Key money

Key money is one of several forms of payment made to a landlord. The term has various meanings 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. Key money is one of several forms of payment made to a landlord. The term has various meanings 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 many states of Australia (NSW, Victoria, etc), the Retail Leases Act calls key-money a payment or benefit without true consideration, expected from a tenant in order for a lease being granted, renewed or modified, and makes such payment illegal. In Japan, reikin (礼金, literally, 'gratitude money') is a mandatory payment to the landlord that is often the same amount as the original deposit (shikikin). However, reikin can be the equivalent of six months (or more) of rent, but is typically the same as one to three months of rent. This money is considered a gift to the landlord and is not returned after the lease is canceled. There are regional variations – in Kantō (Eastern Japan, including Tōkyō), a renewal fee (更新料, kōshinryō) is typically charged at contract renewal, similar to repetition of key money, while in Ōsaka key money is instead deducted from a large security deposit, which is known as shikibiki (敷引き), from 'rental deposit' (敷金, shikikin). In recent years, an increasing number of landlords and real estate agencies have begun to offer reikin-free rental housing, and the semipublic Urban Renaissance Agency does not charge key money or renewal fees. In Korea, the key money system (as opposed to monthly rent or wolse) requires the lessee to make a deposit of about two-thirds the total cost of the leased property in lieu of monthly payment. 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. It's goodwill and non-refundable. (known as PAGHRI) 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 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). The remaining number of years of the contract has little or no impact unless it falls under the legal provision of déplafonnement du loyer, in which the landlord is automatically allowed to ask for a new, market-rate rent regardless of the rent paid so far. In Sweden it's illegal for the landlord or an existing tenant to ask for compensation for an apartment lease, but a significant black market for rental contracts is believed to exist in some cities such as Stockholm. The Swedish Union of Tenants believes that the illegal practice of demanding key money or other compensation happens at most private landlord companies, while the landlords' advocacy group Fastighetsägarna believes that as much as half of the rental contracts are wrongly obtained at any time, and proposes a reduction of rent control as a solution. Merely paying key money is not a crime, but is considered by many to be a way of cheating (since you sidestep the queue system). It typically results in immediate termination of your lease if discovered.