Property Management Blog

Is a Month-to-Month Lease Better for Landlords?

System - Tuesday, May 30, 2023
Property Management Blog

Are you trying to decide between renting with a long-term lease or a month-to-month arrangement?

A savvy landlord knows the importance of requiring renters to sign a lease or rental agreement before moving in. Now, among the lease options a landlord has is a monthly rental agreement. This is a short-term agreement that allows a landlord to rent out their property without any long-term commitments. 

A month-to-month lease is different from a long-term lease and has its pros and cons. The following is everything you need to know regarding any month-to-month leases and whether it’s better for your renting business. 

What is a Month-to-Month Lease? 

First, a month-to-month lease is just like any other rental agreement in the sense that it’s a legally binding document. It binds both the landlord and the tenant to the lease for a month and to break it, either party must serve the other appropriate notice. In Virginia, the Residential Landlord and Tenant Act requires that a notice of at least 30 days be served before terminating a month-to-month lease. 

Usually, a landlord uses month-to-month agreements to extend long-term leases that have come to an end. This helps avoid holdover situations, where a tenant occupies a rental property without a lease agreement. That said, it’s also possible for a landlord to require renters to enter a month-to-month lease from the very start. 

two people looking over contracts while sitting on a couch

Why Would a Landlord Choose a Month-to-Month Lease? 

Landlords who choose a month-to-month lease agreement over fixed-term arrangements usually do so for flexibility purposes. A month-to-month tenancy can make it easy for you to choose who to rent to and for how long. It can also be helpful when you want to extend a longer-term lease agreement rather than have the tenant hold over. 

That said, month-to-month agreements can make it harder for landlords looking to generate a consistent rental incomeon their property. This is because you may find yourself experiencing vacancies now and then. 

Pros of Month-to-Month Lease Agreements 

Just like any other type of lease, a month-to-month lease has its fair share of pros and cons. The following are the pros: 

You Can Terminate It Easily 

Terminating this kind of tenancy isn’t as complicated as terminating a long-term lease. With a fixed-term lease, you’ll have to wait for the lease expiration date to get back your home. The only exception would be to either seek mutual termination or evict tenants for a legitimate cause. 

With this lease, however, all you have to do is serve the tenants with proper notice of termination. The minimum termination notice for renters on month-to-month arrangements in Virginia is 30 days. 

a contract with a pen on top of it

You Can Test the Waters as New Landlords 

Are you a newbie DIY landlord? If so, monthly leases can help you figure out whether or not being a landlord is right for you. You can use this time to learn how best to market your rental unit, screen prospective renters, and handle maintenance requests.

You can Raise the Rent

Having month-to-month renters will enable you to raise rent quite easily without having to lose them. But before you do so, make sure you check local laws to know the minimum notice requirements. 

In Virginia, how much notice you need to provide renters before a rent increase depends on the lease term. For monthly, a 30-day notice is mandatory. Also, make sure to comply with anti-discrimination laws and retaliation laws.

Breaking the Lease has No Penalties

Unlike fixed-term leases, there is no penalty for breaking a short-term lease. After all, it’s expected that either party will ultimately end it. The same cannot, however, be said of fixed-term tenancies. Breaking a fixed-term lease often results in financial and legal ramifications. 

You’re Able to Retain Quality Tenants

A month-to-month rental contract can enable you to retain desirable renters for optimal returns and reduced stress. Once you land one, you’ll just have to keep renewing their lease until they eventually leave. 

two people shaking hands in front of a large window

You Have Time to Find Replacement Tenants

As already mentioned, the minimum notice to break a month-to-month rental agreement is 30 days Once the renter leaves, you won’t be on a time crunch trying to re-rent the property. You’ll have time to market the property, screen prospective tenants, and show the rental units to interested tenants. 

Cons of Month-to-Month Leases 

Month-to-month leases aren’t without some cons. They are as follows: 

The End Date is Never Certain

Monthly written lease agreements can be desirable in some situations, especially when looking for overall flexibility. However, with flexibility comes uncertainty. Having to find a renter now and then will have an impact on your bottom line. 

For optimum return on investment, you’ll want to hold onto a quality renter for as long as you can. 

You’ll have a Less Stable Income

Keeping tenants temporarily will hurt your bottom line. You may have a less stable income, which may result in a poor return on investment

How are Fixed-Term Leases and Monthly Contracts Different from Each Other? 

A fixed-term lease lasts for far much longer, usually between 6 months and a year. Also, unlike month-to-month leases, breaking fixed-term leases carries certain financial and legal ramifications. 

Bottom Line

So, is a month-to-month tenancy better for landlords? It depends! Examine both the pros and cons to determine whether it’s the best option for you. For expert help in managing your rental property, turn to the experts at KRS Holdings. We can help maximize your ROI and provide you peace of mind. Get in touch to learn more about our management services!