Is a Month-to-Month Lease Better for Landlords?

Leases differ when it comes to term periods. Some are short-term while others are deemed traditional and can last until 12 months. Whether you're a full-time landlord or new to property investing, you must decide which one matches your property. This article focuses on what month-to-month leases are when it’s applicable, and their advantages and disadvantages.

Defining a Month-to-Month Lease

A month-to-month rental agreement is a legal contract between a landlord and their tenants that automatically renews each month. It ends when either signing party issue a 30 days notice.

When the landlord and renter want to extend an existing lease, month-to-month leases are often used. However, both parties can sign a month-to-month lease right from the beginning. Month to month leases can also occur in the case of holdover tenants.

Defining Lease Renewal

When your current renters sign a new lease agreement with you, this is referred to as a lease renewal. Often, the rental period lasts from six months to a year. As a landlord, it’s important to forward a lease renewal offer 90 days prior to the expiry of a lease.

Pros of a Month-to-Month Lease

Parties seeking flexibility can prefer this kind of rental lease. If a tenant just wants to stay at your rental unit temporarily or you’re waiting for the economy to get better, then you can opt to rent out your property with a choice to end the tenancy in a shorter time.

landlord in brown suit passing keys to new tenant

Here are the advantages presented by month-to-month leases:

The Flexibility of the End Date

A month-to-month lease has less hassle since any time you want the tenancy to stop, you can just send proper notice to the renter. With a traditional term lease, you need to wait until the whole term is completed.

First-time landlords may want to start with a month-to-month lease to check if this is an easier arrangement. It allows more mastery in screening tenants and learning the best practices when handling a rental property.

Raising the Rental Rate is Quick

Since you have a month-to-month lease, you have the option to adjust the rent price without being subjected to turnovers. This lets you take advantage of the high rental demand.

For example, if it’s peak season and your property is near local attractions, you may price your unit higher without any conflicts. This is a great way to earn more income.

Zero Penalties for Breaking the Contract

With this arrangement, you won’t incur any penalty fees for ending the lease so long as proper notices have been sent to the current occupant.

person holding a contract for a judge who has a gavel on their desk

Landlords generally favor month-to-month leases during holidays, given that more prospective renters are available. It allows them to earn better returns from their investment.

Retain the Top-caliber Tenants

It’s easy to implement a month-to-month lease when a tenant is prompt in paying the rent and reasonably takes care of your unit. What’s more, in the event that you have a problematic tenant, you can end the lease with proper notice rather than go through a complete legal eviction process.

Cons of a Month-to-Month Lease Arrangement

A month-to-month lease offers a lot of conveniences. However, it has its drawbacks, too. Here are the disadvantages that come with these kinds of leases:

Uncertainties Over the End Date

Although the flexibility of an end date can be a welcome change, it can also induce uncertainty for the landlord. This flexible nature encourages temporary tenancy.

If you have great renters, you want them to stay as long as possible so you can generate steady earnings and gain peace of mind knowing that your property is taken care of.

Short Notice to Land New Renters

With only a 30-days notice period to seek new occupants, this can be a stressful episode for landlords.

landlord walking two tenants through a lease contract

Pressure mounts as the end of tenancy draw nearer. It can cause you to skip crucial steps during the tenant screening process, which is essential to ensure that only the right tenants live in your rental.

Unstable Rent Income

Compared to traditional leasing arrangements, which span at least a year, a month-to-month lease can lead to erratic rent earnings, since some months can have more bookings while other months will bring long vacancy periods.

The Signing of a Month-to-Month Lease

For landlords to protect themselves against conflicts, it’s recommended to have a written lease even if it’s a month-to-month agreement. The signing of a new lease every month is not necessary as long as a Holding Over clause is specified in your contract.

The Holding Over clause ensures that the lease continues on a month-to-month term once the tenancy date ends. This makes it convenient not to sign a new lease since it’s stated in writing.

The 30 Days’ Notice for a Monthly Lease

A 30-day notice is a minimum requirement for a landlord or tenant to inform the other that the lease will end. A notice can also be given in advance of the 30-day period. What’s more, you can use the 30-day notice to establish rent price adjustments and policy changes.

person pointing at a section of a lease while someone else signs

Note that for rent price increases, a written notice must be issued. Some states can require you to send it by certified mail so it’s best to learn what your state laws are.

Bottom Line

Now that you have a clearer view of the pros and cons of a month-to-month lease, you can decide whether or not to offer this type of lease to your tenants.

You can also hire a property management company to oversee your rental operations, especially if you decide to offer this kind of lease since frequent marketing and tenant screening will be needed.

If you’re seeking a trusted property manager, contact Gifford Property Management today!

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Andrew Gifford and his team of professionals are easily the best realtors and property managers that I have ever worked with. They provide first rate service in an extremely timely manner. Whether you are a landlord, tenant, or prospective real estate buyer, I highly recommend the services of Andrew Gifford and his real estate team for all your property needs!

Jeff Tillman