Pros and Cons of a Month-to-Month Rental Contract Versus a Fixed Term Lease

As a landlord or property manager, you have the option of renting your property for a fixed term, usually 12 months, or on a month-to-month basis. This article discusses the pros and cons of a month-to-month rental contract, as compared to the longer fixed term lease. 

Pros and Cons of Month-to-Month Leases

A month-to-month rental contract continues each month until one party decides to end it by serving a 30- or 60-day notice to vacate. In California, a 30-day notice is appropriate when the tenancy duration is less than a year, and a 60 day notice is used for tenancies exceeding one year.  Month-to-month leases can be signed with a new tenant, or they can be used to extend a current tenant’s leasehold interest.  A month-to-month tenancy generally renews automatically each month.

One major advantage of a month-to-month lease is the flexibility it creates for the contracting parties. The lease ends whenever either party wants it to if proper notice is given. 

Landlords typically charge more for month-to-month agreements from the start because they’re not as stable as fixed term leases.  The increased rental income landlords receive from month-to-month leases serves as an offset against increased risks that may come with a short-term lease length.

One major downside of a month-to-month lease arises from the increased cost of having the property vacated for periods of time.   The relatively short notice period for terminating the tenancy can make landlords scramble looking for another tenant to avoid a vacancy. In addition, there typically is a greater potential for damage to property with month-to-month leases. 

Landlords may also incur increased upfront costs with a short-term rental since they frequently come fully furnished.  This would include furniture and kitchenware that your resident may require throughout their short-term stay.

While a landlord’s benefits to short-term leases include higher earning potential and the flexibility to change tenants, these benefits may be offset by the above factors.  In addition, the enactment of “just cause” eviction laws mandated by several California counties means that you cannot simply terminate a month-to-month lease without a recognized reason for the termination. 

Pros and Cons of Long Term Leases

Long-term leases are the standard across the rental community. Their benefits include consistent revenue for an extended period, lower maintenance costs, and a lower risk of vacancy.   Quality long term tenants often pay rent on time, take care of the rental, and pose less of a flight risk as compared to month-to-month tenants.    

There are, however, downsides to electing to lease your property under a long-term contract. In addition to lower income potential, you will not have the option to remove or turnover a tenant from the property unless they breach their contract or violate some other legal obligation warranting an eviction action against them. 

If you elect to lease your property under a long-term contract, compare the prices of your property with competing properties and properly screen all applicants, to ensure that your property attracts responsible tenants. 

Please contact Lynx legal with any questions regarding the above, and for help regarding any issues related to an actual or contemplated eviction.  We have handled over 12,000 evictions over the years and have an excellent track record.  We can be reached at 888-441-2355 or info@lynxlegal.com.  Our experienced professionals are standing by to assist in any way we can.