THE REVISED CASH FOR KEYS FORM
The Cash For Keys form (Form CFK) is one of the handiest tools in the REALTOR’s tool box. When selling a tenant-occupied property with a reluctant-to-leave tenant, an agent can employ the CFK form and negotiate the tenant’s smooth exit. Recently, the form was temporarily unavailable in zipForm because it had been withdrawn pending substantive review.
The revised Cash For Keys form (C.A.R. Form CFK, revised 4/23) was added back to the C.A.R. Standard Form library in zipForm on April 18, 2023 — What you need to know
Here is what you need to know about the revised Cash For Keys form:
- The revised CFK form comes with an instruction cover sheet that that must be removed before using this form.
- The CFK must be given to the tenant to sign first, even if the housing provider is preparing it.
- Only after the tenant signs first should the housing provider sign and accept the CFK agreement.
Why was the Cash for Keys form withdrawn in the first place?
The withdrawal of this form was partially due to a recently decided case, Attenello v Basilious, (88 Cal.App.5th Supp. 1). That case involved a negotiated agreement for the tenant to vacate, similar in substance to a cash for keys agreement — which the court determined was unenforceable. Since the case is from an appellate division of a superior court in Orange County, it is not necessarily a binding precedent on other courts throughout California. However, coming from such a populated jurisdiction, it may influence how other courts consider similar situations.
Crucially, the case concerned a property that was subject to the Tenant Protection Act (TPA). You remember the Tenant Protection Act, don’t you? Introduced in January of 2020, it made California the first state in the country to adopt a rent control and just cause eviction law statewide. No other state appears to have followed suit.
One problem with the TPA is that its provisions are NOT waivable. Therefore, the only way to have an enforceable agreement for the tenant to vacate a property is to adhere strictly to the letter of the TPA. In that regard, the TPA states that the tenant may provide the landlord with their own 30-day notice to terminate tenancy. Alternatively, the tenant may make an “offer of surrender” which is then accepted by the landlord.
The judge’s ruling –
The judge in the Attenello case did no one any favors by construing the agreement to vacate the property in the strictest manner possible. According to the court, entering into an agreement to vacate does not constitute the tenant “providing” the notice to terminate. The sketchy logic ignores the reality that residential tenants rarely draft substantive documents for delivery to landlords, or that by signing the document, both landlord and tenant admit receiving the document, which is the essential purpose of codified delivery mechanisms. The Attenello case effectively undermines not only cash-for-keys deals, but really any termination of tenancy in which the tenant does not actually deliver a notice of termination, either personally or by registered or certified mail. In short, it was not a good decision. Mind you, the Attenello case arose out of an eviction lawsuit. After entering into the agreement to vacate, the tenant did not leave, and the landlord proceeded to take the tenant to court to obtain a judgment for possession. Anecdotal evidence suggests that in the overwhelming majority of cases where a cash for keys agreement is entered into, the tenant simply vacates, and no eviction lawsuit is necessary.
TPA-exempt properties –
What about the situation where the property is not subject to the TPA? Let’s say we’re dealing with a property for which a certificate of occupancy was issued within the last 15 years or a single-family property or condo that has been formally exempted from the TPA. Wouldn’t a cash for keys agreement be enforceable in these circumstances? In theory it should be but in fact the Attenello case was so broadly worded that it might even undermine any termination of tenancy where the tenant has not provided a 30-day notice to quit in exactly the right way. But in general, a negotiated termination agreement for consideration, such as a cash for keys deal, should be legally enforceable for TPA-exempt properties.
Offer of Surrender –
The ruling in Attenello did leave one possibility for an alternative to the tenant providing a notice of termination. The law is very clear that a binding agreement to vacate may be based on a tenant’s “offer of surrender” which is then accepted in writing by the landlord. This is an alternative basis to the tenant merely providing a notice to quit. If an offer to surrender is entered into and the tenant fails to deliver up possession at the agreed upon time, then the landlord may go to court to obtain an order for eviction.
The decision by the Standard Forms Advisory Committee to rewrite the CFK as an “offer of surrender” –
Ultimately, this is the legal route that the Standard Forms Advisory Committee (SFAC) has chosen in revising the CFK. The form is structured around the tenant making an offer of surrender which is then accepted by the landlord. This is why it is so important for the tenant to sign the offer of surrender first. The SFAC did consider the possibility of creating two versions of the CFK: one for TPA covered properties and one for TPA-exempt properties. However, such an approach has its own risks including that the wrong form would inadvertently be used. After considering other possibilities and with both the risks and benefits in mind, the SFAC deemed this revised version of the CFK form the optimal approach.