Month to Month Leases: What You Need to Know
Feeling the need for a bit more flexibility when it comes to your living situation? If your needs dictate, you may want to explore lease options other than the typical 12-to-18 month rental period.
What is a month-to-month lease agreement?
Most leases fall into one of two categories: a fixed term or a month-to-month.
A month-to-month lease automatically renews every month without you or your landlord having to say or sign anything. A month-to-month lease agreement can be made in writing or orally. Unlike a fixed-term lease, this type of lease does not specify the end date of the lease. It is important to note that, should your landlord choose to raise your rent, you will have to re-sign (or agree) to the change before it can take effect. During a short-term lease, your landlord must provide the same basic services (e.g. keeping the property safe and livable) as they provide to fixed-term renters.
A fixed-term lease, on the other hand, is always in writing and specifies a finite period of time—usually 12 or 18 months. The landlord and tenant agree to a set rental rate that cannot be changed for the duration of the lease. Tenants who would like to break their lease early should expect to pay a penalty. Typically, this means you won’t get your security deposit or the pre-paid last month rent. Some landlords will require you to continue paying rent until they are able to get a new tenant into your apartment. This makes breaking your fixed-term lease early both inconvenient and expensive.
|Lease Type||Description||Pros||Cons||Best for
|Month-to-Month||Renews every month without a contract or verbal agreement||Flexibility, ease of moving, ability to convert to fixed term, no penalty for exit||Higher monthly cost, susceptibility to rent increases, impact on credit report||Short term renters, corporate relocations, frequent travelers, students, prospective buyers
|Fixed Term||Specifies a finite period of time, always in writing||Lower cost, stability, locked in pricing, firm end dates, ability to plan around move date||Penalty for early exit, limited flexibility, larger overall cost obligation||Long term renters, families, career professionals, pet owners
The Pros of going month-to-month
- You have the flexibility to move out anytime. You can end your lease whenever you need to, as long as you give your landlord the required notice. Most month-to-month leases require that the tenant give 30-day notice before moving out. This is something that should be specified as part of your agreement with your landlord. If you don’t give notice, your lease will automatically continue for the next month. By maintaining a month-to-month lease, you save yourself the cost of breaking a fixed-term lease early.
- If you decide you want to stay put, most landlords are happy to convert a month-to-month lease to a fixed term.
- There is no penalty for leaving early, since the agreement renews automatically each month.
The Cons of going month-t0-month
- Your landlord can raise your rent with only 30 day notice. This means that if you stay in a month-to-month agreement for several months, your rent could change.
- You’ll pay a higher rent than long-term renters. On average landlords will add $30 – $130 a month for short-term renters. In cities with competitive markets, the additional costs can go into the hundreds every month. Before you balk, consider that it’s fairly expensive to repair and prep a unit, plus advertise to find a new renter each time a resident moves out. Because a short-term rental represents more work (and more money) for management, they have to factor in these costs when they set month-to-month rental rates.
- The landlord can terminate your lease with little notice. In some states, they can give tenants as little as 1 – 2 weeks. In others, they are required by law to give 30, 60, or 90 days’ notice before terminating your lease.
- If you consistently sign month-to-month rental agreements, it can begin to hurt your credit over time. Each time you enter into a new short-term lease, the landlord will need to pull your credit report. Pulling your report too often can cause your credit to suffer.
Who should consider a month-to-month lease?
Don’t let the aforementioned “cons” put you off of the idea of a month-to-month lease completely. It may be a necessary and frugal option for you if:
- You anticipate a big life change such as a marriage or career change in the next year
- You’re a student who will only be in the area for 9 months
- You’ve recently moved to a new city and aren’t sure where you want to live
- Your career requires you to travel frequently. For example, you might be consulting on a project or completing your medical residency and only need to be in town for a few months
- You’re planning to buy a home or your home is under construction
- You have a roommate who can’t commit to the full 12 or 18-month lease term. This will keep you from having to either illegally sublet their room or re-sign an updated lease with your landlord
- You don’t have a ton of heavy furniture and can move quickly if you need to. You should also feel confident that you can find a new home easily should it be necessary.
How to find a month-to-month lease
The best way to find a month-to-month lease is to ask the landlord or property manager. Whatever the reason, try explaining your situation to the landlord and ask if they would be open to it. You could offer to pay more than the listed rental rate each month as well. Bear in mind that some loans prohibit the landlord from allowing tenants to rent month to month, so it may not be up to them.
When you’re ready to go from spontaneous to stable, the good news about a month-to-month lease is that most property managers are happy to convert short-term leases into standard 12-to-18 month leases. Making the switch from month-to-month renter to long-term resident means you get to lock in a rental rate for that period, as well.