Month-to-Month Tenancy

What is Month-to-Month Tenancy?

Month-to-month tenancy refers to a form of periodic tenancy in which the landlord leases property to the tenant for a period of 30 days. The tenancy is created through a written, oral, or express agreement.

Month-to-month tenancies may be terminated by either party at the expiry of the contract or by providing a 30-day notice to the other party. It means that a tenant can theoretically stay forever if no one shows the interest to end the tenancy.

For example, if a tenant pays rent at the beginning of each month, and the landlord accepts the payment, it is assumed that the tenancy at will is transformed into a month-to-month form.

How the Month-to-Month Tenancy Works

A tenancy is an element of real estate leasing law. In statutory terms, a lease is an agreement to transfer the right to possession and use of the property for a term in return for consideration between the landlord and a tenant.

In a property lease arrangement, a lease contract agreement outlines the period of the contract and the amount the tenant is required to pay during that period. The landlord grants an exclusive right to use and possess the property for a specific term while retaining an interest in the property. The tenant accesses the property and uses it per the dictates of the lease.

The tenancy carries with it the tenant’s obligation to pay rent to the landlord. The landlord regains the property’s ownership rights after the end of the contract. The relationship between the landlord and tenant is primarily viewed as a contract and, therefore, subject to contract statutes. In most jurisdictions, leases longer than the period specified by the statute, generally fixed at a period more than a year, must be in writing.

Types of Tenancies

Tenancies are grouped into the following four categories:

1. Definite Term

Such a type of tenancy creates a definite term of ownership for the tenant, which automatically expires at the end of the term. Even though the contract may be active for one year or less, the lease is called a tenancy for years or tenancy for a term.

The contract contains a specific starting and ending date, after which the tenant’s tenancy expires. It is created through either oral, written, or express agreement. Since the lease establishes a termination date, notice for termination is not required.

2. Periodic Tenancy

A periodic tenancy runs for an indefinite duration that continues for successive periods unless terminated by notice to the other party. Initially, the contact is created for a specific duration. However, the tenant’s tenancy can continue until termination on notice by either party.

If the lease contains no specific agreement, the common law requires a notice of six months in tenancies from year to year. In most jurisdictions, the notice period’s been abridged by statute to periods ranging from 30 days to 90 days. The notice required in periodic tenancy is one full period in advance, subject to statutory laws. A good example of periodic tenancy is the month-to-month tenancy.

3. Tenancy at Will

The tenancy at will type of lease contains a provision that grants the tenant the right to own property for an unspecified duration. Either party may terminate the contract at will, and in the event of either party’s death, the contract is automatically terminated.

In common law, such tenancies were terminable without necessarily giving notice. Nevertheless, the current requirement of prior notice, usually ten to 90 days, is due to statute changes.

4. Tenancy at Sufferance

The tenancy at sufferance type of lease arises when the tenant, who initially entered into a contractual tenancy, fails to vacate the premises after the expiry of the contract, thereby becoming a holdover tenant. In such a case, the property owner may choose to dispossess such tenant or hold them for another term. Until such a decision suffices, a tenancy at sufferance exists.

Pros and Cons of Month-to-Month Tenancy

Month-to-month tenancy is common in residential leases and is established when the tenant is granted ownership of the property for an indefinite duration unless it is terminated by notice to the other party.

Pros

Flexible end date: The lease can technically continue without a fixed end date. It allows the tenant to conveniently end the contract.

Update rent price: Month-to-month tenancy allows the landlord to update the rent price during the renewal option by justifying using things such as conveniences and flexibility to tenants.

No penalty for breaking lease: Ending the lease does not attract a penalty. At one point, the tenant or the landlord is expected to breach the contract.

Keep quality tenants: Landlords can use month-to-month tenancy to hold onto tenants who take care of the property and pay rent on time.

Cons

Uncertain end date: Although a flexible end date may be beneficial to both the tenant and the landlord, it can present some limitations to the landlord. For example, it may lead to a short-term tenancy, given its flexibility. Ideally, a property owner needs long-term tenants who pay rent on time and take proper care of properties.

Finding new tenants on short notice: A 30-day notice does not provide enough period to find a new tenant. Knowing the end date of a lease puts a landlord in a better position to screen potential tenants.

Additional Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

• Evergreen Contract
• Modified Gross Lease
• Lessor vs Lessee
• Maintenance Expenses
• See all commercial real estate resources