Sie haben den/einen Schlüssel = They/You have the/a key. (singular)
Sie haben die/-- Schlüssel = They/You have the/-- keys. (plural)
So in this sentence "Schlüssel" represents the indefinite plural of some keys. Therefore, the only valid translation is "They/You have keys."
You is take as formal here.
No native English speaker would say "you have key". If there's only one key involved, you must have "the key" or "a key".
I have keys to the building. /or/ I have a key to the building.
The German word "der Schlüssel" does not have a separate plural marker, so "die Schlüssel" is only identified by the "the" word in the sentence.
I'm really confused! Doesn't 'sie' mean they?? And what is the singular form of 'Schlüssel'??
It is confusing! 'Sie' can be she, they, or formal you (capitalised). 'der Schlüssel' is the singular, and 'die Schlüssel' is the plural, so that can be confusing as well because the word doesn't change, just the article. This happens with some masculine and neuter nouns (das Fenster; die Fenster).
No, that is incorrect. Singular nouns always need some kind of determiner (usually an article but it can sometimes be something else like a pronoun). So German Schlüssel without any determiner can only be plural and English “key” (without “a” or “the” or anything like that) is incorrect because it lacks a determiner even though it’s clearly singular.