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.
