Key money

Key money is used differently in different parts of the world. It sometimes means money paid to an existing tenant who assigns a lease to a new tenant where the rent is below market. It sometimes means a bribe to a landlord. In other parts of the world it is used synonymously with normal security deposits, which are used to cover nonpayment of rent and excessive damage to a rental unit.


In Japan, key money as a security deposit can also be accompanied by "reikin" (literally, "gratitude money"), which is non-refundable and often can be the same amount as the original deposit, as much as six months or more. This practice is commonly despised by foreigners living in Japan and Japanese alike for its resemblance to extortion: The so-called gratitude is mandatory. In recent years, an increasing number of landlords and real estate agencies have begun to offer "reikin"-free rental housing to counter the worsening image of the practice.

In Korea, the key money system ("jeonse", as opposed to monthly rent or "wolse") requires the lessee to make a deposit of about two-thirds the housing price. The key money is returned when the lease expires. The key money deposit will not be returned before termination of the lease unless another lessee replaces the outgoing lessee. The jeonse system has a leveraged investment effect for the landlord, and enables the landlord to make more capital gain with less investment.


In the United Kingdom, it is illegal for landlords to require key money.

In France a tenant that has a lease that is below market can assign that lease to a new tenant. The new landlord is required to accept the original, low rent from the new tenant. The new tenant essentially buys the lease from the original tenant.

The capitalization factor is financial and strategic, depending on cost of money, importance of the site to the taker and the location of the site. The ratio used goes from 0 (poor locations) to 12 (top locations e.g. Champs Elysées). Remaining number of years of the contract has little/no impact unless it falls under the legal provision of "déplafonnement du loyer", meaning the landlord is automatically legally allowed to ask for a new, market-rate rent irrespective of the rent paid so far.

United States

In the United States, it is illegal for landlords to require off-the-books key money. The terms of the written lease can be enforced in court. However, a cash bribe, styled as "key money," may be demanded in cities with strict rent controls. Because it is paid in cash, it can be very difficult to prove in court.

Generally in America, apartment leases are not transferrable without the consent of the landlord. The primary exception is the right to rent a space in a mobile home park, which is frequently transferrable, frequently rent-controlled, and frequently subject to French-style "key money" payments to the original tenant in the form of buying the current mobile home at an inflated price. The new tenant can then junk the existing, outdated trailer and replace it with a modern one while keeping the terms of the original lease for the land underneath it.

It is also common in many countries to require key money in the form of a security deposit. In the United States, for example, it is common for a landlord to require the equivalent of one or two months rent as a security deposit to offset delinquent rent payments or damage to the property during occupancy. This deposit is held in escrow and is refunded when the tenant moves out, less any repair costs or unpaid rent.cite web |url= |title=When Your Lease or Rental Agreement Ends FAQ |accessdate=2008-03-19 |format= |work=] Some renters have complained that unscrupulous landlords illegally take some or all of this deposit to supposedly pay for cleaning and repairs. Landlord-tenant laws in the United States typically specify that a landlord must provide a detailed accounting of all deductions from a security deposit on request,cite web |url= |title=Security Deposit Guide Security Deposit Law |accessdate=2008-03-19 |format= |work=] and normally cannot charge for "normal wear and tear," such as replacing old carpets or painting walls that haven't been painted for many years.cite web |url= |title=Chart: Cleaning and Repairs a Landlord Can Deduct From a Security Deposit |accessdate=2008-03-19 |format= |work=]


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Look at other dictionaries:

  • key money — ➔ money * * * key money UK US noun [U] ► PROPERTY a payment that the owner of a house, etc. gets from the person who is going to rent it: »In some agreements, the key money functions as a type of deposit …   Financial and business terms

  • key money — n. money paid covertly, and usually illegally, by a prospective tenant, as to a landlord, to increase the likelihood of being able to lease an apartment in an area where housing is scarce …   English World dictionary

  • Key Money — 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… …   Investment dictionary

  • key money — noun 1. Britain : a payment required of a tenant especially of an apartment on taking possession of the key 2. : a bribe paid by a prospective tenant in order to obtain housing the key money for an average studio in Paris is in the neighborhood… …   Useful english dictionary

  • key money — key′ mon ey n. 1) bus advance rent or security required of a new tenant in exchange for the key to an apartment or house 2) bus money paid, usu. secretly, to a landlord, superintendent, or current tenant by a person desiring future occupancy •… …   From formal English to slang

  • key money — 1. advance rent or security required of a new tenant and given in exchange for the key to the house or apartment. 2. an amount of money paid, often secretly, to a landlord, superintendent, or current tenant by a person desiring future tenancy.… …   Universalium

  • key money — noun a payment required from a new tenant in exchange for the provision of a key to the premises …   English new terms dictionary

  • key money — /ˈki mʌni/ (say kee munee) noun a sum of money paid by a prospective tenant for the opportunity of obtaining an interest in a property …   Australian English dictionary

  • key money — payment given to a property owner in return for long term use of that property …   English contemporary dictionary

  • key money — / ki: ˌmʌni/ noun a premium paid when taking over the keys of a flat or office which you are renting …   Dictionary of banking and finance

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