Month to Month Rent Agreements: Pros and Cons for Landlords

by Lesly Gregory | Published: May 2, 2022

When a tenant's lease agreement is about to expire, you've got a few options should you want to keep that renter if they want to stay. For problem tenants, you simply don't renew, but for others, you can give them options on what a new lease will look like.

You can ask a current tenant to renew their current traditional lease and stay for another year. That makes sense if the tenant isn't planning on going anywhere. But, if things are a little less concrete as far as future plans, you can offer them a month-to-month agreement.

This option may put more risk in your pocket, but many landlords prefer this rental situation after a full year's lease is up for a number of reasons. The existing tenant may have a preference, or you may need to manage your rental property in a certain way. No matter what, you should understand the differences between the two types of lease agreements to make an educated choice. Even with a good tenant, there's always the possibility things won't work out exactly how you expected.

What is a month-to-month lease?

A month-to-month lease is a rental agreement that stipulates that the tenant can stay for one month at a time, with the understanding that the lease may be terminated with 30 days' notice. It often takes the terms of the existing lease, keeping all the other lease stipulations, but removes the fixed term portion.

You can opt to change rent, too, and some landlords will update the lease agreement with a higher rent since, without a long-term commitment, you have no way of knowing how long your tenant will stay.

This short-term lease is a popular option in college towns where students rent, but may not live in the property for an entire year due to job offers or summer opportunities in another area. As long as the required notice of 30 days is in place, though, and nobody is leaving at a moment's notice, you're in compliance with a month-to-month lease.

How is it different from a regular lease renewal?

The main difference between a month-to-month lease and a renewal is that monthly leases can be terminated in a shorter time frame. A renewal of a long-term lease can require up to 60 days' notice, monthly rentals need only 30 days.

There's also no fee associated with ending a month-to-month arrangement with the required notice. Breaking a fixed-term lease early through an eviction can take time and lead to additional legal issues.

You also won't have a specific end date with a monthly rental.

man talking to agent about month to month rent

Why would you want a month-to-month lease agreement?

Flexibility is the main advantage of month-to-month leases. This type of agreement allows both the landlord and a long-term tenant to have more control over their situation. It also lets you keep good tenants in your property longer.

Ability to raise your rent price

One of the benefits of month-to-month leases for landlords is that rent increases can happen with only 30 days' notice. This is not the case with standard rental leases, which usually have set prices that tenants pay for the duration of their leases. This allows you to stay competitive with the cost of your rental property and not get stuck losing money as the market changes.

Keeps your options open

Month-to-month leases also offer landlords the opportunity to easily turn over their property. For example, if you decide to sell, you can do so within a single month rather than having to wait for your current renters to get to the end of their lease.

At the same time, if your month-to-month tenant stops paying rent or becomes an issue in other ways, you can easily get them out of your property and find someone new.

You're also able to move out tenants faster should you want to do any renovating on your property or even move in yourself. With a long-term lease, you'd have to wait until the lease ends to move forward.

Why to avoid a month-to-month lease

While there are some advantages to month-to-month leases, there are also some disadvantages, many of which aren't as significant when working with long-term leases. The biggest of these is unpredictability.

Without fixed-term leases and set end dates, you won't be able to plan ahead for when your property is vacant. You also won't know if your tenants will move out at a time when it's hard to find new renters. This unpredictability could end up costing you more to have a month-to-month option since rent won't necessarily be coming consistently.

Uncertain end date

Another disadvantage of month-to-month leases is that they provide no guarantee as to how long a tenant will stay. A long-term lease has a specific end date, but this option can make it difficult for landlords to plan for the future.

Higher turnover rates

A month-to-month agreement also tends to have higher turnover rates than a fixed-term lease. This means that landlords will need to spend more time and money on marketing their property to find new tenants, and they'll have to do it on short notice.

couple moving out of their month to month rental

The importance of proper notice

Pros and cons aside, if you decide to allow a month-to-month lease, the most important thing to include is a clause around giving notice. This works for either the landlord or the tenant. Both need 30-days' notice to make any types of changes to the living situation.

A tenant must provide 30-days' notice of their intent to move out of the rental, and landlords must do the same if they want the tenant to move out.

Proper notice is also important when talking about the rent amount. As the landlord, you'll need to stipulate the amount of notice you must give your tenant before raising the rent. Thirty days here is also pretty standard.

Ready to go month-to-month?

If you've got a tenant worth holding on to, who doesn't want to sign another long-term lease, give them a break. Consider switching to a month-to-month lease. The option has both positives and negatives, but if you look at each tenant's situation individually, you'll know whether or not it's the right choice.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.
Categories: Landlords

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