Question 1

How should key money payments be processed in Florida commercial lease transactions?

Accepted Answer

Payment processing: the key money payment should be made through a documented, traceable method (wire transfer, certified check, or escrow). The payment should be held in escrow by a neutral third party (such as the closing attorney or title company) until the lease is fully executed and all conditions are met. The escrow agreement should specify: the conditions for release of the key money, the timeline for release, and the conditions for refund (if the lease is not executed). Once the lease is executed and the conditions are met, the escrow agent releases the key money to the landlord. This process protects the tenant from paying key money before the lease is finalized and protects the landlord by ensuring the payment clears before the tenant takes possession.

Question 2

What documentation should accompany a key money payment in Florida?

Accepted Answer

Required documentation: a fully executed lease agreement with the key money provision clearly stated, a separate key money agreement (if the terms are complex or the payment is made to an outgoing tenant), a receipt from the landlord acknowledging the key money payment, evidence of the payment method (wire transfer confirmation, certified check copy), the escrow agreement (if the payment was held in escrow), and any side letters or amendments affecting the key money terms. The tenant should retain all documentation for: tax purposes (to support the business expense deduction), lease enforcement (if the landlord disputes the payment), and financial reporting (for balance sheet and income statement treatment).

Question 3

Can a Florida tenant recover key money if the landlord breaches the lease?

Accepted Answer

Recovery options: if the landlord materially breaches the lease (fails to deliver the space, allows the building to deteriorate, breaches an exclusive use provision, or constructively evicts the tenant), the tenant may be entitled to: a refund of the key money (prorated based on the remaining lease term), damages (lost profits, relocation costs, and other consequential damages), and termination of the lease. The tenant’s right to recover key money depends on: the specific lease terms (whether the key money is characterized as refundable under certain conditions), the nature of the landlord’s breach (material vs. minor), and whether the tenant properly notified the landlord of the breach and gave the landlord an opportunity to cure. Florida contract law and the lease terms govern the analysis.

Key Money Payment

Key Money Payments in Florida Commercial Leases

Payment Processing

Documentation

Recovery for Landlord Breach

Related Terms

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