Landlords have a wide range of options available to them. Choosing the lease's duration is a significant decision that may impact your rental business.
Six-month, one-year, and two-year rentals are popular choices, but month-to-month arrangements are also an option. This gives you and your tenant flexibility. However, it's important to remember that implementing this kind of lease has drawbacks.
In this article, we will provide all the information you need to decide whether this kind of arrangement is best for you. We will also provide information on what to include and how to draw up a month-to-month lease agreement.
What Is a Month-to-month lease?
A month-to-month lease, which is often referred to as "tenancy at-will," is a type of lease that allows the landlord to evict a tenant at any time during the required period.
The contract shall automatically be renewed at the end of every month unless one party gives the other written notice of cancellation via certified mail and within the boundaries of state law.
How a Month-to-month Rental Agreement Works
When it comes to moving in, evicting a tenant from the landlord's property, and abiding by local legislation, a month-to-month rental agreement is similar to a standard lease.
The sole distinction is that either the landlord or the tenant may terminate the contract at any time by delivering a Notice to Quit (otherwise known as a Lease Termination Letter). The state termination period, which is typically 30 days, determines how much notice is needed.
However, as long as it is longer than the minimum required by the state where the property is located, both parties may consent to any termination notice period. Let's look at the process of instating a month-to-month rental agreement.
1. Show the Tenant the Property
The first step is to show potential tenants the property. They can inspect the amenities, fixtures, facilities, and more to determine whether it is suitable for them. If they are still interested, this is a good time to get them to fill out a rental application form.
Next, you'll need to screen all candidates before choosing one. Here's what you'll need to look at:
- Credit report
- Criminal history
- Past evictions
You can use DoorLoop to do all your tenant screening on one intuitive platform. Book a free demo today to try it out for yourself!
3. Make a Decision
When deciding whether to lease the property to the candidate, the landlord can take precautions against people with poor credit or no rental history by raising the security deposit amount, requesting advance rent, or insisting that the tenant pay by automated clearing house (ACH).
After receiving approval, the landlord can proceed to the following stage and start the lease negotiation. If the applicant is rejected, the landlord must provide him or her with a letter of rejection outlining the grounds for the denial of tenancy.
4. Draw up a Rental Agreement
Download our free forms or use our custom property management software to generate a month-to-month rental agreement. Month-to-month lease agreements usually stipulate the tenant's responsibilities, termination period, rental amount, security deposit requirements, and more.
5. Execute the Lease
Make sure that both parties sign the lease. You will also need to get a witness to sign the agreement. Once that is done, your tenant must pay the security deposit and first month's rent before moving in.
Is This Type of Rental Agreement the Right Choice?
A month-to-month lease could be applicable in a variety of circumstances. Some long-term agreements have a month-to-month option that becomes available once the initial contract expires. This generally applies when a renter decides not to sign a new contract but has no urgent plans to vacate the rental property.
The terms of the current lease usually specify how the month-to-month agreement will operate, including whether the renter will be expected to pay more rent than what was specified in the initial lease. The conditions of a month-to-month lease could also be affected by local law.
In other situations, a landlord may choose to impose a month-to-month lease because of the neighborhood's high rental potential, operate the home as a vacation rental, or do so to suit the student population.
While landlords must choose the most suitable method for them, there are some general benefits and drawbacks to consider.
The Advantages of Leasing a Property on a Month-to-month Basis
A month-to-month lease offers a plethora of benefits. Let's take a look at some of the most prominent advantages of implementing such an agreement.
There's Great Flexibility
Perhaps the greatest advantage of a month-to-month rental is the flexibility it offers. Due to the lack of a long-term lease, landlords have more freedom to decide how to use the rental property and how to modify the rental agreement, typically with proper notice.
A shorter lease period enables landlords to maintain competitive prices with those in the area or neighborhood in prime locations where rental prices are rising quickly, and tenants are in high supply.
Compared to a long-term lease, a month-to-month lease makes it significantly easier for landlords leasing their primary residence to return home. Some property owners may desire the flexibility of renting a vacant unit as an executive rental or holiday home.
More Rental Income
Another major benefit of implementing a month-to-month rental agreement is the potential to make more money. One of the most significant benefits of adopting month-to-month leasing arrangements is greater earning potential.
Short-term leases allow you to raise your monthly rent prices. This is because these short-term leases put the landlord at greater risk since renters are free to leave at any point with adequate notice.
It's Easier to Get Rid of Bad Tenants
Month-to-month leases also offer a quicker way to get rid of a renter who pays late or doesn't respect the property. With just a few days' notice, you can remove a tenant. Long-term leases, on the other hand, require a greater notice period before a tenant may be removed.
You Can Tell Whether a Tenant Is a Good Fit for a Long-term Lease
Many landlords start with a month-to-month rental agreement to determine whether a particular tenant is suitable for a long-term lease.
Although the tenant screening process, which involves analyzing a candidate's credit report, past evictions, and criminal background, is helpful, you may later find that the renter is irresponsible or pays their monthly rent late. When you start the tenancy on a month-to-month basis, you can see whether the tenant really is a good fit.
Drawbacks You Should Know About Before Entering Into This Type of Agreement
Although a month-to-month rental agreement may offer many benefits, it does have a few drawbacks that may make it less appealing.
There Is Uncertainty
A month-to-month rental agreement means the landlord could be 30 days away from an empty property. Since tenants aren't tied down to a long-term contract, they are free to leave whenever they want, provided they give proper notice.
That might make it more difficult for a landlord to make long-term plans on both a personal and professional level. We recommend opting for long-term rental agreements during stressful times to avoid this becoming yet another source of stress.
Risk of Lost Income
A vacant property results in lost revenue. In a rental market with lower occupancy, the possibly significant turnover associated with short rental contracts may pose problems since new renters would not be available, and a vacant unit would result in a loss of rental income.
Moreover, seasonal variations in rental rates might occur in some places. The demand varies throughout the year, depending on certain circumstances. It is particularly important to follow the market, or you may have to settle for a lower income.
Greater Turnover Costs
It can be costly to change tenants. Rental units must be cleaned at the absolute lease. Depending on how the previous occupants left the place, they might also need a coat of paint, new flooring, or even significant repairs. Additionally, it takes money and time to promote and fill a vacancy. There is also the expense of doing tenant screenings, possibly on a yearly basis.
How to Write a Month-to-month Rental Agreement
If you've never had to draw up a short-term rental contract before, the good news is that this type of agreement is the same as a long-term lease. However, the lease term is shorter. Let's take a look at some of the things you'll need to include in this type of rental contract.
- Rental property address and the unit number (for multi-family properties)
- Names and contact details of both the landlord and tenant
- The start date and end date of the contract
- Monthly rent amount, when lease payments are due, and any pre-paid rent due
- Additional pet fee (if applicable)
- Late fee provision
- Additional parking fees
- Security deposit amount
- Requirements for insurance
- The notice period for the termination of the contract by either the landlord or tenant
- Provision for the automatic renewal after one month
- Security deposit deductions, according to landlord-tenant laws
- Utilities, repairs, and other responsibilities
- Disclosures (such as the lead-based paint disclosure, required by federal law)
- Months' or days' notice required to terminate the lease
Looking for an easy way to draw up a month-to-month lease agreement? Download our free forms or use DoorLoop to generate custom documents in just minutes!
How to End Month-to-month Rental Agreements
The process for terminating contracts valid for less than a year is pretty straightforward. It's important to consult the lease before ending a rental agreement. Keep in mind that both the landlord and tenant have the right to terminate the lease.
30-days to End the Contract
It usually takes 30 days to modify a monthly lease term, such as increasing the rent or canceling the agreement, although this might differ based on the state where the rental unit is located. Landlords typically request 30 days' notice to terminate month-to-month leases.
Keep in mind that some exceptions do apply. Certain states have lower notice period requirements, such as Connecticut, with a three-day notice period.
Others impose a much longer notice period provision, like Columbia's 120-day notice provision, depending on the reason for the month-to-month lease's termination. Depending on the state, a termination letter for a month-to-month lease may be sent personally or by certified mail.
The termination notice may need to be given before the start of the subsequent monthly contract term in certain states. To prevent the lease from automatically renewing for March, notice should be provided if the lease expires on the final day of February.
Notice Requirements in Each State
The termination period varies from one state to another. Let's look at the termination periods for month-to-month leases in the US:
- Alaska - 30 days
- Arkansas - 30 days
- Alabama - 30 days
- California - 30 days
- Louisiana - 10 days
- Connecticut - No minimum
- Delaware - 60 days
- Arizona - 30 days
- Florida - 15 days
- Hawaii - 45 days for the landlord and 28 days for the tenant
- Idaho - 1 month
- Illinois - 30 days
- Indiana - 1 month
- Iowa - 30 days
- Minnesota - 1 month
- Kentucky - 30 days
- Kansas - 30 days
- Maine - 30 days
- Wisconsin - 28 days
- Maryland - 1 month
- Colorado - 21 days
- Massachusetts - 30 days
- Georgia - 60 days for the landlord and 30 days for the tenant
- Michigan - 1 month
- Nebraska - 30 days
- Wyoming - no minimum
- West Virginia - 1 month
- Mississippi - 1 month
- New York - 30 days
- Missouri - 1 month
- Texas - 30 days
- Montana - 30 days
- New Jersey - 1 month
- Nevada - 30 days
- New Hampshire - 30 days
- South Dakota - 30 days for the landlord and 15 for the tenant
- Oregon - 30 days
- New Mexico - 30 days
- Rhode Island - 30 days
- North Carolina - 7 days
- North Dakota - 30 days
- Ohio - 30 days
- Oklahoma - 30 days
- Vermont - 30 days if a tenant has occupied the unit for two years or less and 60 days for tenants that have been there for more than two years
- Pennsylvania - 15 days
- South Carolina - 30 days
- Tennessee - 30 days
- Utah - 15 days
- Virginia - 30 days
- Washington - 20 days
Although month-to-month leases give the landlord and tenant a lot of flexibility, there are a few things to think about before deciding to go for this type of rental agreement.
The potential for increased revenue and other benefits should be weighed against the danger that a rental unit might go unoccupied for an extended period or interfere with personal plans.
Moreover, the most important considerations when choosing between long-term contracts and month-to-month rental agreements should be market conditions and personal preference concerning financial security.
Need help drafting a lease agreement or termination letter? Download our free forms today, or use DoorLoop to create flawless, custom documents! Contact us to try it out for free!
Frequently Asked Questions
Want to know more? We answer commonly asked questions below!
1. Can a landlord request a security deposit for a month-to-month rental agreement?
Yes. Landlords are allowed to collect a security deposit for month-to-month tenancies. It's important to check local security deposit laws to ensure that you're compliant.
2. Do month-to-month rental agreements have to be notarized?
No, these contracts do not have to be notarized unless the monthly rent is expensive.
3. What disclosures do I need to include in my rental agreement?
Disclosures will differ from one state to another, so it's best to check local laws. However, all rental agreements must have a lead-based paint disclosure if the property was built before 1978 and may pose a lead exposure risk.
Moreover, most states require that landlords disclose the process for returning security deposits and that both parties complete move-in and move-out checklists.