Saturday, 10 November 2012

Key Money

There's an odd term that I came across this week, and I had to actually do some reading to grasp the meaning.  The term?  Key money.

Basically, if you live in a pretty high-scale area that has done rent-control....meaning that the landlord cannot raise the rent to any level he chooses....then there is an established control.  Everyone grins as they pay less than what the rent should be.  For the public, this works out great.

As time goes by though....you eventually discover a great place over in another part of your city or town....that is superior, and you'd like to rent this open apartment.  The landlord smiles and says that he's got lots of people who want the apartment.  The signal is given, and this bidding process is conducted....under the table.

You offer key money.  A bribe of sorts.

This is money that isn't written down and if you ever get upset about the deal....there's no proof that you ever paid the key money.  Naturally, key money is never taxed because it doesn't exist.

How much dos a key money situation cost?  Well....some folks hint at two months of rent.  Some suggest privately that it might go up to three or four months rent if you find a unique property.

The odd thing I find about this concept...is that a number of countries simply see this as a 'gift' to the landlord.  Nothing illegal....just a gift.

So this brings me back to rent-control.  Basically....you've created this great trick where things can't operate on the free market system and everyone is all very happy about that.  But as years pass....to get head....you start to venture back into the free market system to get the things you want.  And you pay for these things....as the free market would require you.  As much as everyone is anti-free market....they've all latched onto it in the end.

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