What Is the Difference Between a Month-To-Month Lease and a Fixed-Term Lease?

In month-to-month leases or short-term leases, the lease renews every month. In a fixed-term or long-term lease, the lease renews at the end of the lease. Many residential leases run for one year and are often renewed annually.

Depending on your needs as a renter, you may prefer a month-to-month tenancy or a fixed-term lease. Each has advantages and disadvantages.

This article explores the pros and cons of a month-to-month lease and how this type of lease works.

Month-To-Month Leases

Month-to-month leases are an attractive option for anyone with short-term rental needs. This type of lease offers the tenant great flexibility since they will not pay a penalty or lose a deposit if they want to move.

It also offers the landlord similar flexibility, such as rental income for a short period. An example of a month-to-month lease is a short-term condo rental in Florida during winter. In this type of rental, the property owner gets income during the off-season, and their tenants get a break from harsh winters.

Month-To-Month Rental Agreements

Often, the landlord and renter agree to the terms of the lease orally, but a month-to-month lease agreement is preferable. A written lease is a legal document, and it offers more protection to all parties to the lease. In a dispute, the written lease should help resolve the dispute.

A written month-to-month rental agreement should include:

• Names of all parties to the lease
• The location of the rental unit or rental property
• The monthly rent amount
• Where to make the monthly rent payment
• Amount of security deposit, if required
• Amount of time to give proper notice to end or change rental terms

Ideally, both should give a 30-day notice of:

• Rent increases
• End date for the lease
• An eviction notice

Although month-to-month leases don't offer the same security as a long-term lease, they work for some people.

Fixed-Term Leases

A fixed-term lease is a rental agreement where the renter pays rent for the period indicated in the written contract.

Renters who break long-term lease agreements may face:

• Loss of their security deposit
• Loss of their pre-paid last month's rent
• Liability for any remaining rent under the lease agreement
• Reputational harm, like a bad rental reference

State law may limit the tenant's liability if they break a lease agreement. The landlord or property manager must often attempt to find a new tenant before demanding any remaining rent.

Benefits of Fixed-Term Leases

Some benefits of a long-term rental commitment include:

• No arbitrary change to the terms of the lease
• No arbitrary rent increases
• A fixed end date
• The ability to sublet, if allowed

Month-to-month agreements may allow for more flexibility, but a fixed-term lease is the best option for tenants with no plans to move for at least a year.

Get Help

Weighing the pros and cons of different types of leases is often challenging. A qualified, local landlord-tenant attorney can review lease agreements and counsel you on your choices.