Month-to-month rentals can be a great way for landlords to fill vacancies until they find a long-term tenant or sell their property. However, setting them up properly is an important part of ensuring a successful rental experience. Otherwise, you may face time-consuming issues like resigning contracts or getting the court’s help to evict a tenant. In this post, we explore how to go about setting up a month-to-month rental, including what type of lease works best, why landlords choose to rent monthly, and more.
Setting up a month-to-month rental
Creating your lease agreement
Leases typically exist in two formats, with an end date (a “fixed-term lease”) or without an end date (an “automatic renewal lease”). Fixed-term leases use calendar dates to signify the start and end of the contract. After this date, the landlord and tenant can renew the lease or move on to something else. Automatic renewal leases, on the other hand, use periods (e.g. monthly, yearly, etc.) to signify the start of the contract. This lease renews until either the landlord or the tenant provides notice that they wish to terminate the contract.
For month-to-month rentals, landlords often create an automatic renewal lease agreement. This is because it is generally less hassle, especially if there is a chance that the tenant will rent for longer than the fixed period. This type of lease means landlords don’t need to resign every month if a tenant decides to remain in the home. It also means that landlords don’t need to work magic to end a lease earlier than anticipated.
Why lease monthly?
There are many reasons why a landlord would choose to sign a month-to-month lease as opposed to a year lease or a fixed term, and flexibility is the main one. With a monthly rental, landlords don’t need to be as concerned about potential decisions for the future. For example, deciding if they want to sell their property. They can do so if they provide their current tenant with reasonable notice before exploring other options for their property. It also allows landlords to make changes to the contract easier as they can do so without waiting for the current lease to end.
In other instances, landlords can use a monthly rental as a trial for a high-risk tenant that they may or may not eventually sign to a longer-term lease. This could include someone who may move on short notice or has no or poor credit. It could also be used to rent to university students who only rent for one or two semesters at a time.
Ending automatic renewal leases
Ending an automatic renewal lease often requires more work than ending a fixed-term lease. With a fixed term, landlords can simply advise the tenant in writing that they are not renewing the contract. They just have to wait for it to expire. With automatic renewal, there is no end date or expiry for landlords to rely on. They are required to end the contract using a Termination Notice. Likewise, to evict a tenant, appropriate notice is required. Typically, this means serving an Eviction Notice. In addition to serving the notice, landlords must give tenants time to respond, amend any issues, and move out.