What is the Ideal lease ? Month to month, Year lease or etc ?

Question

Hey everyone!

I’m currently redoing the leases for my tenants and want to know the general consensus on which lease is best. Do you prefer a month to month lease or a year lease ?

Quincy Lockett · Answer

@Christopher Wall

Month to Month! It gives you the option of ridding your life of a rent paying nag without the long wait. I think of it as Lease Express. If you have a good paying tenant and they want to stay, they can stay for years under a monthly lease.

Bjorn Ahlblad · Answer

@Christopher Wall All my tenants are MTM, to me that favors the LL. You need to look at what other LL are offering for similar class properties and offer the same to your tenants. When we LL'ded in California it was always with one year leases. Here in Wa it is MTM which I have come to prefer. A big deposit and a MTM lease makes for a respectful tenant.

Dave Spooner · Answer

I prefer longer leases, on a year-to-year basis. This combined with a solid tenant screening process allows me to keep high quality tenants longer, while minimizing potential turnover and the costs that go along with it.

Wesley W. · Answer

I've always found that the term leases (anything over 30 days) always obligate the landlord, but never the tenant. I only offer month-to-month (MTM) leases in my properties.  Here's why:

Let's say I sign a tenant to a one-year lease, and 3 months in, their personal/professional situation changes, and they break their lease and move out after a 30-day notice (or maybe less).

I am required, by law in most areas, to "mitigate my loss" by remarketing the unit, making it rent-ready, and starting up my lead generation machine to get applicants, funnel them into my screening system, identifying good candidates and ultimately leasing them up. This takes a LOT of my time.

If I went to get a judgement against this tenant for the balance of the lease (if I could even find them to serve court papers), the judge would tell me to go pound sand, absorb it as a business expense, go re-rent the apartment, move on with my life and quit bothering him with this "nonsense."

Another situation. Joe "pain in the a**" Tenant just signed a year lease. He is noisy and obnoxious and leaves trash in the common areas. I get numerous complaints from my "good" tenants, complaining about Joe. Joe's lease has provisions against this, so I properly serve him a "10 day notice to cure" using a process server ($$). He gets better for a bit, then goes back to his old ways. So, I serve him again ($$). This goes on.

I finally get so fed up that I serve him ($$) with an eviction notice for breach of lease. I spend time and money getting the petition and go to court. Joe tells the judge he "promises" not to do it again and shows receipts from all his on-time rent payment, so the judge gives him "one more chance. " Invariably, I'm back in court AGAIN. I may or may not get a warrant for eviction this time, but meanwhile two of my good tenants have moved out, exasperated by their neighbor, Joe.

Sure, my lease states that Joe is financially responsible for my expenses associated with the enforcement of the lease provisions, but good luck with that.

In each of these cases, the lease favors the tenants, and limits my rights as the landlord.

My month-to-month leases give me the right to terminate the lease for no reason or any reason, including being an "a**." If they don't leave, I get a holdover eviction warrant on them. I find this is a MUCH easier judgement to get than for breach of lease or even non-payment, since the tenant can "cure" his non-payment by showing up to court with the unpaid balance. Meanwhile, next month he starts neglecting rent payments all over again.

I always found that GOOD tenants love the flexibility that the MTM lease affords them if their personal or work situations changes. I tell them I don't want anyone living in my properties that doesn't want to be there, and that is precisely what would happen if they signed a year lease and their situation changed.

I explain to them I am not in the business of whimsically kicking people out, because that costs me money (see the lead generation paragraph earlier in my post), and my goal is to find really good people to call my properties home and then take good care of them so they want to stay a long time. In contrast, bad tenants don't like the MTM leases (another form of self-screening) because they know they'll be out on their ear in 30 days. So, if a tenant pushes back on the MTM, to me that's a red flag, because there really is no down side for them unless they are up to no good.  If they are good tenants, they don't worry about it for a single second because they expect to follow the rules, and they rest easy at night knowing their neighbors will have to do the same.

Frederic Babeux · Answer

I prefer MTM, easier to remove ''bad'' tenants. Also easier for holdover tenants if that ever happens.

Karen F. · Answer

In my C/D rental area, I've found that an initial year lease, then defaulting to MTM after that, works best.  I want a year lease at the beginning, because we always have to do some work to a unit when it turns over.  So I want to recoup that investment in the property.  In addition, we often have a month vacancy when a unit turns over, as we refresh it and then show it.  After the initial year, we like MTM because if the tenant starts to give us trouble, we can raise the rent, which encourages him to depart.  In our area, it's almost impossible to collect any judgement against a tenant, so if they decide to leave early, the most we have is the security deposit to cover us for the vacancy.  On the other hand, if a tenant who is under a year long lease gives us trouble, there's not much we can do to get rid of them.

Our tenants tend to like us, because we charge slightly under market, and we maintain the properties really well, are very responsive.  So once we get in a decent tenant, they stay and stay, and we hardly ever raise the rent on them if they're a good tenant.  After the first year, a year-long lease is more to protect them than us under these conditions, so all our properties go to MTM after the first year.

Ron H. · Answer

As a renter I would have preferred a month to month lease but was never able to find one.  As a LL I do 1 year that converts to month by month on same terms after a year.  One year up front [with good screening] to try to discourage short timers and the MBM to be fairer with renters when they do need to move mid year.  Life happens.

With student housing all my leases ended 1st week of August to align with school year. New leases that started in the middle of term (due to broken lease) also ended 1st week of August.

Kent F. · Answer

My six unit property is near a large research university and most of the tenants are faculty/staff/grad students, so I need to make sure the leases end mid-summer or around Dec. 31 or else it can be more difficult leasing a unit mid-semester. You'll just need to consider your area, who your tenants are, and other factors specific to your property and management style. If you're able, try to get the opinion of other landlords or managers leasing similar properties in your area.

Peter M. · Answer

@Christopher Wall I'll probably be in the minority but I like longer leases because turnover is your biggest expense. Eviction really isnt much different regardless of lease length. Just do regular inspections

What is the Ideal lease ? Month to month, Year lease or etc ?

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