A month-to-month lease agreement is a legal document outlining a formal relationship to rent a residential premise between the property owner and another party.
This type of lease/rental agreement grants a renter tenancy on a per month basis, unlike a long-term residential lease agreement which typically lasts for at least one year.
A month-to-month lease agreement will include all of the following:
- Premises: the location of the apartment, house, or room for rent
- Landlord: the owner or manager of the Premises, also referred to as the “Lessor”
- Tenant: the person(s) agreeing to rent the Premises, also referred to as the “Lessee”
- Rent: the monthly amount owed to the Landlord by the Tenant
- Eviction Notice: the length of time in which the Landlord must provide advanced notice to the Tenant before terminating the lease agreement
If you aren’t sure about renting out your property long-term, a month-to-month lease agreement is a great choice. It gives you a flexible way to earn money on your property while giving you legal protection.
Annual vs. Month-to-Month: Which is Right for You?
There are strengths and weaknesses to both a standard fixed-term lease and a month-to-month lease – which one is right for you?
Month-to-Month Lease Agreements for Landlords
A month-to-month lease agreement may seem like an attractive option for landlords looking for more discretion. After all, you may wish to enter a “trial period” before deciding if a tenant is a good fit and offering a longer term lease.
However, be aware that if you wish to end the lease, the number of days’ notice you must give to your tenant to move out in your lease termination letter varies by state.
Most states only require 30 days advance notice, which means you’ll likely have to undergo the same eviction process as a fixed-term lease – and still be left holding the bag on unpaid rent.
A simple rental agreement like a month-to-month also allows landlords the freedom to choose whether or not to stay in the property management business altogether.
Because you aren’t bound by the terms of an annual lease, you can cut your losses in a much shorter timeframe if it no longer makes financial sense to continue renting.
On the other hand, a month-to-month lease agreement can easily adapt to changing housing markets.
States require, on average, that you grant your tenants a notice of rent increase within one or two months. This means that landlords can remain profitable at a faster rate than with a fixed-term as rental situations shift in your area.
So, let’s recap the three main reasons why a month-to-month lease agreement may be the right choice for you:
- It lets you find the perfect tenant
- It gives you the freedom to walk away
- It offers you financial flexibility
Month-to-Month Lease Agreements for Tenants
If the thought of living in one place for too long fills you with the panic of a thousand anxiety attacks, find yourself a rental that offers a monthly term option.
Month-to-month lease agreements offer tenants more leeway in regards to ending a lease, and are the perfect choice for renters that:
- Value a less restrictive housing situation.
- Need to “try out” their rental before committing long-term.
- Want to live minimally, as month-to-month rentals typically come furnished.
This type of lease is also a great choice for college students or transient workers who may only be in town for a short period of time.
Under a month-to-month lease agreement, your lease will automatically renew at the beginning of every month.
In order to break it, simply inform your landlord that you plan to move with a notice of intent to vacate, and your lease will be over by the end of the month – no pressure, no penalties, no point in staying chained to an apartment that you don’t like.
That being said, if you do enjoy living in your month-to-month rental (and you and your landlord are on good terms), a monthly lease agreement can always transition into a fixed-term lease easily.
Another appealing aspect of units with month-to-month rental agreements are that they often come fully furnished as this allows landlords to stay competitive and desirable to short-term renters.
How to Fill Out a Month-to-Month Lease Agreement
Lease agreements are fairly straightforward forms, however, we’ve gone ahead and written a step-by-step guide to help you complete it.
Step 1: Identify the Landlord and Tenant
Your first step in filling out a month-to-month lease agreement is as simple as writing your own name – literally.
Step 2: Specify the Premises
Specify the location of your apartment, house, or room for rent in this section. Just mark down the address of your rental.
Step 3: Determine the Rent
Here’s where you document how much the monthly rent will be. You’ll need to research the housing market in your area, in order to ensure you’re offering the best rate and maximizing your profit.
Step 4: Name a Guarantor
Perhaps your tenant doesn’t fully meet the income requirements, or their credit score was slightly underwhelming; this section guarantees that a third-party (like a parent) agrees to be held responsible for any unpaid rent or charges.
Step 5: Note the Security Deposit
You can use this section to record the amount required, and paid, for a security deposit. Generally, this is equivalent to one month’s rent in most states. However, each state has laws in place that govern the maximum amount a landlord is allowed to request.
Step 6: Describe the Eviction Process
Since this is a month-to-month lease agreement, there is no section to specify the term of the lease. Instead, you’ll write down how far in advance you must notify the tenant should you decide to terminate the lease. Just like security deposits, eviction notice time frames are different in each state.
A month-to-month lease agreement is a necessary document for every landlord, but it’s a tedious effort to fill it out.
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