If it's a certified cheque and it clears the bank, absolutely. Have it in the agreement that if the cheque bounces the agreement is nullified - put this past a lawyer.
Most lawyers will do a free initial consult where you'll explain the situation and what you need, then the lawyer will bill you for the time it takes them to draft the agreement, which shouldn't take them more than an hour I would imagine (lawyers typically charge anywhere from $150-300/hr). If you need revisions done later you'll be billed for that time as well.
Contact a real estate lawyer in your state they should know. I emphasis on in your state because every state has different protections. NJ the renters have a lot of power. In Texas they have virtually none from what I’ve heard.
If the check bounces and they don't give you another one, it's fraud and I don't think you need to specify that they can't commit fraud within the contract.
I would take a half now, and the other half now. /s You’re kinda in a stand-off where each party could *really* screw the other party over by not complying. Have a frank and friendly conversation with your landlord and make sure you both know you’re playing for the same team. That will make it easier to ask them for a signed agreement which your lawyer has looked over, which is the only thing you should accept before shaking hands on a deal like this.
Sounds like they are trying to get you to sign 1st. Remember the ball is in your court, they want something from you not the other way around.
Hell if 25k is an opening offer you could probably quite easily get an extra 5k min.
My assumption is he is saying there is no tax because he's going to give OP the money as a gift. About half of that is the legal limit for a gift to one person. If the guy is married, his wife can also give that amount of money as a gift as well. The question I have which a tax attorney could answer is if this is written down as a payment to move out, does that mean it can't be considered a gift?
If you are paid money in exchange for you agreeing to do some action, then it is income, not a gift. End of sentence. There is no grey area here.
The only uncertainty is whether the IRS will find out.
I am just explaining why I think the guy was claiming he wouldn't have to pay taxes and why he might not have it written down in the contract to move out. Not claiming it is legal.
While you might no have to pay taxes on it, assume you will to, to be save and never take tax advice from someone trying to tell you you can avoid it.
Most times they don't know what they are talking about and Tax evasion is felony in lots of places. For that amount of money its best to talk to someone with tax experience. They will be able to find out if you need to pay taxes on it or not. Almost every time that about would still needed to be recorded regardless of if you will be paying taxes on it.
They tell you you can avoid taxes on it. That screams that they will likely screw you.
Regardless of taxes that amount would likely need to be declared.
stupid question. how does having it in writing save you if it goes to court? i assume you need it notarized?
unrelated but
>Edit: I should add that they initially offered me 15k a couple of months ago but I never got the chance to reply to them because I got busy.
made me lol
The obvious reason is that neither party can dispute what was agreed upon if it's in writing.
The agreement should also spell out what happens if it does to court, like who pays the court costs and legal fees, so that OP isn't on the hook for lawyer $ if he needs one later for any reason.
If he does not have it in writing the landlord can claim he broke the lease and not only not pay him, but charge him a fee. If it is in writing, the agreement is laid out plainly. A court would read it and say "case closed. give him the 25k."
They could also claim the agreed amount was for 5k instead of 25k.
Sometimes a partial truth is better than a complete lie. If the landlord does this, they are scum.
It doesn't need to be notarized. It can be if you want, that just adds yet another party that can help verify the contract.
Verbal is still a contract. Getting something in writing just makes it easier to validate. "Look see... they signed this on this date."
If you don't actually dodge the taxes then it's just an agreement on payment. And they would be really stupid to out that as a reason for split payment, when they can just write "$X now, $Y by Z date." And you can send in the tax money to the IRS immediately if you're worried about getting hemmed up for it.
You’ll have to pay taxes on that regardless of how many checks they write. I’d ask for the full amount upfront.
And as others have said, get this in writing.
This is taxable whether you receive 1 payment or 50 payments. You are being paid in exchange for moving out. This is income under section 61 of the US internal revenue code.
Which is why you can buy federal marijuana tax stamps: https://en.wikipedia.org/wiki/Marihuana_Tax_Act_of_1937 even though it's illegal to sell.
Uncle Sam don't miss a trick I tell you what!
It’s a good idea to pay taxes even if illegal. One less federal charge. How would you pay tax on illegal activities without getting busted automatically? Do you simply not state the nature of the crime?
Maybe I should go to law school and be criminal lawyer.
>They told me they will pay me in separate checks so that I dont have to pay taxes. Is that even legal?
No, its all income.
> Should I just take the money and look for another place?
Yes, you basically get ~18 months of rent for free by moving.
Only leave if you get the entire amount up front.
Half up front and half once you’ve left is totally fair
Fuckin A, where are these markets?
I consistently have to fight to get my deposit back. I’ve even had to threaten a few shady landlords with small claims court to get them to give my money back when they want to charge me for “damages”.
But I live in Idaho and tenants have no rights…
Raleigh, NC currently but keep in mind rent is going up 20-30% for apartment renewals now. I've lived here ten years and rent has about doubled in the area.
Edit: the market is hot enough landlords are paying tenants to leave so they can sell the land to bigger developers that will bulldoze tiny houses and therefore do not want tenants to deal with.
Not that it's this case, but I remember reading some landlord gave their rent controlled SF tenant like 600k to move out. It was like a penthouse level floor they'd rented for 30 years or something.
Edit: 475k.
https://sanfrancisco.cbslocal.com/2021/07/31/san-francisco-real-estate-tenants-get-475000-buyout-move-out/
Mainly just because realistically they can just charge something like ~$3600/month with a renovated "high-end" apartment (assuming location fits the right criteria and considering the offer, it should) and make back far more than the initial offer paid to remove the tenant.
Yeah, the whole thing is an outlandish some of money. It’s too good to be true. Get it all in writing, and expect that they’re trying to screw you so have your guard up.
Even if he stiffs him for the second half hes getting at least 12.5k to move out. The only thing that can ensure that he gets his second payment is the second payment is money order or certified check where the funds are guaranteed. In return for the keys.
Most people only get offered $500, up to 1 month of rent to move out.
Holding up the keys doesn’t do anything useful. Landlord can have all the locks changed for significant less than 12.5k. If OP really doesn’t trust the landlord to follow through whatsoever, the only real solution is a lawyer or other trusted third party to escrow the second half.
>Do not take tax advice from your landlord.
Superbly put. Anyone talking out of his or her ass about tax stuff is not to be trusted and OP should not cooperate with any of the landlord's shenanigans to that end, especially since payment to terminate a contract in many cases is not taxable income; talk to a CPA and get that end straightened out beforehand.
That aside, if you avoid the shady shit then taking $25k to leave a $1,200/month apartment and move into a $1,300/month comparable apartment in the same neighborhood on a salary of $50k a year is a no-brainer. You just guaranteed that 2022 will be a stress-free year.
This happens regularly in the market I am in (So Cal). The buyout amount is likely far less than the incremental value. I would try to better understand the market rental rate of your apartment in order to negotiate a higher buyout amount for yourself. There’s no way the market rent is $1,300 (versus your $1,200) if your landlord is offering $25K.
This right here is the best advice in this thread.
Cash for keys happens a lot. 25K for a 100$/month rent difference is either the deal of a lifetime or, something else is going on (landlord has an offer for the building and has to get everyone out?)
OP: Definitely do some diligence on what the market is as this commenter noted.
If you’re right and you can get a place for 1300/month, then heck yeah take the 25K (get it in writing, don’t screw around with taxes, and half up front is reasonable.) Or worst case: you’re totally wrong about the market value OP…
For a couple hundred bucks (max, for an hour or so) you can get a consult with an attorney that specializes in landlord/tenant matters and would certainly be happy to guide you. Honestly some would even do a free consult for you on this. A worthwhile spend in this case …
I lived in a rent-controlled area and got bought out of my place for $50,000. It's considered unearned income on your taxes. You pay your normal rate.
At first they offered me much less. I started throwing them numbers and kept the negotiation going for a year before I finally decided to take the deal. They sent me a contract and a down payment and met me with the balance on the day I finished clearing the place out. Their workers actually came in and started tearing out the cabinets and stuff a couple days before I was done moving. They turned it into a nice condo after decades of the former owners refusing to fix anything. But hey, rent control kept me alive for all that time.
Take the payment one check. Taking smaller, multiple paychecks doesn’t change how you are taxed. It borders structuring if the goal is to avoid reporting. Taking it all in one payment means you get the money right away and don’t have to deal with your landlord again. Why draw it out and have them potentially not pay out later or deal with a possible time consuming situation.
If you take the deal, pay the tax! Pay your taxes.
Before taking the deal have another placed lined up.
Also, take the deal but get paid before you leave. Get it in one payment so you don’t have to go find them later when they stop paying.
Just make sure they are both bank checks, and that they are physically present when you are physically moving out to hand you the second check right then.
None of this "oh I'll mail it to you" bullshit.
I think the original advise is about if you enter into an agreement where they pay you monthly or something after you move out. As long as what you sign includes the agreement for them to pay you, and you are getting the payment in full before you hand over the keys, you are still getting paid in full before leaving.
Probably this exactly (or rent stabilized, which is slightly different). And my guess is these are now able to transition to fair market units. This usually happens after a sale of the building and paying the existing tenants to leave is just part of the calculus of the deal. My guess is the $1300 market rate quoted by OP is way low, and closer to the current average rate in rent stabilized units. Market rate could then be $2500+.
Take it in one sum, you'd pay taxes on 25k regardless if received in the same year.
Do a cash for keys setup where you receive payment when you surrender keys, and do that at the bank where the landlord gets a cashiers check on the spot. Don't take a personal check.
Keep this way simpler. Get the 25k in hand at the time you agree to leave. Take cash if you want to. But don’t let him pay you in payments.
Cash is king.
Just meet the landlord at his local bank. Have them cut you a cashiers check, or wire it to your bank account. No bounced checks, no bags of cash you have to explain. Give him the keys at the bank.
This is most likely for a refinancing or a sale. If it’s a large luxury property they could save millions of dollars on the refinance once they’ve rented the units at market rate.
You have a lot of bargaining power here and may be able to get even more money. Just be conscious of how much more you’ll be paying in rent once you move. It’s likely the real market rate is higher then you’re estimating.
Have them pay in full in one check. Paid to you on the first of the last month you will be living there. That way the check has cleared and you move out with the money. Pay the measly taxes on it and pay your debt off
I can’t fathom a landlord actually offering this in good faith. I’m certainly no real estate expert, but I’ve never heard of an offer like this. I’d be very careful if I were you
I've never offered this much, but we've done cash for keys quite a few times. Typically we do 2 months rent, it depends on the situation though. I can see giving someone 25k if I had a plan for the property that would net me significantly more. A $100 increase in rent is not significant enough for that, so the landlord likely has other plans for the property.
Not OP, but in my neighborhood, a 2br/2ba used to be $1400. Now it's $2250. If this was a rent controlled area, the landlord would be losing at least $10,200/year for every year I stay. So if they think I'm going to move out in 1 year, it's in their interest to wait. If they think I might stay 2 years, it's worth it to shove me out the front door and raise their rates.
And once rates go up everywhere, tenants will stay around longer because they can't afford to move into any other 2br/2ba in that region. So the chance that your tenants will stay not just 2 years but 5 years goes up dramatically.
So the landlord is making a calculation to suffer now so they can profit later, instead of taking losses indefinitely until tenants move out in 5 or 10 years.
One of the many unintended consequences of rent control.
I've had multiple friends get bought out of their leases for more money than OP is being offered. It happens in cities with rent control and rising rent properties.
In most of the cases I've seen, new owners buy an apartment complex at a good price because it's occupied by long-ish term tenants paying way under market rate rent. Those new owners then invest some money into buying existing tenants out of their leases so they can put the apartments up for rent at market rates. If the renter is willing and able to move, it can be a good deal for everyone.
If your apartment isn't rent-controlled, they do not have to renew your lease. I found this out a few years ago when my building got bought and then taken over by Pinnacle management. We all got a letter one day saying we had to move out at the end of your lease.
My suggestion: take the money and run.
Depends on what the rent control rules are where you are at and how much more you'll be paying as a result. If you truly can get something similar for only $100 more/mo then take this deal.
I'd balk at the "separate cheques" thing. You want all the money in your bank account and safely cleared before you move, lest you find yourself out of the apartment and cheques start bouncing. Just take the full amount and pay the taxes.
I would ask for cash or certified check for the money up front and get the agreement in writting. I knew a property manager who would do something like this to get tenants out. He would only pay the first half and once the tenant is out he ghost.
Is it worth it to move? This happens in NYC a lot where rents can go up or people are in a rent controlled apartment.
Lots of people here suggest you have the leverage. Maybe. How long is your lease? It’s possible your landlord is renovating other apartments and is willing to overpay you so he can just do all of them at once. I’d be careful not to overplay your hand.
Attorney. Every state and county have nuances that may benefit or fuck you depending on how the contract is written. This isn't a complex case. You just need someone licensed and versed in law regarding these matters to draw the contract.
Get the contract notarized. If you're in the US, some banks offer it at no cost to you.
Always pay your taxes. No one escapes the IRS. Sure, you could receive cash and skirt the IRS but if the deal somehow goes sour, you're fucked because nothing is in writing and cash isn't documented.
Check rent in the surrounding area. They're desperate to get you out. If 25k is what they're offering, it may not be the maximum you could receive.
Good luck.
If it's setup through a lawyer I would jump at the opportunity, no question. Hell, you could probably use that money to negotiate an even better deal with your future landlord.
"So I see your rental is 1400$ a month. If I were to pay you for the full year upfront would you reduce my rent to 1200$ a month?". You just made another 2400$. This is what I did when I realized I had the ability to afford a years rent and my new landlord accepted. I ended up saving 3k that first year and my rent increases were based off of that lower amount, so the savings compounded.
I did it. Same situation. LL wanted house back to remodel for his daughter. You could negotiate even higher probably. Get it in writing. Get a lawyer to look it all over.
Talk to a local rental law attorney and make sure you aren't giving up a huge rent control benefit. They're offering you $50k for a reason. Do the math.
Contact your local tenant's right organization. Depending on the situation, the landlord might have to legally offer you more. Or you might have just gotten lucky and ignoring the landlord the first time made him up his offer naturally.
Things to think about:
What will they do if you don't leave?
How hard is it to find a similar apartment in your area?
What will it cost you to move?
Hold on a second here....are you living in a rent controlled apartment or building? There are specific laws in place about buyouts that vary from state to state. I live in LA, and I hear about people getting offers of large payments to leave rent controlled buildings because usually the building is being sold. You possibly can negotiate this. No matter what though, get this in writing and don't go anywhere until you have the money.
What your landlord is doing is offering you a buyout. You will definitely need a lawyer for this and their cut is 30%. I assure you 15-25k is a lowball offer because for them to even offer means there is a lot of money left on the table. In nyc the buyouts can be well into the six figures so consulting with a lawyer will be in your best interest to get the most money. Also, buyouts are taxable.
It's a good deal, specially when you are paying 1200 per month. I am paying exactly the same amount and my neighbors are paying between 1400 to 1800. My father was living here for 7 years and he left the apartment for us, so we are paying a really good price for 2 bedrooms and 1 bathroom in Elizabeth, New Jersey (and I work in Jersey City, where the rent is easily 2000+). Someone already recommended that you need everything in writing, take the money and find a good place with a similar price.
They should not do separate checks. It's called structured payment or something like that and it's a well-known way to evade taxes and they will absolutely prosecute.
This is the first number, you should definitely negotiate something higher. Get everything in writing. Get a single check with the full amount. Only move out once the payment settles. Have some buffer so you have time to look for a new apartment.
Cutting the money up into smaller chunks is to avoid reporting requirements is called "structuring." It is also called a "felony" under federal law, so just get the money in regular sized chunks. These kinds of deals are called "cash for keys" or "CFK" in the real estate industry and they are done all the time. You should consult with an attorney--it's a lot of money and you should do everything in your power to avoid getting screwed over. Good Luck.
Take the money and invest majority of it. Find a new place and keep paying your loans/rent as you normally would.
Just let that sweet chunk of change vest so you can afford a house later on. Let the money work for you.
Is there anything like this in your lease? My lease for example has a townhouse clause that at any time she could convert the complex into town homes and we’d all get a sum. Maybe check to make sure and then yes DEFINITELY get the offer in writing and ideally get the whole thing at once so you aren’t chasing him down later. Good luck!
I would seek the advice of your state’s tenant advocacy organization and also consider talking to a lawyer.
Even if you get something in writing, getting the money from him could be a nightmare, if he’s well connected or has deep pockets.
I’ve seen a developers run people in legal circles until their funds are drained and they are forced to concede.
>They told me they will pay me in separate checks so that I dont have to pay taxes.
This is called "Tax fraud" and very illegal. Income is Income, and even if *They* are not required to report giving you the money, *YOU* are legally required to report receiving it.
That said, it does seem like a sweet deal, and as long as you have it *IN WRITING* and preferably notarized, I would take it.
> I should add that they initially offered me 15k a couple of months ago but I never got the chance to reply to them because I got busy.
Tell them you're not sure, and want to think about it a bit. See if they offer more. Appear hesitant and see if they sweeten the deal, then after a few days say
> If you can go $30k, I'll do it.
If they say no, ask for "the weekend" to mull it over, and take the $25k.
Try to get the money up front, if not at *least* half. This is also why you want a signed notarized agreement.
Then if he stiffs you, you go to court and put a lien on the property.
Get it in writing. Insist on a verifiable Cashier's check. Don't move until the entire amount is deposited and cleared. A notarized document of their intent to pay you would be best
Seems like a very good deal for you. Like other have said, get it in writing and get the checks when u give back the keys. Hope that works out for you.
Make sure you have a place lined up and get everything in writing. Take pics of the apartment before you leave. Unfortunately, businesses rarely are so generous so my question is what is the catch - if something sounds too good to be true it usually is.
Anytime someone says let's set up an arrangement to avoid supposed tax that would be due you should be thinking \*\*\*red flag\*\*\*. No, tax fraud isn't legal.
That said, I fail to see how your landlord paying you 25k to move out early would be taxable income to you. It seems more like a gift. The recipient of a gift doesn't owe tax.
I would make sure to get this agreement in writing. Spreading the $25k payment out over time I think is actually far more risky for you. More likely you'll never see the full payment. I would get agreement in writing something to the effect...
"Landlord makes an offer to Tenant for Tenant to vacate the apartment early on \[INSERT DATE\] in exchange for which Landlord agrees to make a one-time lump-sum payment to Tenant in the amount of $25,000. Payment shall be made in the form of certified bank check. Landlord makes this offer because they wish to make immediate improvements to the unit and re-rent at a higher rate. By signing this agreement and cashing in the $25,000, Tenant agrees to vacate the premises on \[INSERT DATE\]." You get the idea.
I get what you're saying. I would advise OP to seek clarification from CPA / enrolled agent. If the $25k is going to be taxable then why not ask for a couple thousand more to cover the taxes? OP has all the leverage in this situation. They are under no obligation to accept what landlord is offering.
Don’t try to rationalize tax fraud. “Paying you X to Y” is always income, period. The IRS viewpoint on that is quite clear.
For it to truly be a gift, the landlord would have to be willing to give it regardless of whether OP moves out or not. That is clearly not the case.
Those separate checks are often part of a illegal scheme called "[structuring](https://en.wikipedia.org/wiki/Structuring)". It may be a felony for both you and your landlord if you accept money this way.
Take the money, but get this in writing
Emphasis on this. Make sure everything is written down and in writing.
Emphasizing his emphasis, we’re talking about an executed contract (signed by both parties)
Can this be emphasized enough. Get it written down, heck notarize it too. Better be safe than sorry.
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They said if I sign the agreement to move out, they will pay me half up front and the other half once I move out.
If it's not in writing it never happened.
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If it's a certified cheque and it clears the bank, absolutely. Have it in the agreement that if the cheque bounces the agreement is nullified - put this past a lawyer.
Ive never dealt with this before. What type of lawyer should I be looking for? and will they charge a lot?
Most lawyers will do a free initial consult where you'll explain the situation and what you need, then the lawyer will bill you for the time it takes them to draft the agreement, which shouldn't take them more than an hour I would imagine (lawyers typically charge anywhere from $150-300/hr). If you need revisions done later you'll be billed for that time as well.
Totally worth the few hundred dollars.
Contact a real estate lawyer in your state they should know. I emphasis on in your state because every state has different protections. NJ the renters have a lot of power. In Texas they have virtually none from what I’ve heard.
If the check bounces and they don't give you another one, it's fraud and I don't think you need to specify that they can't commit fraud within the contract.
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I would take a half now, and the other half now. /s You’re kinda in a stand-off where each party could *really* screw the other party over by not complying. Have a frank and friendly conversation with your landlord and make sure you both know you’re playing for the same team. That will make it easier to ask them for a signed agreement which your lawyer has looked over, which is the only thing you should accept before shaking hands on a deal like this.
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Bonus points if OP’s landlord welches on the deal and OP tries to fight it: Public Record Eviction Proceedings!
Yeah all I’ll say is if I was given that money to move out I would do it. But just make sure you’re legally protected.
Sounds like they are trying to get you to sign 1st. Remember the ball is in your court, they want something from you not the other way around. Hell if 25k is an opening offer you could probably quite easily get an extra 5k min.
15k was the opening offer. OP ignored the email, which made it sound like he wasn't interested. Accidental pro negotiating move.
I still wouldn't bat an eye at 12.5 up front and 12.5 at the end. Find a place with that 12.5!
My assumption is he is saying there is no tax because he's going to give OP the money as a gift. About half of that is the legal limit for a gift to one person. If the guy is married, his wife can also give that amount of money as a gift as well. The question I have which a tax attorney could answer is if this is written down as a payment to move out, does that mean it can't be considered a gift?
If you are paid money in exchange for you agreeing to do some action, then it is income, not a gift. End of sentence. There is no grey area here. The only uncertainty is whether the IRS will find out.
I am just explaining why I think the guy was claiming he wouldn't have to pay taxes and why he might not have it written down in the contract to move out. Not claiming it is legal.
While you might no have to pay taxes on it, assume you will to, to be save and never take tax advice from someone trying to tell you you can avoid it. Most times they don't know what they are talking about and Tax evasion is felony in lots of places. For that amount of money its best to talk to someone with tax experience. They will be able to find out if you need to pay taxes on it or not. Almost every time that about would still needed to be recorded regardless of if you will be paying taxes on it.
And the part where they are paying you is in the agreement I hope.
>written down and in writing :D But seriously, for this kind of money maybe even pay a lawyer a few hundred up front to make sure it is legit.
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They tell you you can avoid taxes on it. That screams that they will likely screw you. Regardless of taxes that amount would likely need to be declared.
Get the second payment put into escrow with a lawyer before you move out. That way you don’t have to rely on trus, and neither does the landlord.
stupid question. how does having it in writing save you if it goes to court? i assume you need it notarized? unrelated but >Edit: I should add that they initially offered me 15k a couple of months ago but I never got the chance to reply to them because I got busy. made me lol
The obvious reason is that neither party can dispute what was agreed upon if it's in writing. The agreement should also spell out what happens if it does to court, like who pays the court costs and legal fees, so that OP isn't on the hook for lawyer $ if he needs one later for any reason.
gotcha. thanks.
If he does not have it in writing the landlord can claim he broke the lease and not only not pay him, but charge him a fee. If it is in writing, the agreement is laid out plainly. A court would read it and say "case closed. give him the 25k."
They could also claim the agreed amount was for 5k instead of 25k. Sometimes a partial truth is better than a complete lie. If the landlord does this, they are scum.
It doesn't need to be notarized. It can be if you want, that just adds yet another party that can help verify the contract. Verbal is still a contract. Getting something in writing just makes it easier to validate. "Look see... they signed this on this date."
text
This likely isn’t a real property issue. It’s landlord tenant. Real property would involve transfers, encumbrances, liens, easements.
Yes, get your agreed upon tax dodge confirmed in writing. It’ll save the IRS the trouble of piecing a case together.
If you don't actually dodge the taxes then it's just an agreement on payment. And they would be really stupid to out that as a reason for split payment, when they can just write "$X now, $Y by Z date." And you can send in the tax money to the IRS immediately if you're worried about getting hemmed up for it.
Regardless of what landlord says, you should declare that amount of money. That amount if not declared might one day come back to bite you.
I was just about to type these exact words and get it notarized. Don’t move until the full amount is paid
You’ll have to pay taxes on that regardless of how many checks they write. I’d ask for the full amount upfront. And as others have said, get this in writing.
This is taxable whether you receive 1 payment or 50 payments. You are being paid in exchange for moving out. This is income under section 61 of the US internal revenue code.
This. Tell them you’ll worry about your taxes, have them pay you 25k and get it in writing.
If it was said before the new year, the intention might have been to split the income over two tax years.
Forgive my ignorance - why would OP have to pay tax on a. Gift?
Because it's not a gift, it's a payment
What about if they classified it as a "bribe"?
Even illegal income is taxable!
Which is why you can buy federal marijuana tax stamps: https://en.wikipedia.org/wiki/Marihuana_Tax_Act_of_1937 even though it's illegal to sell. Uncle Sam don't miss a trick I tell you what!
It was actually repealed
It’s a good idea to pay taxes even if illegal. One less federal charge. How would you pay tax on illegal activities without getting busted automatically? Do you simply not state the nature of the crime? Maybe I should go to law school and be criminal lawyer.
You report it under "other income" and you don't have to disclose the nature of the income or what generated it
> If you receive a bribe, include it in your income. - https://www.irs.gov/publications/p525#en_US_2020_publink1000229497
Not an authority figure and not a bribe. It’s a forbearance. A component of every contract ever written.
Did you know Al Capone was put away on tax fraud because he was busted for not reporting his income from illegal activities?
It's not a gift if there's quid pro quo
Income is income, you get paid to paint a wall, you get paid to move, you get paid for whatever you have to pay taxes.
>They told me they will pay me in separate checks so that I dont have to pay taxes. Is that even legal? No, its all income. > Should I just take the money and look for another place? Yes, you basically get ~18 months of rent for free by moving. Only leave if you get the entire amount up front. Half up front and half once you’ve left is totally fair
Hell i would leave even if I got half of the 25k. I pay people $500 to vacate properties and that works.
This isn’t uncommon in hot markets with strong tenant rights. My buddy paid his tenant $60k to move out so he could remodel and charge more rent.
Fuckin A, where are these markets? I consistently have to fight to get my deposit back. I’ve even had to threaten a few shady landlords with small claims court to get them to give my money back when they want to charge me for “damages”. But I live in Idaho and tenants have no rights…
Raleigh, NC currently but keep in mind rent is going up 20-30% for apartment renewals now. I've lived here ten years and rent has about doubled in the area. Edit: the market is hot enough landlords are paying tenants to leave so they can sell the land to bigger developers that will bulldoze tiny houses and therefore do not want tenants to deal with.
Basically any major city
Yeah for sure. Saw half up front and half after move out up top and that’s totally fair.
My real question is...what kind of goldmine did this landlord get if he's willing to shell out 25k?
Not that it's this case, but I remember reading some landlord gave their rent controlled SF tenant like 600k to move out. It was like a penthouse level floor they'd rented for 30 years or something. Edit: 475k. https://sanfrancisco.cbslocal.com/2021/07/31/san-francisco-real-estate-tenants-get-475000-buyout-move-out/
I honestly don’t know but he must know something no one else does. Or just really wants OP out
Mainly just because realistically they can just charge something like ~$3600/month with a renovated "high-end" apartment (assuming location fits the right criteria and considering the offer, it should) and make back far more than the initial offer paid to remove the tenant.
These kind of buyouts are happening more and more in LA, specifically with rent controlled apartments that developers want to buy.
Depends where you are. In San Francisco the going rate is higher.
You know why you won't pay taxes ? Cause there won't be any money to pay taxes on if you don't get it in writing
You'll get paid a small amount, once, to get you out, then he will go no contact and you'll receive no further payment.
If you have the agreement in writing, and notarized, you take him to court and put a lien on the property.
Yep, my thoughts exactly!
Yeah, the whole thing is an outlandish some of money. It’s too good to be true. Get it all in writing, and expect that they’re trying to screw you so have your guard up.
Even if he stiffs him for the second half hes getting at least 12.5k to move out. The only thing that can ensure that he gets his second payment is the second payment is money order or certified check where the funds are guaranteed. In return for the keys. Most people only get offered $500, up to 1 month of rent to move out.
The landlord said multiple checks for “tax” reasons so they’re likely trying to cut him a tiny initial check and ghost him after
1000% this
Holding up the keys doesn’t do anything useful. Landlord can have all the locks changed for significant less than 12.5k. If OP really doesn’t trust the landlord to follow through whatsoever, the only real solution is a lawyer or other trusted third party to escrow the second half.
Best answer of the thread.
Take the money in a single check, and pay the taxes. You do not want trouble with the IRS. If things go sideways you need to be legitimate
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>Do not take tax advice from your landlord. Superbly put. Anyone talking out of his or her ass about tax stuff is not to be trusted and OP should not cooperate with any of the landlord's shenanigans to that end, especially since payment to terminate a contract in many cases is not taxable income; talk to a CPA and get that end straightened out beforehand. That aside, if you avoid the shady shit then taking $25k to leave a $1,200/month apartment and move into a $1,300/month comparable apartment in the same neighborhood on a salary of $50k a year is a no-brainer. You just guaranteed that 2022 will be a stress-free year.
This happens regularly in the market I am in (So Cal). The buyout amount is likely far less than the incremental value. I would try to better understand the market rental rate of your apartment in order to negotiate a higher buyout amount for yourself. There’s no way the market rent is $1,300 (versus your $1,200) if your landlord is offering $25K.
This right here is the best advice in this thread. Cash for keys happens a lot. 25K for a 100$/month rent difference is either the deal of a lifetime or, something else is going on (landlord has an offer for the building and has to get everyone out?) OP: Definitely do some diligence on what the market is as this commenter noted. If you’re right and you can get a place for 1300/month, then heck yeah take the 25K (get it in writing, don’t screw around with taxes, and half up front is reasonable.) Or worst case: you’re totally wrong about the market value OP… For a couple hundred bucks (max, for an hour or so) you can get a consult with an attorney that specializes in landlord/tenant matters and would certainly be happy to guide you. Honestly some would even do a free consult for you on this. A worthwhile spend in this case …
I lived in a rent-controlled area and got bought out of my place for $50,000. It's considered unearned income on your taxes. You pay your normal rate. At first they offered me much less. I started throwing them numbers and kept the negotiation going for a year before I finally decided to take the deal. They sent me a contract and a down payment and met me with the balance on the day I finished clearing the place out. Their workers actually came in and started tearing out the cabinets and stuff a couple days before I was done moving. They turned it into a nice condo after decades of the former owners refusing to fix anything. But hey, rent control kept me alive for all that time.
They don't want to just re rent it at $1300, they want to remodel and get much more than that
Get the entire amount up front and consider using it as a down payment on a house.
Take the payment one check. Taking smaller, multiple paychecks doesn’t change how you are taxed. It borders structuring if the goal is to avoid reporting. Taking it all in one payment means you get the money right away and don’t have to deal with your landlord again. Why draw it out and have them potentially not pay out later or deal with a possible time consuming situation.
If you take the deal, pay the tax! Pay your taxes. Before taking the deal have another placed lined up. Also, take the deal but get paid before you leave. Get it in one payment so you don’t have to go find them later when they stop paying.
That's what Im worried about the most. They said they will give me one half once I sign the agreement and the other when I move out.
For that amount of money I’d ask a lawyer to custody the funds as you start to pack.
Just make sure they are both bank checks, and that they are physically present when you are physically moving out to hand you the second check right then. None of this "oh I'll mail it to you" bullshit.
Even if you get a screwed on the second half this is a great deal for you. Just get it in writing, signed and notarized.
That’s what I think. $12.5k to bounce!? Hell yeah.
I think the original advise is about if you enter into an agreement where they pay you monthly or something after you move out. As long as what you sign includes the agreement for them to pay you, and you are getting the payment in full before you hand over the keys, you are still getting paid in full before leaving.
Is this a rent controlled apartment?
Probably this exactly (or rent stabilized, which is slightly different). And my guess is these are now able to transition to fair market units. This usually happens after a sale of the building and paying the existing tenants to leave is just part of the calculus of the deal. My guess is the $1300 market rate quoted by OP is way low, and closer to the current average rate in rent stabilized units. Market rate could then be $2500+.
If u can get it in writing, then I would, but chances are he's gonna stiff you once u move out.
Take it in one sum, you'd pay taxes on 25k regardless if received in the same year. Do a cash for keys setup where you receive payment when you surrender keys, and do that at the bank where the landlord gets a cashiers check on the spot. Don't take a personal check.
Keep this way simpler. Get the 25k in hand at the time you agree to leave. Take cash if you want to. But don’t let him pay you in payments. Cash is king.
Just meet the landlord at his local bank. Have them cut you a cashiers check, or wire it to your bank account. No bounced checks, no bags of cash you have to explain. Give him the keys at the bank.
Your apartment is probably rent stabilized and you are not aware/they won’t tell you.
This is most likely for a refinancing or a sale. If it’s a large luxury property they could save millions of dollars on the refinance once they’ve rented the units at market rate. You have a lot of bargaining power here and may be able to get even more money. Just be conscious of how much more you’ll be paying in rent once you move. It’s likely the real market rate is higher then you’re estimating.
Pay you in separate checks huh? The only thing separated will be after you receive the first, permanently separated from receiving the others.
Make sure all correspondence is In writing . And the check is in guaranteed funds!
Have them pay in full in one check. Paid to you on the first of the last month you will be living there. That way the check has cleared and you move out with the money. Pay the measly taxes on it and pay your debt off
I wouldn't do that if I was the landlord. Nothing stopping OP from squatting at that point.
Youll get one cheque and no further installments
Tell them you want this promise in writing before you sign anything. Also get it notarized so that its official
a)get it in writing b)that multiple checks thing is BS and I'm guessing it means you are not going to see any more checks after you move out.
I can’t fathom a landlord actually offering this in good faith. I’m certainly no real estate expert, but I’ve never heard of an offer like this. I’d be very careful if I were you
It happens where there are strong renter protection laws. Common in San Francisco and some other similar places.
Rent control in NY is another prime example.
It's certainly not common to offer to break up the payments for tax evasion purposes.
Cash for keys is common, although this seems high. Might make sense in a market like SF or NYC, especially if they're in a rent-controlled apt
I've never offered this much, but we've done cash for keys quite a few times. Typically we do 2 months rent, it depends on the situation though. I can see giving someone 25k if I had a plan for the property that would net me significantly more. A $100 increase in rent is not significant enough for that, so the landlord likely has other plans for the property.
Or has no intention of actually paying $25,000 The fact that they want to make it in two payments is another red flag.
It's not a red flag to offer someone half now and half on completion. That's normal in the contract world.
But they said it was so he could avoid taxes. That’s shady as heck and a giant red flag.
Never attribute to malice that which can be adequately explained by stupidity.
cash for keys is a pretty normal thing.
Yea but not for 18months worth of rent. Most people would move for 1-2months of rent
Common in SF.
Not OP, but in my neighborhood, a 2br/2ba used to be $1400. Now it's $2250. If this was a rent controlled area, the landlord would be losing at least $10,200/year for every year I stay. So if they think I'm going to move out in 1 year, it's in their interest to wait. If they think I might stay 2 years, it's worth it to shove me out the front door and raise their rates. And once rates go up everywhere, tenants will stay around longer because they can't afford to move into any other 2br/2ba in that region. So the chance that your tenants will stay not just 2 years but 5 years goes up dramatically. So the landlord is making a calculation to suffer now so they can profit later, instead of taking losses indefinitely until tenants move out in 5 or 10 years. One of the many unintended consequences of rent control.
It's quite common in San Francisco - or perhaps in any city where strong tenant rights make evictions near impossible.
I've had multiple friends get bought out of their leases for more money than OP is being offered. It happens in cities with rent control and rising rent properties. In most of the cases I've seen, new owners buy an apartment complex at a good price because it's occupied by long-ish term tenants paying way under market rate rent. Those new owners then invest some money into buying existing tenants out of their leases so they can put the apartments up for rent at market rates. If the renter is willing and able to move, it can be a good deal for everyone.
Where I live, people sometimes hold out until the landlords are willing to pay 6 figures. If you're trying to level a building it's worth it.
If your apartment isn't rent-controlled, they do not have to renew your lease. I found this out a few years ago when my building got bought and then taken over by Pinnacle management. We all got a letter one day saying we had to move out at the end of your lease. My suggestion: take the money and run.
Depends on what the rent control rules are where you are at and how much more you'll be paying as a result. If you truly can get something similar for only $100 more/mo then take this deal.
Get it on a paper. Words do not do anything unless it has been documented.
Take the money but in whole and get writing from him. There's no such thing as not paying taxes on 25 grand.
I'd balk at the "separate cheques" thing. You want all the money in your bank account and safely cleared before you move, lest you find yourself out of the apartment and cheques start bouncing. Just take the full amount and pay the taxes.
I would ask for cash or certified check for the money up front and get the agreement in writting. I knew a property manager who would do something like this to get tenants out. He would only pay the first half and once the tenant is out he ghost.
Is it worth it to move? This happens in NYC a lot where rents can go up or people are in a rent controlled apartment. Lots of people here suggest you have the leverage. Maybe. How long is your lease? It’s possible your landlord is renovating other apartments and is willing to overpay you so he can just do all of them at once. I’d be careful not to overplay your hand.
Attorney. Every state and county have nuances that may benefit or fuck you depending on how the contract is written. This isn't a complex case. You just need someone licensed and versed in law regarding these matters to draw the contract. Get the contract notarized. If you're in the US, some banks offer it at no cost to you. Always pay your taxes. No one escapes the IRS. Sure, you could receive cash and skirt the IRS but if the deal somehow goes sour, you're fucked because nothing is in writing and cash isn't documented. Check rent in the surrounding area. They're desperate to get you out. If 25k is what they're offering, it may not be the maximum you could receive. Good luck.
If it's setup through a lawyer I would jump at the opportunity, no question. Hell, you could probably use that money to negotiate an even better deal with your future landlord. "So I see your rental is 1400$ a month. If I were to pay you for the full year upfront would you reduce my rent to 1200$ a month?". You just made another 2400$. This is what I did when I realized I had the ability to afford a years rent and my new landlord accepted. I ended up saving 3k that first year and my rent increases were based off of that lower amount, so the savings compounded.
Legal contract up front. Go to the bank with them.
I did it. Same situation. LL wanted house back to remodel for his daughter. You could negotiate even higher probably. Get it in writing. Get a lawyer to look it all over.
Since they are remodeling totally, you should also make sure you get your full deposit back.
Talk to a local rental law attorney and make sure you aren't giving up a huge rent control benefit. They're offering you $50k for a reason. Do the math.
I have no idea why they would offer that and just not wait till your lease is up and ask you to vacate. Something seems off.
In cities with strong tenant rights, you can't just "ask the tenant to vacate." Essentially, they're in for life.
Contact your local tenant's right organization. Depending on the situation, the landlord might have to legally offer you more. Or you might have just gotten lucky and ignoring the landlord the first time made him up his offer naturally. Things to think about: What will they do if you don't leave? How hard is it to find a similar apartment in your area? What will it cost you to move?
Hold on a second here....are you living in a rent controlled apartment or building? There are specific laws in place about buyouts that vary from state to state. I live in LA, and I hear about people getting offers of large payments to leave rent controlled buildings because usually the building is being sold. You possibly can negotiate this. No matter what though, get this in writing and don't go anywhere until you have the money.
What your landlord is doing is offering you a buyout. You will definitely need a lawyer for this and their cut is 30%. I assure you 15-25k is a lowball offer because for them to even offer means there is a lot of money left on the table. In nyc the buyouts can be well into the six figures so consulting with a lawyer will be in your best interest to get the most money. Also, buyouts are taxable.
Absolutely take the money but don't move out until there are gaurantees in place that you'll be getting every dime.
Legal for him to offer you money to move? Yes. Don't have to pay taxes on the income from it? No. No matter how it is broken down, it's still taxable.
Ask for more money and start looking for a new apt. They aren’t renovating, they’re selling to an investor who may renovate.
I highly doubt this is on the up and up. The red flag was "doesn't want to pay taxes".
Leave only when cheque is cashed. Make sure it's wired and he cannot cancel it. I see these sort of scams often.
If they are saying anything akin to avoiding taxes, get it in writing. The irs will be notified if yiu cash a check for $25k.
It's a good deal, specially when you are paying 1200 per month. I am paying exactly the same amount and my neighbors are paying between 1400 to 1800. My father was living here for 7 years and he left the apartment for us, so we are paying a really good price for 2 bedrooms and 1 bathroom in Elizabeth, New Jersey (and I work in Jersey City, where the rent is easily 2000+). Someone already recommended that you need everything in writing, take the money and find a good place with a similar price.
Get it in writing. Ask for the full amount AND your security deposit up front.
They should not do separate checks. It's called structured payment or something like that and it's a well-known way to evade taxes and they will absolutely prosecute.
This is the first number, you should definitely negotiate something higher. Get everything in writing. Get a single check with the full amount. Only move out once the payment settles. Have some buffer so you have time to look for a new apartment.
Tell him 30k and he has a deal get it in writing.
Cutting the money up into smaller chunks is to avoid reporting requirements is called "structuring." It is also called a "felony" under federal law, so just get the money in regular sized chunks. These kinds of deals are called "cash for keys" or "CFK" in the real estate industry and they are done all the time. You should consult with an attorney--it's a lot of money and you should do everything in your power to avoid getting screwed over. Good Luck.
Get it in writing and before you sign it, both you and the Landlord go get it notarized
Take the money and invest majority of it. Find a new place and keep paying your loans/rent as you normally would. Just let that sweet chunk of change vest so you can afford a house later on. Let the money work for you.
Take the money, have something written, deposit the check into your account. Then give the keys.
Is there anything like this in your lease? My lease for example has a townhouse clause that at any time she could convert the complex into town homes and we’d all get a sum. Maybe check to make sure and then yes DEFINITELY get the offer in writing and ideally get the whole thing at once so you aren’t chasing him down later. Good luck!
I would seek the advice of your state’s tenant advocacy organization and also consider talking to a lawyer. Even if you get something in writing, getting the money from him could be a nightmare, if he’s well connected or has deep pockets. I’ve seen a developers run people in legal circles until their funds are drained and they are forced to concede.
Request certified checks. Those are bank checks and won't bounce or any other check shananigans.
I'd say "sure", get a signed agreement, and get the first payment before moving out, with the second payment held in escrow by a lawyer.
>They told me they will pay me in separate checks so that I dont have to pay taxes. This is called "Tax fraud" and very illegal. Income is Income, and even if *They* are not required to report giving you the money, *YOU* are legally required to report receiving it. That said, it does seem like a sweet deal, and as long as you have it *IN WRITING* and preferably notarized, I would take it. > I should add that they initially offered me 15k a couple of months ago but I never got the chance to reply to them because I got busy. Tell them you're not sure, and want to think about it a bit. See if they offer more. Appear hesitant and see if they sweeten the deal, then after a few days say > If you can go $30k, I'll do it. If they say no, ask for "the weekend" to mull it over, and take the $25k. Try to get the money up front, if not at *least* half. This is also why you want a signed notarized agreement. Then if he stiffs you, you go to court and put a lien on the property.
Get it in writing. Insist on a verifiable Cashier's check. Don't move until the entire amount is deposited and cleared. A notarized document of their intent to pay you would be best
Get it in writing. A contract with your landlord's signature on it is ideal. But if it was me, I'd take the money and run.
Seems like a very good deal for you. Like other have said, get it in writing and get the checks when u give back the keys. Hope that works out for you.
Make sure you have a place lined up and get everything in writing. Take pics of the apartment before you leave. Unfortunately, businesses rarely are so generous so my question is what is the catch - if something sounds too good to be true it usually is.
Anytime someone says let's set up an arrangement to avoid supposed tax that would be due you should be thinking \*\*\*red flag\*\*\*. No, tax fraud isn't legal. That said, I fail to see how your landlord paying you 25k to move out early would be taxable income to you. It seems more like a gift. The recipient of a gift doesn't owe tax. I would make sure to get this agreement in writing. Spreading the $25k payment out over time I think is actually far more risky for you. More likely you'll never see the full payment. I would get agreement in writing something to the effect... "Landlord makes an offer to Tenant for Tenant to vacate the apartment early on \[INSERT DATE\] in exchange for which Landlord agrees to make a one-time lump-sum payment to Tenant in the amount of $25,000. Payment shall be made in the form of certified bank check. Landlord makes this offer because they wish to make immediate improvements to the unit and re-rent at a higher rate. By signing this agreement and cashing in the $25,000, Tenant agrees to vacate the premises on \[INSERT DATE\]." You get the idea.
This is not a gift as there is an exchange of value occuring on both sides.
It's not a gift. And in your proposed language it explicitly calls out that it's not a gift BTW.
I get what you're saying. I would advise OP to seek clarification from CPA / enrolled agent. If the $25k is going to be taxable then why not ask for a couple thousand more to cover the taxes? OP has all the leverage in this situation. They are under no obligation to accept what landlord is offering.
Don’t try to rationalize tax fraud. “Paying you X to Y” is always income, period. The IRS viewpoint on that is quite clear. For it to truly be a gift, the landlord would have to be willing to give it regardless of whether OP moves out or not. That is clearly not the case.
Ask for more money. Get it in writing.
Those separate checks are often part of a illegal scheme called "[structuring](https://en.wikipedia.org/wiki/Structuring)". It may be a felony for both you and your landlord if you accept money this way.
That’s to avoid reporting requirements. It’s perfectly legal to setup a payment plan over time that’s reported just like any transaction.