Key Money
Learn what key money means in Canadian rental markets, how it’s regulated, and why both tenants and landlords should proceed with caution.
May 22, 2025
What is Key Money?
Key disclosure refers to the seller’s obligation to disclose material facts or known defects about a property that could affect a buyer’s decision to purchase.
Why Key Money Matters in Real Estate
In Canadian real estate, key money is generally discouraged and in many provinces may be illegal unless explicitly permitted under tenancy law.
Key facts about key money:
- Often paid upfront and separate from rent or deposit
- May be required for commercial or residential leases
- Can violate tenancy legislation depending on jurisdiction
Tenants should be cautious and review provincial laws before agreeing to pay key money. Landlords found demanding unauthorized payments can face legal penalties.
Understanding key money helps renters identify unethical practices and landlords ensure compliance with tenancy regulations.
Example of Key Money in Action
A landlord in a high-demand neighborhood asks for $2,000 in key money to prioritize the applicant over other interested tenants.
Key Takeaways
- Upfront payment to secure a lease.
- Often discouraged or illegal.
- Common in tight or rent-controlled markets.
- Not considered rent or damage deposit.
- May expose landlords to legal action.
Related Terms
- Security Deposit
- Lease Agreement
- Rental Application
- Residential Tenancies Act
- Landlord Responsibilities
Canadian respondents were more likely to expect an undersupply of development/redevelopment equity capital (63%) than debt capital (46%) in 2027. These are survey expectations, not measured financing volumes. Source: PwC and ULI, Emerging Trends in Real Estate 2027, pp. 136–137. Original chart.
Toronto census metropolitan area housing starts fell from 37,718 units in 2024 to 26,087 in 2025, a 30.8% decline (rounded to 31%). Starts measure construction begun, not completed homes. Source: CMHC, as cited in PwC and ULI, Emerging Trends in Real Estate 2027, p. 145. Original chart.
Illustrative calculation: a $4.5-million value ceiling versus income-based capacity of about $4.25 million at 4%, $3.62 million at 5% and $3.13 million at 6%. Assumes 50-year amortization and 1.15 debt coverage.
Source: Department of Finance missing-middle backgrounder and Budget 2026 Chapter 3, November 5, 2026. Fiscal-year funding starts are not home-completion dates.
