Key money has become a hot topic in Australia’s property scene in 2025, as both buyers and renters navigate an evolving housing landscape. With new state policies and a surging rental market, understanding the ins and outs of key money is more important than ever—whether you’re house-hunting in Sydney, securing a commercial lease in Melbourne, or considering your next investment move.
What is Key Money and Why Is It Back in the Spotlight?
Key money refers to a payment made by a prospective tenant or buyer to secure access to a property, over and above rent or purchase price. Historically, it’s been associated with commercial leases—think cafes or retail stores paying a premium to take over a prime spot. But with Australia’s residential rental crunch and changing property laws, key money has crept into broader conversations.
- Residential rentals: Reports from major cities in 2025 show an uptick in under-the-table key money requests as competition heats up for scarce listings.
- Commercial leases: Key money remains a common—if often regulated—feature, particularly in high-traffic retail zones.
- Legal context: In most states, demanding key money for residential leases is illegal. However, enforcement is patchy and some landlords still attempt it discreetly.
2025 Policy Updates: What’s Changed for Key Money?
This year has seen several legal and regulatory shifts affecting key money across Australia:
- New South Wales: The state government announced a 2025 crackdown on illegal key money for residential tenancies, with higher fines and a new online reporting tool for renters.
- Victoria: Commercial leasing reforms clarify the distinction between legal goodwill payments (such as for business fixtures) and banned key money demands. Residential key money requests remain strictly prohibited.
- Queensland and Western Australia: Both states have launched rental watchdog initiatives, encouraging tenants to report illegal practices, including key money requests, as part of a broader push to improve housing affordability.
While the specifics vary by state, the overall trend is toward increased scrutiny and enforcement. If you’re asked for key money in a residential context, it’s likely illegal—regardless of how it’s described (“application fee”, “holding deposit”, etc.).
Key Money in Practice: Real-World Scenarios
To understand how key money plays out in 2025, let’s look at a few real examples:
- Inner-city rentals: In Sydney’s eastern suburbs, reports surfaced in early 2025 of renters being asked for “one week’s rent” upfront to secure a viewing slot—well beyond legal holding deposit limits. Renters can now report such practices via NSW Fair Trading’s digital portal.
- Commercial tenancies: A Melbourne café owner paid a $50,000 key money premium to take over a lease on a high-traffic laneway. The payment was fully documented, reflecting the business’s established goodwill and fit-out value—permitted under Victorian law, as long as terms are transparent and agreed in writing.
- Regional resurgence: As regional towns attract more remote workers, some local landlords have tried to reintroduce key money for prime rentals—prompting new compliance campaigns by local councils in 2025.
Whether you’re a renter, buyer, or business owner, the message is clear: always get terms in writing and check your state’s latest legislation before agreeing to any upfront payments beyond standard bonds or deposits.
How to Protect Yourself from Illegal Key Money Requests
With the property market moving fast and competition fierce, it can be tempting to pay whatever it takes to secure a home or business location. But illegal key money can cost you more than just cash—it could also jeopardize your legal rights as a tenant or buyer. Here’s how to protect yourself in 2025:
- Know your rights: Check your state’s tenancy and leasing laws. In most cases, key money for residential leases is strictly illegal.
- Request documentation: Any payment outside the standard bond or deposit should be detailed in writing and compliant with state law.
- Use official channels: If you’re pressured for key money, use your state’s reporting tools (such as NSW’s Fair Trading portal or Victoria’s Consumer Affairs hotline).
- Don’t be afraid to walk away: If something seems off, trust your instincts. There’s a growing network of tenant advocacy services and legal resources ready to help in 2025.
Conclusion
Key money remains a grey area for many Australians, but 2025’s policy updates are bringing more clarity—and tougher penalties for those who break the rules. Whether you’re eyeing a new rental, negotiating a business lease, or investing in property, it pays to understand your rights and stay up to date with state legislation. By staying informed and vigilant, you can avoid costly pitfalls and secure your next property with confidence.
