Key Money
Key money is an upfront payment made by a tenant to secure a lease, separate from standard deposits and rent. This practice is common in competitive rental markets or when acquiring existing businesses with favorable lease terms. Key money is typically non-refundable and represents compensation for the right to occupy the premises.
Example
“In Manhattan's tight rental market, Maria had to pay $3,000 in key money on top of her security deposit to secure the prime apartment.”
Memory Tip
Key money is the extra cash you need to get the 'key' to your dream rental in a competitive market.
Why It Matters
Tenants in high-demand markets may encounter key money requirements, making it essential to budget beyond standard moving costs. Understanding the non-refundable nature helps tenants make informed decisions about rental commitments.
Common Misconception
Many tenants mistakenly believe key money is the same as a security deposit and expect to get it back when they move out.
In Practice
In a hot Manhattan rental market, a landlord might require $5,000 in key money plus first month's rent and security deposit to secure a desirable apartment. A restaurant tenant might pay key money to take over a lease in a prime location with existing equipment.
Etymology
The term originated from the literal practice of paying extra money to receive the physical keys to a desirable rental property, especially in competitive markets.
Common Misspellings
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