What Is the Difference Between a Month-By-Month Lease and a Fixed-Term Lease?
Depending on your needs as a renter, you may prefer a month-by-month lease or a fixed-term lease. Each has its advantages and disadvantages.
The type of lease you choose typically is determined by how much flexibility and mobility you desire. This article covers the basic differences to help you make an informed decision when selecting a rental property.
Month-By-Month Leases: An Overview
A month-by-month lease is also referred to as a "month-to-month lease" or "month-to-month rental." It is an arrangement where the lease may be altered or terminated by either party. Parties must give "proper notice" to end or change a lease, typically at least 30 days in advance. These rules can vary by state law, but this article offers a guide on general explanations of the lease types.
This type of lease offers you more flexibility since you will not have to pay a penalty or lose a deposit if you decide you want to live elsewhere. However, the landlord may give you 30 days notice to:
- Raise your rent (often called a rent increase)
- Change the rental terms (such as the rent end date)
- Evict you for any reason (called an eviction notice)
Contracts may be either written or oral, and rent is paid each month. Some rental units, including residential hotels, may offer week-to-week leases.
Fixed-Term Leases: An Overview
A fixed-term lease is a type of rental agreement where the renter agrees to stay and pay rent for the time indicated in the written contract.
Renters who break a long-term lease like this typically lose:
- Their deposit
- Their pre-paid rent for the final month of the lease (if applicable)
Renters who break a fixed-term lease early may be held liable, to varying degrees, for the amount of time and rent left on their contract. However, the law typically limits this liability. You would still owe rent until:
- The landlord finds a replacement tenant
- The amount of time deemed reasonably sufficient to find a new tenant passes
Example: Breaking a Fixed-Term Lease
- Rob, the renter, has a 1-year fixed-term lease
- He tells Larry, the landlord, he is moving away after only 6 months
- Larry finds another tenant to rent the place after a 3-month search
- In this scenario, Rob would likely only be liable for 3-months of rent to Larry
Benefits of Fixed-Term Leases
The trade-off for this long-term rental commitment is that the landlord may not:
- Change the terms of the lease
- Raise rent
- Terminate the lease until the lease period has ended
Month-to-month agreements allow for more flexibility and often require less of a deposit. However, a fixed-term lease usually is the best option for tenants who do not plan on moving for at least a year (or whatever the lease term happens to be).
Questions About Lease Terms? Consider Contacting a Real Estate Attorney
Even honest mistakes with the drafting of leases and lease-related disputes with tenants can get landlords into sticky legal situations. The best way to avoid these types of legal problems is to speak with a landlord-tenant attorney in your area. An attorney can answer additional questions or provide honest help in resolving a dispute.