Learn more about month-to-month tenancy and whether it might be an option for you.
Definition and Examples of Month-to-Month Tenancy
A month-to-month tenancy renews each month. It doesn’t have an expiration date and will continue until the tenant or the landlord gives notice. A month-to-month tenancy can start as month-to-month or occur when a separate lease—such as a fixed-term lease—has expired and the tenant continues to live in the property. In these cases, the tenancy can become month-to-month. For example, say you rented a two-bedroom apartment for $2,500 per month under a one-year lease. Once that year is up, you and your landlord may want to continue the arrangement, but you may not want to commit to renting for another year. In this case, your landlord may agree to a month-to-month tenancy, in which you’d continue to make monthly rent payments but are not obligated to continue renting for another year.
How Month-to-Month Tenancies Work
Let’s consider another example to show how month-to-month tenancies work when you are the landlord. Say that you’ve just received notice from your job that you’ll be working overseas for the next eight months. You own a home and are carrying a mortgage payment, so you will continue to have to make mortgage payments during your leave. Rather than leaving the property vacant, you consider renting it out. You consider a month-to-month tenancy because it may be difficult for you to find a tenant willing to sign a lease for eight months. A month-to-month tenancy would allow you to collect rent and the flexibility to return to your home after you leave, assuming you give the tenant proper notice. Let’s say that you’ve rented out your property to a tenant and have nearly completed your time overseas. The state you live in only requires a 30-day notice if you’ve been gone less than a year. You’re returning six months after you left, so you only need to give notice 30-days before you need your property. The amount of notice you’ll need to give to terminate the lease depends on your state and any additional terms in the contract. For example, some states, such as California, will require a separate amount of notice if you’ve lived in the property for more than a year, even if you’re on a month-to-month lease. Additionally, some cities establish strong protections for month-to-month tenants, which include needing to give “just cause” for them to be evicted or forced to leave the property.
Pros and Cons of Month-to-Month Tenancies
Pros Explained
Offer more flexibility: Because a month-to-month tenancy has no fixed terms, it can offer more flexibility to tenants and landlords. Those looking for temporary stays or wanting to rent their homes out for a short amount of time will benefit from a month-to-month tenancy.Can adjust rental rates as the market changes: Entering into a fixed-term contract can provide stability for a landlord, but it also locks you into a certain amount of rent. In areas where rent is rising, this can mean lost income. Month-to-month tenancies can allow you to change rent when appropriate—although this depends on your state’s laws.No penalty: There is generally no penalty for ending a month-to-month lease.
Cons Explained
Higher chance of vacancy: Having a long-term tenant guarantees your property will not go vacant, allowing you to generate a reliable source of income. Relying on a month-to-month tenancy means you have a greater chance of having a vacancy if your tenant leaves and you have no other applicants.Fewer protections as a tenant: Depending on your state, you may have fewer rights than a fixed-term tenant when it comes to your home. This can be important if your landlord wants to remove you from the property.Reduced revenues: Landlords may face a higher turnover rate with month-to-month tenancies. This could raise the number of units they have vacant at any given time and reduce income and revenues.
