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Whether you are a renter or a landlord, a lease agreement is an essential document that defines your legal relationship. The terms of the rental agreement also determine both parties’ rights and obligations.

What is a Month-to-Month Lease?

A month-to-month lease is a rental agreement that automatically renews unless you give proper notice to the other party. To a month-to-month tenancy, either party must provide adequate notice as defined by their contract or state law if the lease does discuss notice requirements.

Most commonly, a party to a month-to-month lease must give 30 day notice. For example, a landlord must tell a tenant by the end of April that they will not be renewing the lease after May 31. In this scenario, the tenant will have a legal right to occupy the premises through May 31, but is required to vacate by June 1. If the tenant refuses to leave the property on June 1, the landlord can post an eviction notice and follow the procedures of their state’s laws for removal.

How Does a Month-to-Month Tenancy Works?

When you agree to a month-to-month lease, you are essentially agreeing to be tied to your landlord or tenant for a minimum of two months. Unless you provide notice on the day of the lease signing that the lease will not continue after the end of the month, the tenant will have legal rights to occupy the premises for a month after being notified of an intention to not renew. The tenant will also have a legal obligation to pay for the next month’s rent unless they provide adequate notice to vacate to the landlord. This type of lease can work to avoid legal proceedings with squatters.

All residential leases are governed by the laws of the state where the property is located. Differing provisions in each state’s landlord-tenant laws can have large impacts on lease requirements.

Because a month-to-month tenancy only guarantees the landlord receives rent for the next month, they are typically more expensive than comparable long-term leases. The tenant generally pays more for the freedom to end a lease with only one more month’s rent locked in.

Pros and Cons of a Month-to-Month Lease

Choosing a month-to-month lease has both benefits and downsides for landlord and tenant alike.

Some of the benefits include:

  • Flexible End Date - Both parties are only guaranteed to be tied to each other for the next month.
  • Flexible Rent - Just as the lease’s end date is only locked for the next month, so is the amount of rent due.
  • No Penalty - If any unexpected events occur, both parties can end the lease without breaking the contract and owing the other side compensation.

Some of the disadvantages landlords and tenants should consider include:

  • Uncertain End Date – There is a lack of stability with a month-to-month lease, at it can be ended by either party at any time.
  • Short Notice - The month-to-month provisions can end with only 30 days’ notice. A renter must be prepared to secure replacement housing on short notice, while a landlord may lose rental income they were counting on.

What is a Fixed-Term Lease?

Unlike an open-ended month-to-month lease, a fixed-term lease ends at a time specified in the rental agreement. While one-year or two-year terms are typical, a fixed-term tenancy can be tailored to suit a landlord or tenant’s particular needs.

For example, a student may know they are leaving in nine months, so they can request the lease end when they plan to move. Or a landlord desires all their leases end in a particularly popular month for renters. The landlord can draft a 14-month lease that expires in August if that helps them.

How a Fixed-Term Lease Works?

A fixed-term tenancy locks in a lease’s provisions for however long the parties agree. A standard period for a residential lease is one year. During that year, the tenant will have the legal right to occupy the premises, and the landlord will have the ability to collect rent.

Rent is usually paid monthly for the duration of a fixed-term lease but can be paid upfront, every three months, twice a year, or however often a landlord and tenant agree. Either party who wants to terminate a fixed-term lease prior to the end of the contemplated time will need to break the lease. Such a breach has consequences and possible legal damages.

Pros and Cons of a Fixed-Term Lease

Just as with month-to-month leases, fixed-term tenancies offer different pros and cons.

With a fixed-term lease, you can benefit from:

  • Price Certainty - You will know exactly how much you will pay for rent or receive in income through a fixed-term lease.
  • Predictability - A landlord can rely on a fixed-term lease to know precisely when they will need to begin searching for new tenants. Similarly, a renter can understand when they are required to start apartment hunting again.

The drawbacks to a fixed-term tenancy agreement include:

  • Penalties- It is tough to predict when sudden events will create changes in your life. Being locked into a fixed-term lease means that bad luck can cost you predetermined penalties if you have to break the lease.
  • Missed Financial Opportunities - If the property market takes a turn in your location, whether good or bad, a fixed-term lease prevents one party from seizing on new opportunities. A landlord may not be able to raise rents in a hot rental area, while a tenant cannot accept a great deal elsewhere after a downturn.

How to End a Month-to-Month Lease and a Fixed-Term Lease?

As a legal contract, both month-to-month and fixed-term leases will address the ways you can adequately notify the other party of your intention to not renew the lease.

In a month-to-month scenario, you:

  • Provide at least a 30-day notice that you intend to not renew.
    • Tenants provide notice to vacate.
    • Landlords provide intention to end tenancy.
  • Comply with lease provisions for ensuring the other party is aware of your intentions.