Typically, month-to-month tenancies are a default which occurs when a tenant chooses to stay on after the original lease term ends. There is nothing perilous about this process; the tenant is still bound by the terms of the original tenancy agreement.
However, month-to-month tenancies present some disadvantages to landlords:
1. Vacancies may occur at a bad time. Landlords who plan to stay in the business long-term often plan vacancies so that they occur during a high rental season. That allows for a better selection of replacement tenants. Planned vacancies also provide the best opportunity to perform routine repairs and updates.
Converting to a month-to-month tenancy gives the tenant more flexibility when it comes to terminating the lease. Often, that can be done with a shorter notice period, and in many cases the termination has no consequences, even if the landlord cannot find a new renter right away.
Allowing tenants the power to decide when to leave can throw off the landlord’s plans. Instead, renewing the lease for another term, even if it’s for a shorter period than the original lease, allows the landlord better control over cash flow.
2. Lower property values. Landlords benefit not only from cash flow, but also from appreciation of the rental property. Appreciation is dependent upon avoiding property damage. Tenants who are eager to stay in the property are likely to request a lease extension for a longer term to avoid having to move. Those tenants are more likely to continue to care for the property.
By contrast, the nature of month-to-month renting creates a sense of impermanence, as though the tenant may be leaving any day. Tenants who roll into month-to-month tenancies can lose interest in the property as they investigate other options. At the same time, the landlord may put off doing routine maintenance until the tenant leaves — which could be in a month, or years.
3. Symptom of another problem: the absentee landlord. There is a subset of month-to-month tenancies that include those managed by absentee landlords. An absentee landlord is someone who rarely checks in. It’s common for these landlords to report extensive property damage, crime and defaults. It is not necessarily the month-to-month tenancy that creates that problem, but rather the month-to-month tenancy was born of bad management. No doubt the absentee landlord also failed to conduct routine property inspections, make repairs, or stay in touch with the tenants. These are the landlords who tend to suffer the greatest income loss.
Certainly, there are circumstances where a month-to-month arrangement is beneficial, like when the owner wants the option of taking the property back sooner than later. But, it’s best to weigh all of the options, and to stay in the driver’s seat when it comes to managing your tenancies.
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.