Legal Definitions - key money

Definition: Key money is a payment made by a new tenant to a landlord in exchange for a key to the leased property. It can also refer to a payment made by a prospective tenant to a landlord or current tenant to increase the chance of obtaining a lease in an area where there is a housing shortage. The first type of key money is legal, while the second type is usually illegal and violates housing laws.

• When John signed the lease for his new apartment, he had to pay key money to the landlord in order to receive the key to the front door.
• In some cities with high demand for housing, landlords may ask for key money from prospective tenants in order to secure a lease. This is often illegal and can be considered a bribe.

The examples illustrate the two different types of key money. The first example shows how key money can be a legitimate payment required by the landlord in exchange for access to the property. The second example shows how key money can be an illegal payment made by a tenant to a landlord or current tenant in order to secure a lease. This type of key money is often used in areas where there is a housing shortage and can be considered a form of bribery.