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month-to-month rental agreement

Month-to-month rental agreement

September 2, 2022

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This article is written by Warisha Solanki. This article has been edited by Sonali (Associate, Lawsikho).

This article has been published by Sneha Mahawar.

Introduction

Landlords have all sorts of choices when it comes to determining the length of the Lease agreement. Most of the standard Lease agreements are for twelve or eighteen months and another option is to draft a month-to-month rental agreement, which offers flexibility for both tenant and the landlord. This tenancy is commonly found in residential leases.

What is a month-to-month rental agreement

A month-to-month rental agreement, as the name implies, lasts for a period of 30 days. It is a written contract for a short term of 30 days. A month-to-month rental agreement is unlike a twelve months or eighteen months lease agreement.

The big difference is in the duration of the lease. Month-to-month rental agreements are used by landlords when they wish to rent the property to the tenant on a monthly basis. It typically involves automatic renewal unless the tenant or the landlord provides notice of non-renewal. It is important that this lease agreement is written and signed by both the tenant and the landlord.

Most month-to-month rental agreements require 30 days prior notice either by the landlord or the tenant although this may vary based on local laws. A Month-to-month agreement should include the term and conditions to which the parties have agreed and have set forth the responsibilities and rights.

Significance of month-to-month rental agreement

There are many situations that can arise in which a fixed-term rental agreement is the best option. One such situation is the presence of tenants that constantly move from location to location as their job requires, and for them, a month-to-month lease offers more flexibility.

Another class of tenants who may certainly benefit from this type of agreement are tenants who have recently sold their house and need a place to stay temporarily. Having the ability to rent a temporary residence while they find a new home is invaluable and it ensures that there will be no legal or financial issues associated with it. This type of agreement is also beneficial for those who want to get to know a particular neighbourhood or landlord prior to committing to a long-term lease.

It might happen that one wants to transition to a month-to-month lease agreement once the long-term lease agreement has ended and this lease transition would allow one to stay in the current home for another 30 days without having long-term commitments.

The month-to-month agreement can also be beneficial for landlords depending on the specific property situation. There are many properties that are in less desirable locations, and these properties attract low-income tenants who might have more difficulty in being consistent with the payment of rent. When this occurs, a month-to-month lease gives such a landlord more flexibility in removing the tenant due to non-payment of rent by giving a 30-day prior notice.

Difference between a month-to-month rental agreement and a fixed-term rental agreement

In today’s rental market, the most popular type of agreement is the fixed-term lease which can have a duration of a year or more depending on what is agreed upon between the landlord and tenant.

Fixed-term lease agreements are popular for landlords because they provide measures of financial consistency by bringing constant rent. They are popular for tenants because these fixed-term lease agreements provide security by locking in the rent amount for the term of the lease as well as ensuring that they cannot be evicted as long as they pay rent in time.

While the fixed term can be very beneficial for tenants and landlords seeking financial and residential security, a month-to-month lease agreement that is not for a fixed term can be beneficial to landlords and tenants who are seeking flexibility.

A month-to-month lease allows the flexibility for both the landlord and the tenant to alter or terminate the lease with a 30 days notice with no repercussions.

Pros and cons of a month-to-month rental agreement

Most of the month-to-month agreements are used to extend the existing lease, but it is also possible for the landlord and the tenant to sign month-to-month lease agreements from the beginning.

Pros of a month-to-month agreement

Flexible

A month-to-month lease comes with the liberty to move whenever one might need or want to do so. Living without a fixed term makes it a lot easier to apply for a new job, switch neighbourhoods and travel.

No penalties

Whenever one wants to leave, there will be no penalties that come from breaking a lease.

Security deposit

There are fewer or no chances to deposit a security amount, even if the tenant gives a security deposit he shall get it.

Financial fluidity

Landlords charge rent every month in a month-to-month rental agreement and in this case, the tenants can also start looking for better offers elsewhere.

Cons of a month-to-month agreement

Expensive

The rent of a month-to-month lease agreement can be more than a normal rental agreement. This is because the landlord takes the risk of vacating the property in a short-term period.

The term can change

The landlord has the right to change the term of the agreement at will, which means rent increases are possibly high.

Uncertain

The tenant cannot be sure of their tenancy beyond the span of 30 days. Even landlords cannot be sure of the tenant(s) willingness to live on the premises.

Terminate

The landlord has the flexibility to terminate the lease by just giving prior notice of 30 days leaving the tenant in a difficult position.

Key concerns to keep in mind while drafting a month-to-month rental agreement

Leased premises and leased term: describes the property, the location, and the start of the month-to-month agreement;
Rental payment: states amount, timing, manner of payment;
Security deposit: the amount of deposit and conditions and mode for payment;
Fittings and fixtures: description of the leased premises;
Default: explains default and remedies;
Possession: explain when the tenant may take possession of the property and who is responsible for utilities;
Permitted use: states what is authorized use of the premises;
Assignment: sets conditions under which tenant may assign;
Maintenance: states that the tenant will keep and maintain the premises in good condition.

Important clauses for drafting a month-to-month rental agreement

Important clause for the tenant

To check on pending dues such as electricity and development charges of the society;
To check on the amount to be paid as rent and the amount for the security deposit;
To check on payment of bills and other charges.

Important clause for the landlord

To check on the rent if it needs to be increased;
To evict a tenant in case of breach or non-payment.

Conclusion

This article highlights the difference between month-to-month and fixed rental agreements. It further discusses the merits and demerits of a month-to-month agreement and also highlights a few things to keep in mind before entering into such an agreement.

References

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