Month-to-month rentals can be a great way for landlords to fill vacancies until they find a long-term tenant or sell their property, but setting them up properly is an important part of ensuring a successful rental experience. Otherwise, you may face time-consuming issues like resigning contracts or getting the court’s help to evict a tenant.
In this post, we explore month-to-month rentals, including what type of lease works best, why landlords choose to rent monthly, and more.
Creating Your Lease Agreement
Leases typically exist in two formats, with an end date (a “fixed term lease”) or without an end date (an “automatic renewal lease”).
Fixed term leases use calendar dates (e.g. May 31) to signify the start and end of the contract. After this date, the landlord and tenant can renew the lease or move on to something else.
Automatic renewal leases, on the other hand, use time periods (e.g. monthly, yearly, etc.) to signify the start of the contract; this lease renews until either the landlord or the tenant provides notice that they wish to terminate the contract.
Each lease carries its own advantages and disadvantages, which we cover in detail in our article about fixed and automatic renewal lease terms. Before advertising their rental, landlords need to choose which lease works for their situation.
For month-to-month rentals, landlords often create an automatic renewal Lease Agreement because it is generally less hassle, especially if there is a chance that the tenant will rent for longer than the fixed period. This type of lease means landlords don’t need to resign every month if a tenant decides to remain in the home, and it also means that landlords don’t need to work magic to end a lease earlier than anticipated.
Why Lease Monthly?
There are many reasons why a landlord would choose to sign a month-to-month lease as opposed to a year lease or a fixed term, and flexibility is a main one.
With a monthly rental, landlords don’t need to be as concerned about potential decisions for the future, such as whether they want to sell or not, so long as they provide their current tenant with reasonable notice before exploring other options for their property.
It also allows landlords to make changes to the contract easier as they can do so without waiting for the current lease to end.
With reasonable notice, landlords can lower or increase the rent price, remove or add amenities, amend lease terms, and more.
In other instances, landlords can use a monthly rental as a trial for a high-risk tenant that they may or may not eventually sign to a longer-term lease. This could include someone who may move on short notice or has no or poor credit. It could also be used to rent to university students who only rent for one or two semesters at a time.
Ending Automatic Renewal Leases
Ending an automatic renewal lease often requires more work than ending a fixed term lease. With a fixed term, landlords have the ability to simply advise the tenant in writing that they are not renewing the contract and wait for it to expire.
With an automatic renewal, there is no end date or expiry for landlords to rely on; they are required to end the contract using a Termination Notice. This means—especially when it comes to problem tenants—landlords need to be vigilant, handing down lease violations when necessary and abiding by the proper notice periods for follow-ups or evictions. (Notice periods can differ depending on the state, but for monthly rentals, one month’s notice is usually acceptable.)
Likewise, to evict a tenant, appropriate notice is required. Typically, this means serving an Eviction Notice advising the tenant that you want them to vacate the property and then providing them time to respond, amend any issues, or move out, depending on the situation.
Preparing Your Automatic Renewal Lease
Month-to-month rentals fill a specific niche in the rental market and allow landlords and tenants more flexibility with lease terms. As long as lease notices are used properly and consistently, landlords may find that renting month-to-month opens them up to a greater variety of tenants that could move on to become long-term tenants in the future.