Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Key Money

What it is:

Key money is money paid to a landlord or property owner in order to reserve a spot as a tenant on the property.

How it works (Example):

Let's say Company XYZ is a restaurant firm that wants to open a location in the new ABC outdoor mall. The mall is under construction, but Company XYZ likes the location and the demographics of the surrounding population, so it writes a $5,000 check to the ABC landlord. This "gets the keys" and reserves a spot for Company XYZ.

Why it Matters:

Key money is essentially a security deposit, but in many cases it is a payment to persuade the landlord to rent property to a tenant. For this reason, many people consider key money to be pretty much a bribe.