What is key money?
Key money, sometimes called initial lease payment, is an amount paid by the tenant at the time the commercial lease is agreed to. Key money can be considered either as advance rent or as the valuation of specific elements, such as renovations, location, or building characteristics.
It’s important to define the purpose of key money and to include it in the lease contract to avoid misunderstandings.
Key money as an integral part of the rent
📌 When rent is revised:
Rent can be revised every three years. If key money is part of the rent, the judge will consider it when calculating the new rent amount.
📌 When the lease is renewed:
If the lease is not renewed, the tenant may request eviction compensation. If the key money is considered part of the rent, it will also be included in this eviction compensation.
Accounting treatment of key money
According to the Court of Brussels, key money can be recorded as an amortizable expense over the lease period.
Is it legal to request key money?
Key money is not legally defined and is not covered by any specific legislation. However, it is a common practice.
The law on commercial leases does not prohibit key money at the start of a lease. However, if additional payments are demanded upon renewal, a judge may review the legitimacy of the initial key money payment.
Key Money vs. Goodwill
- Key money is a payment to access empty premises, like an entrance fee.
- Goodwill refers to all tangible and intangible assets that contribute to the business’s value and service to customers.
Sources : droitbelge.be ; businessdatabase.be