Lease agreements are important to ensure the safety and security of a home or apartment a renter has decided to live in. These agreements should be something that suits the lifestyle of the renters but also helps the landlords fulfill their requirements as caretakers of a building. A month-to-month lease option can help renters who are not ready to commit to a long-term stay, and it can provide a steady source of income for the landlord.
What is a month-to-month rental agreement?
Month-to-month rental contracts last for 30 days and automatically renew at the end of the month until the renter or the landlord decides to cancel. These agreements are similar to a traditional lease agreement in that they include such clauses as security deposit requirements, insurance requirements, and penalties for late rental payments. However, unlike a long-term lease, either the renter or the landlord can cancel a month-to-month rental agreement as long as they give proper notice. Most states require at least 30 days’ notice, but it will vary from state to state.
This can be the perfect option for one of your renters who is perhaps planning for extended travel or taking a temporary job in a city, or even if you just need to quickly fill a unit. However, it’s important to weigh the pros and cons of a month-to-month rental agreement, as it is not the right fit for everyone.
Flexibility
The most obvious benefit is the flexibility a month-to-month lease gives. It allows renters to move out, penalty-free, in just four weeks without an early termination fee. Also, if the renter likes their accommodation and decides they want a longer-term lease, you can convert it to a standard lease. In this case, the month-to-month rental agreement is a sort of trial when both the renter and the landlord decide if it will be a good fit.
On the other hand, this flexibility extends to landlords, as well. Landlords can terminate a rental agreement within the appropriate notice period and don’t wait until a full year-long lease has ended.
Costs
With increased flexibility comes increased costs. Taking on a month-to-month renter is a risk for landlords, as there is a higher chance of temporary vacancy. Landlords will typically charge more for short-term renters in order to cover costs. Raising the rent price can help cover the repairing, prepping, and advertising that comes with finding a new renter.
As month-to-month rent technically starts a new agreement between landlord and renter each month, the landlord can raise or lower the price every month depending on shifts in the local market. This can sometimes be a large shift if the property is in a big city.
Problem Renters and Roommates
Month-to-month rent gives landlords a way to remove renters who are not respecting the building. This can include renters who are having trouble paying their rent or those who are a nuisance to neighbors. As long as landlords give enough notice, usually 30 days, they can terminate a lease whenever they choose. On the other hand, month-to-month rental agreements are a good way to see if a renter will be a good long-term fit. If the landlord and renter are in agreement about the property, a month-to-month lease can become a long-term lease in the future.
How To Create a Month-to-Month Rental Agreement
As month-to-month rental agreements are essentially contracts that renew every 30 days, both the landlord and the renter must be in agreement on the details of the contract. After the landlord finishes preliminary vetting tasks such as checking a renter’s credit score and current job status, the negotiations can begin. For month-to-month rent, lease agreements must clearly state how many days each party must give before terminating the agreement. Usually, both parties agree to notify the other 30 days prior to the next payment cycle. They also must agree on what day the rent is due. This is typically the first of the month.
As renters will be paying for their property once a month, landlords must decide when they will start charging late fees. Many landlords will charge a late fee the day after the rent is due, but some may give a grace period. They must also decide how many days a renter can be late on the rent before eviction happens.
Month-to-month rental agreements can benefit both the renter and the landlord. They can allow landlords to charge a slightly higher rent price and offer flexibility. Plus, month-to-month rental agreements can always transition to long-term agreements if both parties are happy.
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