Minooka, IL · Member since 2013 · 353 posts · 85 votes
An existing tenant I have wants a month to month lease. I'm okay with that. What's the best way to do paperwork so I don't have to meet with them every month to sign a lease.
I almost always do year leases even for renewals, but I had a tenant who wanted a month to month lease.
I wrote it up that EITHER party could cancel the rental agreement with 30 days written notice without cause. (That means for no reason, good or otherwise.)
The tenant read that and said well that means you can kick me out any time? And I said you asked for a month to month lease, that's a month to month lease. I think he thought in his mind that it would be uni-laterally month to month, as in only month to month for him. He singed the lease and stayed for a couple of years.
Check your current lease with them. Often there is a little paragraph that says in the event the lease expires and neither party gives notice to vacate then the tenancy continues on a month to month basis. The only thing you may need to do is if you were going to raise the rent it is different than what is on the original lease, so you would have a 1 page addendum that adjusts the rent amount but says all the original lease provisions are still in place or something to that effect.
If your lease does not have the little MTM clause then write up your lease that says it is a month to month agreement. You don't actually have to sign anything every month, the exchange of monthly rent activates(for lack of a better word) the agreement every month. So as long as they pay and neither party gives notice to move out you should be good.
I almost always do year leases even for renewals, but I had a tenant who wanted a month to month lease.
I wrote it up that EITHER party could cancel the rental agreement with 30 days written notice without cause. (That means for no reason, good or otherwise.)
The tenant read that and said well that means you can kick me out any time? And I said you asked for a month to month lease, that's a month to month lease. I think he thought in his mind that it would be uni-laterally month to month, as in only month to month for him. He singed the lease and stayed for a couple of years.
They were asking for when their lease is up in January. I don't care if its month to month after January as long as they continue to pay on time and it doesn't trouble me.
I prefer month to month leases. If I want, I can terminate the lease for any reason. So troublesome but hard-to-evict tenants can be removed with less pain.
I write the lease to end one money after they move in. Then the month-to-month clause kicks in. Tenants seem to prefer it, too.
@Jon Holdman , what you say makes a lot of sense. In fact, it's hard for me to figure out a good reason to do yearly leases as an ordinary residential landlord - and yet, most landlords (including myself) and property managers use yearly leases. Why? Are there any real benefits to using a yearly lease? Should I tell my managers to start doing month-to-month? Is there an incentive for the non-owner manger to want a yearly lease, rather than m2m?
Really, the only advantage of a 1 year lease is all in the minds of the tenants. If they have a 1 year lease, they are likely to stay that 1 year. However, if they really want to move early, they will, and it costs more to go after them then to just re-rent it and move on. If you prefer a month-to-month from the beginning, then do that.
I've been tossing around the whole M2M vs 12Mo lease the past week or so and I've decided from this point on I'll probably do M2M for similar reasons to what Jon Holdman stated. Unless I get a great tenant that I don't want to let go I'm strictly M2M
I think part of this depends on your market too. A lot of tenants in my market want more than a one year lease.
I would like to see some data on the average length of tenancy between the two strategies. I'm inclined to lean towards the 1 year lease strategy as winning out, but I need to see more data to prove it. If turn over is one of the highest costs, then picking the strategy that yields the longest tenancies would be best. To hedge against the reasoning behind the main argument for m2m strategy, getting problem tenants out quickly, a better tenant screening policy could be implemented.
@Jon Holdman I like the idea of only month to month all the time, but I would be worried I'd rent it out and 4 months later they move out and I have to go through the whole process of renting it out again. Or perhaps for a new renter I could say we'll do month to month, but anything less than six months and half of your security deposit will be kept. Any thoughts?
@Jon Holdman I think I will also take your advice of doing month-to-month leases right off the bat. I've already started using those for roommates that rent the extra bedrooms in my house....why not for the rental units too? Then when it turns out that even my screening didn't prevent a bad tenant, I can just end the lease! And if they're good and like the place, they stay. I say it's win-win for both renter and landlord...especially in the type of rental market I'm in.
What type of clause do you put into a MTM lease regarding rent increases? Are you allowed to increase at any time, no greater than X% from the previous month?
The benefit of a 12mo or 24mo lease here is that tenants almost expect and understand that when renewing every year, there is a good chance the rent will increase $50-$100. How would you get that across with a MTM, or what wording could be used in the MTM lease itself?
In our area, month to month is really hard for any tenant to find and people expect to sign a 1 year lease. I'm with Michelle in the idea that the tenants feel obligated to stay for the 1 year term if they have any decency at all... However, it is more difficult to get rid of the tenant if they aren't what you expect.
We did give 1 tenant a month to month as a trial basis because they were moving to the area and looking for jobs, if they didn't find them, they would likely move on.
Another good tenant wanted month to month at the end of a lease and because they are just not heard of around here, we upcharged just a tiny bit and encouraged them to sign a new 1 year lease with us to drop that fee. They were looking to buy a home and didn't want the obligation of a 1 year lease so they paid the fee and stayed for about another 6 months when they bought a house.
The one year lease gives some predictability to when vacancy will occur. That is an advantage if there is a time frame that is desirable to rent your unit. For example if you are targeting families who want to move for the new school year. I have never had a problem with letting a one year go to month to month but generally the expectation in this area is a yearly lease.
I do 1-yr and recently started 2-yr leases, and so far, the 2-years are working well. I do not personally like month to month from either side of it -- as a landlord, I want a tenant who commits for at least a year to avoid turnovers (understanding a bad one will leave, anyway, but hopefully they've been mostly screened out), and from the renter's side (which I've been on as well), I do not want to put the effort into moving in somewhere unless I am assured I won't have to move again for at least 6 months. Moving costs are expensive, finding a new place is a time-consuming pain, and I want the rent price locked in for that term so I can budget without fear of random rent increases.
I used to do one year leases. I had tenants break them several times. Even tenants who checked out well through the screening process. I do agree that, at least in some cases, they encourage a tenant to stick around. But if push really comes to shove the tenant will leave and there's really nothing you can do about it. OTOH, if a tenant is troublesome but not too troublesome your hands are really tied. How many posts have you seen here where someone talks about calls from neighbors complaining about your noisy tenant? Or unauthorized dogs? Or extra people? Or whatever.
I have had one tenant leave after less than a year. But she gave lots of notice and left the house in good condition. All the others have been there or were there over a year.
What type of clause do you put into a MTM lease regarding rent increases? Are you allowed to increase at any time, no greater than X% from the previous month?
The benefit of a 12mo or 24mo lease here is that tenants almost expect and understand that when renewing every year, there is a good chance the rent will increase $50-$100. How would you get that across with a MTM, or what wording could be used in the MTM lease itself?
It may vary by state but you should be able to raise it as many times as you want *giving the proper notice* if you're on M2M. The % of increase may be limited by law in your area.
Once the tenant has satisfied their 1 year commitment (and has been a good tenant) I allow them to go month to month more as a gesture of good faith than anything else. Have them sign an addendum to the lease stating the updated terms. If they are a nightmare I either don't renew their lease or make them sign a new 12 month lease. I have several tenants that have stayed more than 2 years on month to month after their leases expired.
We do 12- 36 month leases because the rerenting timing is *very* important. Outside of the April-August renting season, it is very hard to get good tenants at market rent due to the military "moving season". Two encourage tenants to full fill their obligations, we have a break lease clause that the tenants initial by. It state that they are required to give 2 month notice and 2 months break lease fee if they are break their lease for any reason besides military orders. This came about after a tenants broke their lease with limited notice and left the house in bad shape and a mess.
Here in Florida the timing isn't as important as it is in the colder states. November and December is a tougher time to rent with the holidays but other than that I've never had a major problem filling a unit.
I never do month to month for one reason, in Florida if the lease is for a term of 6 months or less (which month to month is) you have to collect and pay sales tax. If I write a 1 year lease and the tenant skips out on me in under 6 months I don't have to pay. If I write a month to month lease I have to collect sales tax on the first 6 months the tenant pays rent.
Hello BP I am adding to this thread as I was looking at answers to mu current landlord/tenant situation. I purchased a duplex a year ago and the side A tenant did not renew her annual lease. There is no clause regarding reverting to m2m in the original lease, so I created a month agreement which clearly states either party can give 30 days notice to the other. I figured when they chose to do a month to month that they had intentions to leave, as with my experience, having a 12 month lease offered stability to tenants. So my tenant, who let me add I inherited a year ago and has not been the cleanest, has violated rules of the agreement, i.e. trash around the yard, smoking in the apartment, late rent etc. So the tenant calls me and said her sliding door needed repairs, I had not walked through that apartment since I took over the purchase due to tenant never home. I finally walk thru the unit and its the most disgusting thing you have ever seen. along with smoking in the unit which is outlined in the lease there is crayon marks all over the walls, blinds are broken, damage kitchen cabinets etc. So i made the decision this past weekend to serve the 30 days notice citing repairs that needs to be done, which the tenant states were there when she took unit. Tenant now is angry and said she cannot move in 30 days and needs 60 days which I refuse. I get the sense they do not have the money to get another apartment but would rather they go at this point before I have to gut my whole unit. I told tenant its the state law that I provide notice and can possibly give extra 5 days if she is in the process of moving but that's it, she is now refusing to leave in 30 days. Do I need to do anything different at this point?
MTM is better for the landlord. The lease is there mostly to protect the tenants from rent hikes, especially in C properties. Most C property tenants will leave if they have to and break the lease. There is little you can do except keep the security deposit. Sure you can sue for lost rent but good luck collecting. But you as a landlord are stuck with fixed income and variable expenses and state determined eviction criteria. I think the first lease should be a year so you dont attract transient tenants but after that MTM is better for you anyway and you shouldnt resist it. The only other place year leases help is when getting financing and showing rental income, banks like to see full year leases. And some HOA's require them also to prevent transient tenants.
Financing is an issue, all the banks/credit unions whether conforming Fannie/Freddie or portfolio are requiring year leases, not only for the financed properties but also all other rental properties owned.
I've had some tenants for 30 years and they have been on MTM, then the back wants new year leases signed. Call it what you want its a fact of life in the regulatory world of finance. Of course it would not apply to private financing, hard money or CASH purchases.