“Breaking Down Rental Agreement Month To Month”
Are you familiar with rental agreement month to month contracts?
A rental agreement month to month contract is a fairly common arrangement for property rental. Its contents are somewhat similar to that of a fixed-term lease. However, it differs from the fixed-term lease in a variety of ways.
In this blog post, I’ll break down rental agreement month to month contracts so you’ll understand those differences. This can also help you better understand when you should be using a rental agreement month to month contract.
Understanding a Rental Agreement Month to Month
A rental agreement month to month is a contract between the property manager and the tenant. Like every other type of rental agreement, it’s a binding legal document once signed.
Why is it called “month to month”? Because its terms are renewed monthly.
Compare this to most other rental agreements, which only have to be renewed after much longer tenancy periods.
The rental agreement month to month contract is, therefore, one that doesn’t fit every type of situation. If you’re considering a rental agreement of this kind, you probably have very specific reasons for it.
To help you figure out if you need to make a rental agreement month to month contract for your property, let’s talk a little more about what these agreements entail.
What Is a Rental Agreement Month to Month?
A rental agreement month to month is similar to a lease agreement. Both agreements contain similar clauses such as pet policies and insurance requirements. You may also find security deposit details and late rental payment penalties in both.
However, a rental agreement month to month is a contract meant for short-term tenancy. On the other hand, a lease agreement is meant for long-term tenancy. This is the most important difference between the two of them.
As mentioned earlier, the rental agreement month to month contract is also renewed monthly. That also tells you the standard length of tenancy for these contracts.
Length of the Agreement
A rental agreement month to month tenancy typically lasts for a month or 30 days. It automatically renews at the beginning of each month, unlike a lease agreement. However, if either party opts for a nonrenewal, a notice must be provided.
The notice period depends on state laws. However, a 30-day minimum notice period is the most common.
Application of a Rental Agreement
A rental agreement month to month contract can be used once a fixed-term agreement ends. When a tenant doesn’t want to leave immediately after the lease agreement ends, a rental agreement like this may come into play.
Rental agreements like this may also be used in locations with high rental potential. Examples include temporary housing and college apartments.
Finally, rental agreement month to month contracts may be employed when either the tenant or property manager is unwilling to commit to a long lease.
Advantages of a Rental Agreement
Rental agreements are appealing to many property managers because of their benefits. Some consider using this type of agreement because of its flexibility. In addition, some say it can be used to help determine whether a tenant will be a good fit for long-term tenancy.
To add to these benefits, here are the other advantages of using a rental agreement month to month.
Additional Earning Potential
In a rental agreement month to month, tenants can end their tenancy at the end of every 30-day period. That gives the landlord little time to find another tenant for the property.
With long-term leases, the landlord’s source of income (or rent) is guaranteed for a long period. With a rental agreement month to month contract, however, there’s a high risk of the source of income vanishing at almost any time.
This sort of risk is factored in when property managers set the rent for rental agreement month to month contracts. That’s why these agreements tend to charge more for rent each month than long-term leases.
More Flexible Rental Terms
Since a month-to-month rental agreement is meant for short-term tenancy, it gives you more flexibility than the average lease. You have more choices in terms of what you can do with the property. You can even change the terms of the rental provided that there’s proper notice.
On the other hand, the flexibility of the agreement also applies to your tenants. They’ll be able to transfer to another rental property more easily, for example.
Easily Evict a Tenant
A rental agreement month to month contract will enable you to get rid of problematic tenants more quickly than a lease agreement. You can legally evict your tenant if they fail to pay monthly rent or cause damage to the property.
Just remember that you still need to give a 30-day notice to the tenant. Not doing so may be grounds for legal actions against you.
Basic Components of a Rental Agreement
Now that you know what a rental agreement month to month contract is and why some people use it, it’s time to learn what goes into one.
The contents of a rental agreement month to month are mostly similar to those of other agreements. Remember that the biggest differences are the lease duration and rental due date. Those two points should be clearly discussed in the rental agreement.
Now if you want to draft your own rental agreement month to month contract, you’ll need to know the other things to put in it. Here are the other basic components of a rental agreement.
Landlord and Tenant Information
This is the first section of any standard rental agreement. The full legal names of you and your tenant should be disclosed.
In addition, the full address of the property and contact information should also be included. It’s best to verify the information given by your prospective tenant by doing a basic background check.
Basic Terms of Lease
The rental agreement should specify that it’s a month to month lease. It should include the rental amount and mode of payment. Of course, don’t forget to state the due date.
Aside from that, include grounds for lease termination such as damaging your property and doing illegal activities. Including these clauses will help you to easily evict a tenant once they violate your terms.
Lastly, the details on lease renewal should also be stated. Remember that a rental agreement of this kind automatically renews. So it’s best to specify your conditions on automatic renewal.
Be sure to note what a tenant must do if he doesn’t wish to renew the agreement. Note too the amount of time he’s provided to do it, either from or before the end of the current tenancy month.
Details on Deposits and Fees
Details on deposits and fees are pretty much self-explanatory. Deposits are different from monthly rental payments.
They’re usually used for reasons such as for repairs. Make sure to state the things for which security deposits may be used when writing your agreement.
Other applicable fees should also be included. Detail the fees that’ll be charged for late or returned payments.
Other Terms to Consider
You can add any other subsections that you want. If you have specific rules and regulations, make sure to include them in the agreement.
For example, if you require the tenant to pay for the insurance then it should be mentioned. You may also want to include details on your right of entry such as weekly or monthly routine inspections.
Final Thoughts on Understanding a Rental Agreement Month to Month
A property manager must realize that a rental agreement month to month has some differences from other agreements. Even though its contents are somewhat similar to that of a fixed-term lease, it still differs in a variety of ways.
A rental agreement is meant for short-tenancy that usually lasts a month or 30 days. It can be used once a fixed term agreement ends and in locations with high rental potential.
If you’re going to use a rental agreement because of its advantages, make sure to include the basic components. Those include the tenant and property details, the basic fees, the rent arrangements, and so on.
For questions about rental agreement month to month contracts, leave them in the comments section below.
Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.
Article: Breaking Down Rental Agreement Month To Month