Rental Property Investor · Edgerton, WI · Member since 2017 · 86 posts · 35 votes
Hey friends, this is completely me thinking out loud through the forum and seeing what others think. With all the current regulations being implemented to stop evictions around the country, has anyone thought about trying to modify current leases or start new leases on month to month terms instead of long term so that landlords would be able to remove tenants not paying and not be locked into terms without being able to evict? Just a passing thought that I was thinking about going forward, suggestions? Thoughts?
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
@Phillip Davis There's definitely some advantages to landlords in having tenants on month-to-month agreements vs year-long leases, even in normal times. Almost all of my tenants are on MTM agreements. It gives me much more flexibility in regards to when I can raise the rent or change the terms of the tenancy.
It could be even more important to have tenants on MTM agreements now with the way many jurisdictions across the country are banning/suspending evictions. While Aaron is correct that if you terminate a MTM tenancy and the tenant refuses to move you still have to go through with an eviction (unlawful detainer) to recover possession of the property, here's the big difference between a MTM tenancy and a tenant on a year-long lease right now...
Let's say you have a tenant 6 months into a year long lease who stops paying rent. Normally, this would be a clear-cut eviction case for non-payment of rent. However, many jurisdictions have implemented a moratorium on evictions for the non-payment of rent. In the county where I invest, you would not likely get the tenant out for the remainder of the lease term, even if the tenant never resumed paying.
However, suppose this same tenant was on a MTM agreement. Instead of addressing the non-payment of rent, you could instead just issue a 30 day notice to terminate their tenancy. Then, if they didn't leave, they'd be a holdover tenant. You could then potentially proceed with an eviction to remove them for being a holdover tenant, since the executive order in that county only suspends evictions for non-payment of rent. Then, after getting the tenant out, nothing would prevent you from going after the tenant in small claims court for the past due rent they owed you. So you'd still have options to recover your money, if you chose to go that route.
In my opinion, MTM agreements are just much more advantageous to the landlord all the way around.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
@Phillip Davis There's definitely some advantages to landlords in having tenants on month-to-month agreements vs year-long leases, even in normal times. Almost all of my tenants are on MTM agreements. It gives me much more flexibility in regards to when I can raise the rent or change the terms of the tenancy.
It could be even more important to have tenants on MTM agreements now with the way many jurisdictions across the country are banning/suspending evictions. While Aaron is correct that if you terminate a MTM tenancy and the tenant refuses to move you still have to go through with an eviction (unlawful detainer) to recover possession of the property, here's the big difference between a MTM tenancy and a tenant on a year-long lease right now...
Let's say you have a tenant 6 months into a year long lease who stops paying rent. Normally, this would be a clear-cut eviction case for non-payment of rent. However, many jurisdictions have implemented a moratorium on evictions for the non-payment of rent. In the county where I invest, you would not likely get the tenant out for the remainder of the lease term, even if the tenant never resumed paying.
However, suppose this same tenant was on a MTM agreement. Instead of addressing the non-payment of rent, you could instead just issue a 30 day notice to terminate their tenancy. Then, if they didn't leave, they'd be a holdover tenant. You could then potentially proceed with an eviction to remove them for being a holdover tenant, since the executive order in that county only suspends evictions for non-payment of rent. Then, after getting the tenant out, nothing would prevent you from going after the tenant in small claims court for the past due rent they owed you. So you'd still have options to recover your money, if you chose to go that route.
In my opinion, MTM agreements are just much more advantageous to the landlord all the way around.
Rental Property Investor · Edgerton, WI · Member since 2017 · 86 posts · 35 votes
6y
@Kyle J. I am in no way an expert in all the laws being incorporated right, my thoughts were exactly what you referred to as replacing a tenant because of end of lease vs lack of payment, which again not being an expert in new laws, might be a loophole giving us the landlord a little of the power back on our investments.
Rental Property Investor · Portland, OR · Member since 2018 · 73 posts · 24 votes
6y
@Kyle J.
Do you foresee property managers shifting to MTM in the future? What would drawbacks be for potential tenants if they see the lease is only MTM? Slower time to occupancy?
Chicago, IL · Member since 2017 · 14 posts · 4 votes
6y
I think drawbacks to tenants are that they will worry that you will kick them out or raise the rent at any point. It also increases your risk of vacancy since they can leave basically at any time. I have found it easier to fill vacancies in the spring/summer than in the winter, so I prefer my leases to end during "moving season".
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
6y
A simple clause in the lease that applies to both tenant and landlord saying to the effect: "Lease may be terminated by tenant or landlord with a XX-day written notice, one upon the other".
This emergency won't last forever (I hope!) and our clients like the security that a detailed lease provides. BTW, at least in PA, with a lease, we can give 3-days, 10-days, or NO days notice to pay or quit. Can't do that with a month to month--gonna have to be 30-days.
I understand the benefits of the m-t-m, we just prefer the lease.
@Phillip Davis I've done month to month leases before. Just be mindful that if the tenant decides not to leave the property, you will still have to go through the eviction process as they are considered a "holdover tenant". I had this happen to me in 2017. I easily won the case, but it still took a month after the lease end date before he actually left due to the court order. Had he appealed, it would have taken even longer.
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
5y
So with eviction moratoriums likely to be extended until September 2021 by Biden, this strategy of going month to month is still our best and only viable option that I can see.
Has anyone been trying this? Any push back from applicants?
Investor · Dayton Ohio · Member since 2020 · 9 posts · 4 votes
5y
@Robert Steele I'm very interested in if you have received an answer on this question, I have a new building where all of the leases expire in June (one tenant has been here for 2 years, the others for less than a year) and I'm debating if I should just keep all of them month-to-month after that point to be safe, then once the ban is lifted, and if they have a good track record maybe revert back to annual renewals to give them some peace of mind on rent/living situation (This is a B-/C+ area)? They've all paid on time, and appear to be good tenants (I'm still in the monitoring phase on if they're bad or good)
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
5y
@Bryan Egner My tenants are all still on yearly leases so I haven't had much of an opportunity to find out. I did lease out one property however. Some applicants where not happy about month to month but the applicant I finally settled on was fine with it. An interesting side note, I discovered from applicants that there is actually a niche of demand for short term leases. People who are moving into new construction and just need a place while they wait for the builder to finish. They are willing to pay a premium.
North Las Vegas, NV · Member since 2015 · 12 posts · 2 votes
5y
Thank you Kyle for your post. My husband and I are about to rent out first rental (our previous home) and the thought occurred to me that month to month, from a risk management standpoint, would put us in a more advantageous position than the potential problems of a lease in this Covid climate. He of course wanted "proof" and BP is a nationwide group of investors that always helps get my questions answered...and I'm a real estate agent. Yes, if someone is the renter you hope you've rented to, they are not just going to pick up and leave...if they do, we have our property back to rent again. The other scenario for landlords I'm sure has been devastating, losing money, trying to get federal help and those not paying rent more likely to ruin the home. I would love to hear anybody elses experiences with month to month vs leases during this covid. Thanks guys.