Month to Month Rental Agreement

Written by Weekend Landlords

March 2, 2022

It is a strange period right now for the real estate market in the post-pandemic world. One of the most surprising effects of the last year is that, while home prices have risen, the cost of renting has decreased or stabilized in many areas.

Now is a good time for landlords to review and reassess their leases. 

By providing tenants with options for a long-term lease, landlords that strategically offer month-to-month leases may be able to enhance cash flow and keep rental properties occupied.

In this article, we’ll look at the pros and cons of month-to-month leases for landlords, why some tenants prefer short-term leases, and what terms and conditions should be put in a month-to-month lease.

How does a Month-to-Month Lease Work?

A month-to-month lease is a rental agreement that allows tenants and landlords to cease the tenancy at any time by giving 30 or 60 days’ notice. The landlord or the tenant can terminate the lease early by giving the other party official notice, which should be sent via certified mail and under state legislation.

If the parties do not agree to cancel, the rental time will continue indefinitely.

How does a Long-Term Lease Work?

The majority of long-term residential leases are for a period of 12 months.

Landlords prefer fixed long-term leases because the cash flow from the tenant’s monthly rent is relatively predictable, and expenditures are lower as less money is spent maintaining the rental between tenants. A rental property is more manageable to finance with a long-term tenant in place. Tenants are more likely to choose fixed-term leases because the rental payment is guaranteed as fixed until the lease is renewed.

Advantages of a Month-to-Month Rental Agreement

Month to month leases are another option for landlords and tenants Let’s explore a few of the advantages of a month-to-month lease:

  • Both parties have more flexibility

A year-round option to terminate a tenancy by giving 30 days’ notice provides flexibility that a long-term lease does not. It benefits both parties due to the post-pandemic situation, when both parties may be uncertain about their plans for the coming year.

A landlord may select when to discontinue a month-to-month arrangement in favor of a long-term agreement, which is especially useful if a landlord would like to start looking for new tenants during the summer when moving fees are at their peak.

  • More Possibilities to Change the Cost of Rent Payment

Rent is at an all-time low as a result of the post-pandemic economy. However, we can anticipate that the economy will improve in the coming months, which means landlords may have the desire–and the ability–to increase rent prices.

In most states, it is illegal to increase the rent during a long-term lease. However, landlords have the ability to adjust the rent amount up to 12 times a year if the lease officially expires and renews each month.

  • Ways to Improve Tenants Management

Another benefit of a month-to-month lease for landlords is tenant management. A landlord may have a fantastic renter who is awaiting word on a job offer in another state or considering relocating due to the impending arrival of a child.

Rather than risk losing the renter and having to find a new one, a landlord might offer a month-to-month lease to maintain the perfect tenant for as long as possible.

Disadvantages of a Month-to-Month Rental Agreement

Sometimes there may be disadvantages to month-to-month leasing. Let’s look at some of the most significant disadvantages of month-to-month leasing that every landlord should be aware of before offering it to tenants.

  • Flexibility Can Provide Uncertainty

Flexibility, as previously indicated, may benefit both landlord and tenants. However, as a landlord, it can potentially lead to more uncertainty. In the worst-case situation, landlords may have frequent turnover as both bad and good tenants opt to depart after only a few months.

  • Increased Vacancy Periods Due to Short Notice

According to the current pandemic situation, tenants are staying put longer than they have in the past. This news is excellent for landlords, as vacancy periods may become less common. However, if more tenants choose to remain in their current rental, it becomes increasingly difficult to fill vacancies.

A month-to-month agreement might provide particular issues in replacing those vacancies due to the short notice (remember, the minimum is 30 days). Landlords will only have a limited time to begin advertising and exhibiting a property.

Final thoughts

It is an unusual time right now for landlords and tenants. Examining your current leasing system might be just what you need to meet today’s difficulties. We hope our month-to-month lease overview has helped you decide if this flexible system is suitable for you.

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