When executed, a lease agreement is a legal contract that details the expectations of the tenant and the landlord. A lease not only provides a tenant and landlord with important legal protections but also essential lease terms like the rent, security deposits, occupancy limitations, termination dates, utilities, and other basic data.
Most residential rental agreements between a landlord and tenant have expiration dates extending at least 12 months. Many of these annual leases offer a renewal option for continued occupancy under certain conditions.
However, not every landlord or tenant wants to trap themselves for a year or more, so some may prefer not to sign long-term, annual lease documentation.
Fortunately, in these situations, a simple month-to-month rental agreement offers a viable, open-ended alternative to a long-term rental commitment.
What is a Month-to-Month Lease?
A month-to-month lease, which may include a month-to-month room rental agreement establishes a legal occupancy relationship. It differs from a traditional rental lease because a monthly lease has NO specific end date.
Many think a month-to-month rental agreement refers exclusively to a short-term arrangement. Yet, if a landlord and tenant can maintain a relationship that meets each of their needs, a month-to-month lease has the potential to last for years.
A month-to-month rental agreement is usually offered with an automatic renewal feature. In fact, unless the tenant or landlord gives proper notice to terminate the contract, a monthly lease will renew each month.
The number of days required to give notice depends on the rental unit’s location, plus any relevant lease provisions. Proper notice for a month-to-month lease may mean giving advance notice of 15, 30, 60, or 90 days.
For up-to-date information on the tenant-landlord laws in your state, check out the U.S. Department of Housing and Urban Development’s webpage that consolidates state links to the relevant and topical landlord and tenant laws and other real estate trends.
The Advantages of a Simple Month-to-Month Rental Agreement
Consider these advantages of a simple month-to-month rental agreement that is offered to landlords –
They offer flexibility not available with a longer-term lease.
Rent prices can be adjusted more with a monthly lease. The past few pandemic years have been characterized by rising rents – driven by a rental demand far outpacing the growth of home supply. (See Harvard University’s JCHS Study 2022) In a market with rising rents, waiting for a lease to expire to modify the rent to current levels can be frustrating.
There is no penalty for ending the lease on the landlord’s timeline. The Spring/Summer selling seasons are the best time to list because of improved weather for viewing potential properties; the weather is better for moving; and a family can move and settle prior to the new school year.
Adjust leasing terms and conditions as situations warrant. For example, a landlord may decide that he/she will no longer accept tenants with dogs larger than 40 pounds.
They are a great choice for first-time landlords. A month-to-month lease is a great option to test the waters of property ownership. Consider using this time to solidify the process you use to screen tenants or find support personnel (contractors, etc.) to assist as needed.
A landlord can extend the initial lease at the tenant’s request. A monthly lease is a smart, simple way to help the good tenants (who are moving out) by providing them with some wiggle room with regard to time.
They offer greater control over who will occupy the unit. Landlords have the capacity to remove less than ideal tenants more quickly by giving appropriate notice.
They make it easier for the current owner to exchange the property if they decide to sell. Selling a rental property can become tricky when trying to negotiate the terms of a sale with a long-term tenant still occupying the premises.
Consider these advantages for tenants.
They can leave the property when they want with proper notice. Often, the very reason a tenant chooses a month-to-month rental agreement is because they can move quickly. If they find a better rental deal, they are only required to give notice.
Short-term tenancies offer peace of mind to some individuals. Many people personally feel trapped by a long-term lease.
The Disadvantages of a Month-to-Month Rental Agreement
The landlord assumes the increased risk of a potential vacancy, which may interrupt cash flow. It becomes difficult to anticipate future income when budgeting because of the potential for higher tenant turnover and higher hidden costs.
Finding new tenants on short notice can be challenging, depending on the specific market and conditions. A landlord may make a short-sighted decision and take on a problematic tenant to keep the property’s cash flow stable.
Frequent screening for new tenants and higher maintenance/cleaning costs. This process is necessary but time-consuming.
A landlord can end the lease with proper notice. If unprepared and given short notice, a tenant may face stressful situations as they must find new living arrangements quickly.
The terms and monthly rent can change with proper notice.
Short-term rentals tend to have higher average rents because the landlord agrees to absorb the uncertainty or risk of future rent payments.
The month-to-month rental agreements that you use must be up-to-date with regard to federal, state, and local housing and property law. When you choose an online, simple month-to-month rental agreement pdf (or, if needed, a sublease agreement template), be sure the agreement complies with the most current landlord-tenant laws.