Friday, July 14, 2006

Key money

Gulf News headline: Key money puts Abu Dhabi rents beyond reach.

Key money - a charge for the transfer of an apartment - occurs when rents are held below the level that would balance supply and demand. When rents are held down - say, by rent control - you create apartment seekers who are willing to pay more for an apartment but cannot find one. That creates the opportunity to collect key money.

Who collects the key money? It may be the apartment owner who charges the legally allowed rent, but then charges an additional fee to transfer the apartment to a new tenant. Or it could be the existing tenant who transfers her contract to a new tenant for a fee.

In the Abu Dhabi case there is no mention of rent control. Rather it appears that the apartments are government owned and the government has chosen to rent at below market rates. Enterprising building supervisors (the watchmen) watch for match-making opportunities between tenants moving out and persons seeking apartments. When a match is made the new tenant pays the key money, and the watchman and the departing tenant split it.

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Blogger احسان said...

Hi. I have a question about keymoney in UAE and Duabai. whet we are goint to leave a building, does we get the same key money we paid before ore it rises by time? thanks in advance

5:17 PM  

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