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Where did I put my key (money)?: If It’s Not in the Lease It’s not Enforceable

First few Article Sentences

The market for nursing facility beds in California is at historic highs with the price per bed currently ranging from $80,000 - $100,000. For owners wishing to retain the asset but not remain directly involved in operations, leasing facility beds also presents an attractive option right now with beds currently leasing out in the Southern California area for anywhere between $500-600/bed per month.

In the context of leasing, in addition to the rental rate most landlords will require “key” money as a condition of the lease. Key Money is a form of payment made by the tenant to the landlord not included in rent which compensates the landlord for giving the tenant the keys to the commercial property. The legal basis for supporting the enforcement of key money obligations relates to the concept of goodwill in that the landlord is turning over a going concern for the tenant to operate. In other words, the landlord is transferring a viable operating business to the tenant which has an intrinsic value the tenant pays for in the form of key money. Currently, key money paid in connection with nursing home leases can vary from as much as $10,000 - $14,000/bed.


Cohn, Jonathon E.

 

Arent Fox LLP

Law, Self-Referral

July 13, 2015

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