What is Key Money?

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

How Does Key Money Work?

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 Does Key Money Matter?

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.