When most landlords consider how to lease a rental property, a standard fixed-term, or long-term, rental agreement typically comes to mind. Under this type of contract, the tenant agrees to occupy the property for a set amount of time, usually a year, paying rent monthly and incurring a penalty if they break the lease early.
However, this isn't the only type of rental agreement a landlord may want to consider. An alternative is a month-to-month lease. Here, we'll discuss the pros and cons of having month-to-month tenants, as well as the legal rights of each party in the arrangement.
What are month-to-month tenants?
Month-to-month tenants are renters who have entered into a periodic tenancy with a landlord in which they pay rent on a monthly basis to stay at a rental property, with no set expiration date. Whether at the landlord's request or the tenant's, month-to-month tenants pay rent on a monthly basis until either party gives 30 days' notice. The lease has no fixed end date and will automatically renew, or roll over, at the end of each month until notice is given by either the landlord or renter.
Often, a month-to-month rental agreement is created to temporarily extend a fixed-term lease after it's expired. If you're not familiar with constructing month-to-month leases or leases in general and your tenant requests one, consult a real estate attorney to help create the contract.
This is just one type of lease a landlord can structure with a tenant to legally transfer their rights to the exclusive possession and use of the property to a tenant for an agreed-upon amount of rent and period of time. The renter uses the property in the manner stated in the lease agreement; when the contract ends, the landlord's ownership rights are returned.
Pros of month-to-month tenants
Control over timing
A big advantage of having month-to-month tenants is that a landlord can end a rental agreement at any time quite easily. Usually, they don't have to give any reason at all.
However, the landlord must provide just cause, or a legally recognized reason, for ending the lease in New Jersey, New Hampshire, and most rent-controlled cities.
Either way, the landlord has to give the month-to-month tenant fair warning they're terminating the rental agreement; 30 days' notice is typical, but it may vary from state to state.
Financially, month-to-month tenants provide great fluidity, as the landlord can change the rent amount monthly if they'd like. This gives landlords the opportunity to charge what they wish, when they wish. Thus, monthly leases typically have higher rents than long-term leases.
However, tenants seeking monthly leases usually understand they're paying a premium for the noncommittal nature of this arrangement. For example, a couple might be waiting for their new house to be built and will remain in the rental until construction is complete; no matter how long that takes, the monthly rental agreement gives them the flexibility a fixed-term lease wouldn't.
Cons of month-to-month tenants
While a monthly lease allows the landlord to give their tenant the boot at short notice, it also allows the tenant to leave at short notice. That means the landlord may be left scrambling to fill a vacant property or else lose the income from the monthly rent. So, overall, month-to-month tenants don't offer a predictable income stream like fixed-term renters do.
The uncertainties of monthly rents, in terms of the timing and cost, affect both the landlord and tenant, and landlords may find it challenging to locate renters willing to live with the instability of renting month-to-month or paying the typically higher price.
It can also mean unpredictable overhead for the landlord. For example, if your tenants are constantly leaving (see "Sudden vacancies" above), you're spending extra time and money on preparing the property for new renters, advertising the rental, screening new tenants, showing the unit, and more.
Rights of month-to-month tenants
As discussed, landlords usually don't need to provide a reason for ending a monthly rental agreement; they only need to give proper notice per state law, usually 30 days. However, they can't legally terminate the lease due to discriminatory or retaliatory motives. For example, if the month-to-month tenant complained to a building inspector about their apartment being unsafe and the landlord wanted to end the lease out of anger, that would be illegal.
Also, some states stipulate that, when the landlord provides notice to the renter, it must be delivered in a specific way or printed in a certain size or style of font. If they fail to do so, the notice may be deemed invalid. Be sure to check your state's specific laws pertaining to month-to-month leases.
Rights of month-to-month landlords
Sometimes, the landlord doesn't need to provide proper notice before ending a monthly lease. If a month-to-month tenant violates the rental agreement -- for example, by damaging the property or failing to pay rent -- the landlord can terminate the lease and evict the renter in as few as three to five days if they don't pay.
In some cases, the tenant may not have the option of correcting the violation or paying the past due rent. They have to leave or face an eviction lawsuit. To learn what's legal in your area, be sure to do your due diligence and consult with a real estate attorney.
The bottom line
For landlords seeking greater control over their property -- including charging more than fixed-term leases and ending the rental agreement whenever they want -- month-to-month tenants are a great option, offering plenty of flexibility. Another huge perk is that landlords can quickly and easily change their rental fee to reflect current market conditions. For example, they can increase the fee when demand for rental properties is high but supply is low, or lower it when supply outpaces demand. However, if you're concerned about not receiving a predictable income stream and the possibility of dealing with sudden vacancies, monthly leases might not be for you.