New housing law discourages practice of 'cash for keys'

In Los Angeles, a new law says that landlords offering buyout agreements must inform tenants of all their rights.
In Los Angeles, a new law says that landlords offering buyout agreements must inform tenants of all their rights.
Tony Hoffarth, Flickr Creative Commons

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Martha Ponce said she and her boyfriend were offered $2,500 to move out of their rent-controlled one-bedroom in Lincoln Heights a few months ago.

They refused because they couldn’t find an affordable replacement. But Ponce said most of her neighbors thought they had to take the buyout from the realty management company so they moved out, and turned to relatives and friends for temporary housing.

"You don’t know how sad it was to see people hauling out mattresses, leaving refrigerators, because they hadn’t found a place of their own," Ponce said.

What the tenants didn’t realize is that under L.A.’s rent regulations, they didn’t have to go, and if they waited, they could receive as much as $20,000 dollars in relocation fees. A city law that took effect this year aims to protect tenants against unlawful buyout agreements. It requires landlords to inform tenants of their rights and to notify the city if they execute these so-called “cash for keys” agreements.

"It's really about trying to level the playing field for tenants in some of these tricky situations," said Ben Winter, a housing policy specialist for Mayor Eric Garcetti. "It's helping to protect the tenants and give them a little bit more tools in some of these hot-market areas."

Winter said that landlords have been using buyout agreements to circumvent the no-fault eviction process for many years. But anecdotally, the practice has picked up steam because of the city's tight housing market.

The average rent for a 1-bedroom in Los Angeles is about $2,300, according to the aggregator site Rent Jungle. Winters said a minority of landlords, the "bad actors," are trying to cash in on the hot market by pushing out poorer renters to make way for wealthier ones who will pay more. 

Winter said he's heard of cash-for-keys agreements taking place in immigrant-majority neighborhoods.

"We see some buildings that may have a lot of undocumented tenants," Winter said. "They're especially vulnerable to this process."

Housing advocates such as Annie Shaw call the law a good first step but say it will only work if tenants and landlords are aware of it. 

"I think it will work if the city holds the landlord accountable," said Shaw, a volunteer organizer with the Chinatown Community for Equitable Development. "On top of that, tenants need to know their rights better."

To raise awareness, Ponce and her neighbors who were offered cash-for-keys agreements by the  company, NBK Realty Management, took part in a rally last Saturday. 

NBK Realty Management did not return KPCC's request for comment.

Renters with questions about the new cash for keys law can call the city's rent hotline at 1-866-557-RENT or the city webpage Home For Renters.