Updated December 2020
While all landlords know having a solid lease agreement in place is key to good business, they might not always know what the right type of lease agreement is!
The lease agreement is the legal contract between tenant and landlord. There can be many variations within it as long as they comply with state and local law. One thing landlords can control is whether it is a month-to-month or year-long lease.
Do you know when to use each of these leases? Many landlords have used both types of lease agreements by default, but they might not understand how to actively choose between them. There are advantages and disadvantages to choosing a month-to-month or year-long lease. Landlords should investigate both to see which one is best suited for their property and their needs.
Today, we’ll help you to kickstart your research into month-to-month leases so you can determine when and how to incorporate this lease style into your business effectively.
Table Of Contents For Benefits Of Month-To-Month Leases
- What Is A Month-To-Month Lease?
- How Does A Month-To-Month Lease Work?
- The Benefits Of A Month-To-Month Lease For Landlords
- What Are The Downsides Of A Month-To-Month Or Year Long Lease?
- FAQs About The Benefits Of A Month-To-Month Lease
A month-to-month lease is a specific type of rental agreement; do you know what the terms of this type of agreement usually say?
A month-to-month rental agreement is an agreement that lasts for 30 days. Usually, this type of lease has automatic renewals until either you or the tenant writes a notice of nonrenewal. Month-to-month rental agreements usually require 30 days’ notice to end, but the specifics will depend on the local laws.
When Are Month-To-Month Leases Used?
The month-to-month rental agreement is a very common type of lease used for residential properties, particularly after long-term fixed-term lease agreements run out. Rather than writing an entirely new lease, the terms of the original lease renew 30 days at a time until one of the parties ends the agreement.
This is known as a hold-over. For a hold-over to be effective, it should be written into the original lease. Otherwise, both parties will need to sign a lease addendum that outlines how the lease will roll over and what the terms of the month-to-month contract will be.
That’s not to say that month-to-month agreements are not used of their own accord, as they are. Some landlords will use these leases to fill properties for short amounts of time between long-term contracts, such as during the summer in a college town. Other landlords will offer this type of tenants in special cases to tenants looking for a semi-temporary arrangement.
As you now know, a month-to-month rental agreement is a rental agreement that typically auto-renews each month. While not all month-to-month agreements work this way, the majority of them do.
Each month, the tenant will be obligated to pay rent to continue staying at the property. When the landlord or the tenant is ready for the lease agreement to end, that part must give proper notice to the other party to end the arrangement. In most states, 30 days’ notice is required, but this can vary.
Once notice has been given, the tenant will need to move out of the property by the agreed-upon date. If they do not, you will be able to send a notice to them to begin the eviction process.
Lease Terms Matter
As with all lease types, it is very important to use the correct language in your lease agreement when setting up a month-to-month tenancy or when setting up a long-term lease agreement that will roll over into a month-to-month agreement.
Make sure that all terms of the agreement are very clear and cover everything from rent to pets to eviction proceedings. If there might be a question about it, be sure that it is included in the agreement. While you can always add addendums later, both landlord and tenant must sign off on all changes, so it is best to be thorough from the start.
To ensure you have included everything that is necessary, check out our free month-to-month lease agreement template. This template gives you a great overview of everything you should include. Adapt it to fit your rentals, and you are good to go!
The benefit of a month-to-month lease is that the landlord has great flexibility in controlling whether or not they want the tenants in the rental. if they wanted a change for any reason, they could just give the adequate notice required by the state, then the tenant would have to move out. It’s also easier to implement policy changes, raise the rent, or enact any other updates to the lease.
Many landlords feel that a month-to-month gives them some flexibility in dealing with tenants. It is especially important in states that tend to favor tenants over landlords in disputes.
Among the benefits of a year-long lease is the security of having renters in place for the duration of the lease dates. In theory, it means no turnovers for a year. It makes tenants commit to the rental and gives landlords plenty of notice to re-rent it.
A year-long lease also means the tenants are protected from rent increases and from being asked to vacate by the landlord for whatever reason.
The downside of a month-to-month lease is that it doesn’t represent as much permanence for landlords who are seeking long-term tenants. Tenants can give their vacate notice in as short as 30 days’ time. A month-to-month lease means less security in the minds of many landlords.
On the other hand, a year-long lease has downsides, too. If a landlord wants to get rid of a problem tenant, they often have to wait until lease renewal time to do so. Evictions are expensive and time-consuming with a one-year lease agreement.
What Kind Of Lease Is A Month-To-Month Lease?
A month-to-month lease is a periodic, short-term lease. This type of lease typically renews automatically every month unless otherwise outlined in the lease agreement. There are some cases where the terms may be set up more specifically.
When these lease agreements are set up without a specific end date, it can be continued indefinitely until one of the parties chooses to end the lease agreement.
Is It Better To Rent A Property Out Month To Month?
There is not a strict better or worse answer when it comes to thinking about renting your property out on a month-to-month contract.
As mentioned in the complete article above, there are both pros and cons to this type of agreement. While you gain a lot of flexibility and control by doing month-to-month contracts, you also lose much of the stability that comes with fixed-term leases. Still, short-term leases are great for the period following a fixed-term lease and for specific real estate types.
Ultimately, you will need to crunch some numbers and determine which type of rental situation will make the most sense for you and your business. Write up your personal goals and how the pros and cons would affect your business. Then, make your choice.
Can A Month-To-Month Lease Be Negotiated?
Yes! Like all types of leases, it is possible for you and your tenant to negotiate some terms of the lease to better suit both parties. While you are well within your rights to want to keep your lease agreement as presented, potential tenants can also refuse the lease agreement and move on to another rental.
If you are willing to negotiate price, pet policy, or other terms, make sure to come to your tenant with an open mind. By discussing what both parties are looking for, you may be able to set up a month-to-month tenancy that will satisfy both parties.
How Much Notice Does A Landlord Have To Give On A Month-To-Month Lease?
In most states, 30 days’ notice is the minimum time that must be given to end a month-to-month lease agreement. This applies to both parties. It is possible to give more notice than that if possible, but the minimum is set by your state laws. Make sure you research those laws to ensure that the usual 30 days applies to you.
The flexibility of month-to-month lease agreements that allows for only 30 days’ notice is also part of the stress of using this type of contract; it can feel a bit frantic to find a new tenant that quickly. That is why this type of lease agreement is often best for those in high-traffic areas for short-term rentals, such as college or vacation towns.
How Much Notice Do You Need To Give A Tenant To Increase Rent?
When renting out a property under a month-to-month lease agreement, you must give the proper amount of notice for the state you are doing business in. In most states, this is 30-days notice. To give notice properly, the notice must be in writing. All changes in the terms of the rental agreement must be treated in this way.
The Key Takeaway On Month-To-Month Leases
Landlords typically agree that a month-to-month lease was the most flexible for landlords. In states where eviction laws are tough, landlords liked to be able to get rid of troublesome tenants on their own. They believe good tenants would stay whether they were in a year-long lease or a month-to-month one.
However, several landlords like the stability of a year-long lease, especially for college students or in heavily military communities. There’s no way to prevent tenants from breaking that lease, however.
Of course, every landlord will have different needs when it comes to choosing a month-to-month or a year-long lease.
As long as you know what your priorities are and how the lease type affects those priorities, you’ll be able to make the right choice for your properties and business in the long run.