It can be tempting to allow a good tenant to remain beyond the term of the initial lease. Unless the lease is renewed, however, the transaction generally defaults to a month-to-month rental. While everything may appear the same — same tenant, same rent checks — going month-to-month can affect the overall profitability of the rental property.
Here’s why:
Tenant Takes Control
Sure, going month-to-month means that the property is not vacant, and that seems like a win-win. However, the rules for month-to-month tenancies generally allow the tenant a shorter notice period for terminating the lease — on their schedule. There is nothing to prevent them from doing so at an inconvenient time — like November or December. Unless there’s a short-term, interim lease, future leasing periods will ends at a time when few renters are looking to move.
What’s Happening Inside?
Allowing the tenant to remain on a month-to-month lease is often accompanied by a failure to inspect for damage at regular intervals — like at the end of a one-year lease term. That could mean repairs are neglected, maintenance is overlooked, and when the tenant does move out, the landlord may lose profits restoring the unit.
Rent Freeze
Unless the original lease provides an alternative, month-to-month leases generally continue at the same rate of rent. What if that goes on for another year? It is important to check the local rules to see if a rent increase is allowed in a month-to-month lease, and if not, a landlord may have to consider an alternative strategy — like renegotiating for a set-term lease.
