Month to month rental agreements are a strategic way for property owners and managers to fill vacant apartments until they can secure a long-term tenant or sell their property. However, properly setting them up is an integral part of guaranteeing a successful rental experience for both the owner and tenants alike. Otherwise, the property owner might deal with time-consuming and expensive issues, such as unexpected vacancies or filing a legal case to evict a tenant. Simultaneously, month-to-month rentals are beneficial for tenants who don’t want to commit to a long-term lease. For example, maybe the tenant is considering moving to another state, or perhaps the tenant simply wants to try out the apartment before committing to a year-long lease.
Below, we will discuss month to month rental agreements, including what type of lease works best, why property owners and managers choose to rent to tenants month to month, and what should be included in the lease agreement.
Drafting Your Lease Agreement
Apartment leases typically come in two forms. A lease with a definite end date (a “fixed-term lease”) or leases without an end date that renews automatically (an “automatic renewal lease”).
Fixed-term leases use calendar dates to represent the commencement and end of the lease agreement. After the end date, the renter can either move or work with the landlord to renew the existing lease agreement or negotiate a new lease agreement altogether.
On the contrary, automatic renewal leases use periods (e.g., monthly, yearly, etc.) to represent the start of the lease agreement. An automatic renewal lease renews until either the owner or the tenant provides notice that they wish to end the lease agreement. Typically, the lease will state how much notice is required by either side, typically 30 days or more. However, regardless of what’s stated in the lease, state or local laws may have stricter requirements that may control how much notice is required, thereby overriding the lease agreement terms.
Each of the preceding types of leases carries its own advantages and drawbacks, which we will discuss below. Prior to advertising their rental property, property owners and managers should have a good idea about what type of lease they plan to offer.
For month-to-month rental agreements, property owners or managers often create an automatic renewal lease agreement. It also means that landlords do not need to do a lot to end a lease agreement earlier than expected.
Provisions in a Standard Rental Agreement
A standard rental agreement, whether it’s a fixed-term lease or an automatic lease renewal lease, will include some or all of the following:
- The name of tenants, the property owner, and the property manager
- The rental amount
- The rent payment due dates
- The duration of the lease agreement
- Whether the lease includes automatic renewal
- Security deposit information
- Late fees and any other fees
- Tenant amenities, such as parking
- Penalties for property damage (typically a reduction in the security deposit when the tenants move)
Why Choose Month-to-Month Leases?
There are many reasons that owners and property managers choose to enter into a month-to-month lease agreement instead of entering into a set term or yearly lease agreement. Primarily, a month-to-month lease provides the most versatility for both the owner and the tenant.
With month-to-month leases, landlords don’t have to worry if their plans change in the future. For example, if a landlord wants to sell their property in the future, they can do so without worrying about selling the property with long-term leases in place. Instead, the property owner can give their tenants reasonable notice before exploring other options for their property.
It likewise enables property owners and managers to make changes to the lease agreement sooner, as they can do so without awaiting the existing lease agreement to end.
With reasonable notice, property managers can decrease or increase the rental rate, get rid of, or add amenities, amend lease terms, etc.
In other instances, property owners or managers can utilize a month-to-month rental as a trial for high-risk tenants that they may or may not eventually sign to a longer-term lease. This could consist of someone who might move on short notice or has bad credit. It could likewise be used to lease to college or graduate students who only need to rent for a couple of terms while taking classes. Smaller landlords or owners of single-family rental properties may be inclined to choose month-to-month rentals for similar reasons as well.
Terminating A Month to Month Rental Agreement
Ending an automated renewal lease often needs more work than ending a fixed-term lease. With a fixed-term lease, property owners or managers can advise the tenants that they won’t be renewing the lease. However, after that, they simply have to wait for it to end.
There is no end date for property owners to rely on with an automated renewal. They are required to end the agreement by serving the tenant with a Termination Notice. When it comes to troublesome tenants, property owners and managers need to be mindful and create a paper trail when tenants are consistently violating the lease terms or missing rent payments. Likewise, property owners and managers must abide by the applicable notice periods. Notice periods can differ depending upon the state, but one month’s notification is typically the standard for monthly rentals.
Similarly, to kick out a tenant for lease violations, adequate notice is required; state and local laws typically set this. In addition to serving the notice, property owners need to offer tenants time to respond, cure any issues (if curable), and vacate the property.
Month-to-month tenancies and leases fill a specific niche in the rental market and allow tenants and property owners flexibility when drafting lease terms. As long as lease notices are used consistently and adequately, property owners and managers may find that renting month-to-month is quite useful and profitable. Sometimes it can open them up to rent to a higher range of tenants who may become long-term tenants in the future. Likewise, month-to-month tenancies can be helpful for some tenants who don’t want to (or can’t) commit to a long-term lease agreement.