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Landlords Guide to Month to Month Lease Agreements

One word to describe the life of a landlord: scenarios.  As in, there are a lot of different scenarios that occurs between landlords and tenants.  Including the scenario when a lease ends and converts to a month to month lease agreement.

There are many reasons that call for a month to month rental agreement.  We will do our best to explain the value.  If you’re a tenant, we will have a tenant specific post.

To save you time and jump to a specific question, click on the table of content below.  Otherwise we will walk you through the entire process.

Before we continue, we wanted to share that Burbz has a page for landlord resources.  Several of the templates we will discuss can be found on that page.

 

What is a lease?

What happens when a lease ends?

When to use a month to month lease agreement?

Advantages of a month to month rental agreement

Disadvantages of a month to month rental agreement

Does a month to month lease need to be signed every month?

Do month to month tenants have rights?

Can a landlord ask a tenant to move out when a lease expires?

How do you write a 30 day notice?

 

What is a lease?

For simplicity, a lease is the contract agreement between two parties for a property.  A lease needs to define a specified start and end date, payment amounts and frequency, as well as requirements and limitations.

A lease is important for both landlords and tenants.  Landlords benefit from protection on their property and expected rent.  Tenants benefit from no rent increases for a period and the right to occupy.

 

What happens when a lease ends?

Any good lease will define the termination, expiration or continuation process. 

Regarding termination, landlords and tenants have the right to terminate the lease agreement.  This applies to long-term leases as well as short-term lease agreements.  Commonly landlords are required to provide a 30-day notice and tenants provide a 60-day notice.  This allows both parties to prepare adequately for finding new tenants or a new home.

Since leases have a defined end date, either party can decide to let the lease expire upon the end date.  The lease agreement will indicate the required notification duration.  Usually a 30-day notice.

The last potential is letting the lease continue without a termination or notice for expiration.  Again, your lease should state what occurs upon end date.  Typically, a long-term lease will renew for a shorter duration.  Almost always 30 days.  This is what a month to month lease refers to.  The original lease agreement stays intact but the clause for month to month renewal is in effect.

 

When to use a month to month lease agreement?

Two instances for month to month lease agreements to be beneficial for landlords.

Long-term renters who want to continue renting.

Short-term renters looking for a rental 30 days or longer.

For long-term rentals, your initial lease should have a clause that defines the month to month renewal process.

For short-term rentals, you will need to create a lease agreement.  It is important to define the start and end dates, as well as rent amount.  Here is a simple month to month rental agreement pdf.

 

Do month to month tenants have rights?

Absolutely.  Make sure to follow your state and local laws since they can be unique.

For long-term renters, you must continue to follow all Landlord Tenant Laws.

Short-term rentals have a unique set of laws.  Again, research your local laws.  Read our previous blog for important things landlords cannot do.

 

Does a month to month lease need to be signed every month?

No.

Most leases will have a renewal clause when the lease expires without notification.  For long term rentals, this clause will renew every month.

For short-term rental agreements, the renewal clause could define as days, weeks or even a month.

If the original lease agreement does not include a renewal clause, then it is best for the landlord to create a month to month agreement.  Or, create an addendum to lease.

 

Can a landlord ask a tenant to move out when a lease expires?

Yes.  A landlord has the legal right to demand a tenant to move out of a rental property.

However, landlords must follow the law and lease agreements.  Both typically require a 30-day notice, some states have a 60-day notice.  Landlords cannot simply request the tenant to move out the next day with no further notice.

Upon notification, the tenant will be legally required to vacate the property.  It is important to follow your state and local laws so it is done legally.

 

How do you write a 30 day notice?

Landlords can create their own 30 day notice to tenant to move out.  Include your name, date and address of the property.  It is important to refer to the clause of your lease that states a 30 day notice is required.

Most importantly, include a set date and time they need to be vacated by.  Without the time, the tenants can legally stay until midnight.  This date must be 30 days or more.

Or, consider buying an affordable 30 day notice so you only fill in the required fields.

 

Advantages of a month to month rental agreement

Flexibility

Landlords benefit from month to month leases when they have a desire to do something different with the rental property within the year.  Perhaps remodel or sell the property.

It is easier for landlords to plan major renovations knowing the rental is still earning income during the design and permitting phase.  Or, it allows landlords the opportunity to earn more money for a few months to pay for renovations.

If you are considering to sell the property, month to month leases allow the flexibility to end the lease upon sale.  Unless the new owner is an investor, the buyer will want to move into their home as soon as escrow closes.  In this scenario, landlords can continue to earn rental income until the property closes.

Change lease terms

On a month to month lease, the terms continue unless the landlord makes adjustments.  Often this allows landlords to increase rent or adjust pet policies.  Your state and local law will dictate how much can be changed on the lease as well as the required days for notice.

 

Resolve Problem Tenants

Sometimes tenants fall into the gray area of not good, but not bad.  At the end of a lease, going to month to month provides landlords an opportunity to quickly terminate the lease if needed.

Although landlords must follow lease terms and provide the required 30-day notice.

More Money

Short-term rentals generally receive more rent due to the risk associated with vacancy.  Landlords can earn an extra $100 to $300 per month with short term leases.

For long-term leases, landlords can slowly increase rent every month if they wish.  Here is a rent increase notice.  Generally, landlords ask for an extra $25 to $50 per month.  Sometimes the tenants accept or they reject and move out.

 

Disadvantages of a month to month rental agreement

Vacancy Risk

Since tenants only need to provide a 30 to 60-day notice, this can leave the landlord with a vacant unit.  Long term landlords will receive enough notice to start listing the property.

Short-term rentals face this risk more than long-term.  Although it is expected for the lease to have a hard end.  This increased vacancy risk is the reason landlords charge more for short term leases.

Loss Revenue

When a rental property sits vacant, it loses money.  With the increase of vacancy comes the potential for losing revenue.

For long-term landlords, seasons can impact the expected vacancy for your rental.  In cold states, tenants prefer not to move during the winter months.  If your property does not lease before fully into the season, a price reduction might be required to remain competitive.

Therefore, it is important to time your month to month lease not to leave you vulnerable.  Landlords can either provide notice for the lease to expire or request the tenants sign a lease that gets you through the cold months.

 

In conclusion

As a landlord, you can allow your tenants to stay on a month to month lease, create a new lease or let the lease expire.  For long-term rentals, month-to-month rentals give you the flexibility to sale or remodel the property and handle tenant issues quicker.

Along with your responsibilities, it is important to continue collecting rent.  Burbz offers landlords free rent collection online so tenants pay directly to your bank account.  Without you sharing your personal information.  Never forget to collect rent with our rent reminders, which still operate on month-to-month leases.

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