What is a month-to-month lease?
As some ponder whether to buy a home with a mortgage that’ll last the next 30 years, you might be thinking about a more immediate question: Should you stay in one place longer than the next 30 days?
Rather than locking yourself into a long-term situation that forces you to plant roots somewhere, you may be looking for rental options that let you pick up and move quickly. If so, a month-to-month lease could be a good fit for you.
What is a month-to-month lease?
Typically, when you sign a lease to live in a rental, it’s for six or 12 months, and sometimes 24 months. When that period expires, your landlord might offer the option to extend the lease on a month-to-month basis. Rather than having a set move-out or renew date, you and your landlord can continue with those terms until one of you decides to terminate the lease. There are select rentals that offer month-to-month leases for new tenants, too.
Benefits of a month-to-month lease
| For renters | For landlords |
| · Ability to move out on short notice | · Ability to increase the rent on short notice |
| · No big commitment to a location | · Ability to get rid of troubling tenants quickly |
“The key benefit of a month-to-month rental agreement is that it provides the most flexibility to both parties,” notes Whitney Prout, policy and compliance counsel at the California Apartment Association.
For renters: That flexibility gives you the ability to decide to move out on short notice with limited odds of paying any additional money.
For landlords: That flexibility means you have the chance to increase the price of rent on short notice. Plus, if your tenant is frustrating or late on payments, you can take comfort in knowing that you won’t have to deal with them for much longer.
Drawbacks of a month-to-month lease
| For renters | For landlords |
| · May pay higher monthly costs | · Uncertainty about who’s paying rent |
| · Potentially short window to find a new home | · Quick turnaround needed to find new tenants |
For renters: Flexibility means convenience, and convenience comes with a cost. Prout says that renters may pay a higher amount each month in a month-to-month lease compared to a 12-month lease.
“Think of it like Amazon Prime,” Prout says. “If you choose the monthly option, it’s more expensive than the by-the-year option because you can cancel anytime.”
Additionally, that cost can go up at any time. Depending on where you live, your landlord is required to give you a notice about any increase in rent. In California, for example, Prout says that landlords must give at least 30 days’ notice if planning a rent increase of 10 percent or less. If the increase is more than 10 percent, the notice must be issued at least 90 days in advance.
While many state laws operate on the 30-day mandate similar to California, there are some exceptions that accelerate the timeline to move out. For example, in North Carolina, a landlord can inform you of plans to terminate your lease with as little as seven days warning. Having to find a new place to live within a week is never a good position to be in.
For landlords: Securing a new tenant can often require work and time. If your month-to-month tenant decides that he or she plans to move out at the end of the next payment cycle, you’ll have to start advertising the property and finding someone else to take over the lease. In North Carolina, that seven-day warning works both ways — if no one shows interest within a week, you could find yourself with an empty rental and a smaller bank account.
Prout says California landlords tend to prefer a six- or 12-month lease as opposed to a month-to-month arrangement.
“This helps ensure that they recover the cost associated with the downtime and expenses of getting the unit ready for occupancy,” Prout says.
When to choose a month-to-month lease
When you’re feeling uncertain about your future and your lease is nearly up, asking your landlord if you can continue on a month-to-month basis can give you additional time to sort out your plans.
The changes in the rental market due to COVID-19 are a perfect example. Let’s say you have been paying to rent an apartment just a few blocks from your office. If your employer is keeping the office closed for the foreseeable future, the perk of that short commute no longer exists. As you work to sort out your next steps, a month-to-month lease can be a practical solution.
Plenty of landlords know that tenants are looking for flexibility in the midst of the pandemic, too. In New York, for instance, the number of short-term and month-to-month leases available on listings portal StreetEasy increased by 70 percent earlier this year.
How to end a month-to-month lease
What happens if you decide to move out and “break” your month-to-month lease? It’s fairly easy, thanks to the flexible contract.
“We don’t usually refer to a tenant ‘breaking’ a month-to-month agreement,” Prout says. “By its nature, a month-to-month agreement continues until terminated by either party by providing proper notice, so a tenant is entitled to provide notice of termination at any time.”
That notice needs to be in writing, Prout points out, and it needs to be on paper, not via email or text.
“The tenant remains responsible for the rent for those 30 days,” Prout says, “and then they’re off the hook.”
