A woman in a business suit holding a tablet in front of a couple, negotiating an agreement.
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Why is This Rental Market Trend Increasing in Canada?

As landlords are facing rising costs, like mortgages coming up for renewal at increased interest rates, they’re opting to sell instead of renegotiating the mortgage on rental properties. As a result, tenants are being forced into looking for a new home in a rental market defined by low vacancy rates and record-high average monthly rents.

Tenants are likely to face a steep increase in rent if they move, jumping hundreds or even upwards of $1,000 per month. And while rents have been increasing, salaries have not, making this an additional strain on renters. Cash-for-key deals help lessen the financial blow on tenants while landlords stand to make a profit from a sale.

Related: What is Mortgage Payment Shock and Why Are Canadians Worried?

Are Tenants Using ‘Cash for Keys’ to Take Advantage of Landlords?

Some individuals view cash-for-key agreements as a means for tenants to exploit landlords due to delays in Ontario’s tribunal system.

According to a recent CBC News article, “Paralegals and landlords say some tenants are taking advantage of long delays at the Ontario Landlord and Tenant Board, which resolves disputes between landlords and tenants, and are asking for higher cash-for-keys demands than ever before.”

However, others view the process as a way for tenants to receive fair compensation, since they’re being forced to move when rental rates have skyrocketed. It is often the tenant who bears the highest burden in these scenarios, including the time it takes to find a new home, likely paying a much higher monthly rent, first and last month’s rent deposits, and all of the expenses associated with moving.

Related: 10 Things You Need to Remember Before Signing a New Lease in 2024

Tenant vs Landlord Rights

Tenants have rights when asked to vacate a rental property if the landlord wishes to:

  • Sell the property
  • Demolish a property
  • Take possession of the property so the homeowner or their spouse, child or parent can move in

For example, per the Ontario Landlord and Tenant Board, a landlord must follow a specific process for each of these three circumstances. Also, a landlord cannot ask a tenant to vacate a property before selling it.

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In response to the CBC piece, published by Now, Douglas Kwan of the Advocacy Centre for Tenants Ontario stated, “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.” In a case such as this, he claims it is legal and reasonable for a tenant to demand a cash-for-keys arrangement.

In conclusion, cash for keys is a legal agreement between landlords and tenants to vacate a property in exchange for compensation, providing an alternative to the costly and lengthy eviction process.

The trend is increasing in Canada due to rising costs for landlords and a competitive rental market, with tenants using this method to mitigate the financial impact of relocating. Although some landlords feel taken advantage of — and there’s a possibility that some tenants could have unreasonable demands — it’s a reasonable route to consider.

Related: What is a First Home Savings Account and How Does it Work?



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