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

A rental agreement, also known as a month-to-month lease, allows a landlord to rent out their property without any long-term commitment. And just like a fixed-term lease, it’s a legally binding document between you and your tenant.

A month-to-month is just that – an agreement that automatically renews every month until either party terminates it. But is a month-to-month lease better for landlords? Well, to find out, here are answers to commonly asked questions in this regard.

Why Would a Landlord Choose to Rent Out Their Property Using a Month-to-Month Lease?

Are you just starting out and are still learning the ropes of renting out a property? Or, are you a seasoned landlord but looking for some flexibility in regards to who you rent out to? If you answered ‘yes’ to any of these questions, then a month-to-month lease may be ideal for you.

On the other hand, though, a month-to-month lease also has its cons. For one, there will be hardly any consistency when it comes to the rental income. And you’ll need to brace your finances due to the relatively high vacancy periods you may experience.

What are the Pros of Renting Out a Property on a Month-to-Month Lease?

Terminating a Month-to-Month Lease is Easy

Terminating a fixed-term lease isn’t easy. You’ll need to wait until the entire period, which can run between 6 months to a year, to end in order for the tenant to move out. If you’ve got a difficult tenant, waiting for that long can feel like death by a thousand paper cuts.

However, with a month-to-month agreement, all you have to do is serve the tenant with a proper notice. Specifically, you must serve the tenant with a 30 days’ advance notice to end it.

More Control Over the Tenant You Rent to

A month-to-month lease also gives landlords more control over the kind of tenant they rent to. If you rent to a tenant and they become difficult in the future, for whatever reason, you can simply get rid of them by serving them a one month’s notice.

This may not be easy in a fixed-term lease, where you’d need to follow the state’s eviction process to remove them. In Maryland, the eviction process takes anywhere between 3 weeks to five months, depending on the reason. The process may also take longer if the tenant files an appeal or requests continuance.

A Month-to-Month Lease Can Be a Great Way to Test the Waters

If self-managing your rental property, a month-to-month lease can be ideal when starting out. It can enable you learn the ropes of being a landlord. For example, on how to advertise your rental property, and how to screen prospective tenants.

You Can Increase Rent at Any Time

In a fixed-term lease, you must wait until the current term has ended in order to raise rent. And that may be several months away. But this isn’t the case with a month-to-month lease.

In Maryland, you can raise rent at any time for practically any reason. What’s more, you won’t have any responsibility to provide an advance notice.

The state also has no rent control laws, except for one city: Takoma Park. Otherwise, landlords are free to charge whatever amount of rent they wish. That said, there is a limit to how much fees on late rent payment you can charge tenants. The state caps it at 5%.

There are No Penalties for Breaking a Lease Early

As long as you have properly notified your tenant, there will be no penalties for breaking the lease early. Generally speaking, in a month-to-month lease, it’s usually expected that either party will break their lease at some point.

The same cannot, however, be said in a fixed-term lease. Breaking a fixed-term lease usually comes with certain legal and financial ramifications.

What are the Cons of Renting Out a Property on a Month-to-Month Lease?

While a short-term agreement is helpful in some ways, it also has its downsides as well. The following are the cons of renting out a property on a month-to-month lease.

The End Date isn’t Certain

While having some flexibility may be desirable, it however comes with some certain level of uncertainty. If you rent to a quality tenant, you’d want them to stay for as long as possible in order to maximize your rental income.

You’ll Have Little Time to Find a New Tenant

In a month-to-month agreement, a tenant is only required to give their landlord a 30 days’ notice prior to moving out. But trying to find a replacement tenant within such a short period of time can prove stressful.

And being on a time crunch may mean not being able to screen tenants properly, which might result in renting to potentially difficult tenant.

The Rental Income May Not Be Consistent

Consistency in rental income is key in order to maximize your rental income. However, this may prove to be a tall order when renting your property on short-term basis.

Do Landlords and Tenants Have to Sign a Month-to-Month Lease?

Yes! Just like a fixed-term lease, both parties must sign the agreement in order to make it legally binding. You may also want to include a Holding Over clause in the agreement. This will make sure that the lease automatically renews every month until either party ends it.

Other clauses you’ll want to include in your agreement in order to make it foolproof are as follows.

• Rent-related details: when and where rent is to be paid, as well as the acceptable methods for rent payment
• Names of all adult tenants
• Pet and smoking rules
• Responsibility on repairs and maintenance
• The security deposit amount, and any other fees

Bottom Line

There you have it – everything you need to know when it comes to renting out your property on a month-to-month basis. If you have more questions or need expert help in managing your Maryland rental property, McKenna & Vane Property Management can help.

McKenna & Vane Property Management has the skills and experience to manage an assortment of properties like single-family homes and condominiums. We service the areas of Anne Arundel, Howard, Carroll, Frederick & Montgomery Counties. Get in touch to learn more!