Month-to-Month Rental Agreement | Definition & Terms of Use
A month-to-month rental agreement is an arrangement where rental of the unit can be terminated and a tenant can leave on short notice. A tenant can remain as a tenant for only for as long as they wish. Against that, a landlord has the right to have a new tenant on short notice if they wish. A month-to-month rental agreement is considered a type of renewal by the Residential Tenancies Act, 2006. Just like a lease or tenancy , a month-to-month rental agreement covers the rights and responsibilities of both tenants and landlords. Tenants usually prefer month-to-month rental agreement forms because they offer them flexibility. They do not have to worry about renewing, and can leave at any time, provided they give the required notice. Landlords may choose month-to-month rental agreement forms for similar reasons. However, unlike tenants, landlords benefit from having flexibility to rearrange tenants with short notice without much complication. If so requested, the landlord must give the tenant a written statement within 21 days of when an increase in rent is proposed or applied.
What Are The Key Components of a Month-to-Month Form?
The essential provision of a month-to-month rental agreement is the amount of rent, how and when it is to be paid, notice requirements, and any special clauses.
The following should be included:
- An explicit statement indicating that it is a month-to-month rental agreement required by Section 1945 of the California Civil Code.
- The rental amount should be stated in figures and spelled out, including whether the rent will be prorated for a partial month’s rent, whom it is payable to, how it is to be paid, i.e., check, cash or money order, and any other relevant information.
- Specify that one month’s (30 day) notice is required to terminate the rental agreement only in California, if this is the case. Also, include language similar to, "Tenant may not be evicted without a showing of cause including violation of the rental agreement or nonpayment of rent."
- Include a signature line for the landlord or agent’s signature with printed name, address, and phone number.
- Present and explain the rental agreement to the tenant in its entirety, answer any questions he or she has, and inform the tenant that he or she will be given a copy. Finally, have the tenant sign all copies of the agreement.
Advantages and Disadvantages of Month-to-Month Agreements
Like any other rental agreement, there are pros and cons to being in a month-to-month rental agreement. For instance, the renter is probably going to get more flexibility than a person in a long-term lease, since they can terminate the month-to-month rental agreement by providing one month’s notice. However, that same flexibility will apply to the landlord, who will be able to increase the rent or change the terms of the rental agreement as long as they provide a comparable amount of notice. Some of the benefits and drawbacks for both tenant and landlord include:
For landlords:
Long-term rental income: Being able to easily increase the rent due to inflation or interest rates means landlords can keep up with the current market rent directly.
Greater flexibility: Landlords won’t be tied to a tenant for a specific period if they wish to sell the property or use the property for another purpose.
Easier screening: Since the landlord can terminate the tenancy on short-notice, they can afford to take a little more risk with tenant screening, and will have an easier time terminating an underperforming tenant.
For tenants:
Long-term commitment: Tenants will benefit from knowing that they will have a place to stay for at least a month, even if their landlord is not cooperative.
Flexibility: The tenant is able to remain in the property for as long or as little as they need.
No penalty for breaking the lease: A tenant may be free to vacate the property without having to pay a penalty fee.
How to Prepare a Month-to-Month Rental Agreement Form
Drafting a month-to-month rental agreement form is fairly straightforward, although customizing it to the needs of the parties and for compliance with local and state laws requires some additional effort.
- Parties/Property: in the first paragraphs, identify the parties to the Agreement – landlord(s) and tenant(s) by full name and address. Then, identify the property by full address and any particulars such as unit number, garage number, or designated parking space.
- Term: state the beginning date and the ending date of the Agreement term (usually left blank so that both parties can fill in the dates that work for them). Generally, however, such tenancy shall be on a month-to-month basis and therefore would continuance in full force and effect from month to month until either party terminates the tenancy by providing 30 days’ written notice to the other.
- Rent: state monthly rent amount and when due, including when late fees apply.
- Utilities: state utilities that are provided by Landlord and those that are a part of the Tenant’s expense.
- Use: state that the property is intended for residential use and may not be used for any other purpose.
6 . Other Items: identify any other provisions that are particularly important to that property or wish to be highlighted and should be included in the written agreement. For example, items such as pets, smoking, noise, pool use, barbecuing, overnight visitors, and other housekeeping rules should be clearly stated. Will you allow pets and industry-standard breed and size restrictions? Heavier restrictions are used on cottages, beach houses, and other second homes where access must be scheduled ahead of time and kitchens are shared. Will you require security deposits (and even additional deposits for pets)? Finally, state how these documents are to be signed – electronically or on paper.
7. Review: after the text has been added and highlighted sections ("must sign" or must fill out) have been added, it is best to review the Agreement to determine if any other provision should be added. Can the rental be assigned or sublet to third parties? What about renewal and/or increases in rent?
8. Done!
All forms should be reviewed by a legal professional for compliance with both local and state laws and for their enforceability under your particular facts and circumstances.
Legal Aspects and Best Practices
A month-to-month rental agreement is intended to be an informal agreement for renting out residential space between a landlord and a tenant. And while that is the general outlook of the rental agreement, it is still important to note that a month-to-month agreement does not mean that there are no legal considerations in either party’s mindset.
State regulations play a crucial role in the relationship between tenants and landlords. There are general principles that dictate the relationship, such as the fairly consistent structure of lease agreements.
For example, the laws surrounding the "hot topic" of addressing security deposits are generally found within the states’ landlord and tenant act. Here, the act would describe how security deposits must be held and maintained during the period of time that the tenant is occupying the space. There are other general laws that can be found within that same act, which can guide both the landlord and tenant on issues pertaining to their general relationship.
In addition to addressing the general legal considerations that surround the usage of a month-to-month agreement, best practices should be incorporated into maintaining a good rental relationship. This is especially important at the outset of the agreement when you are first establishing the relationship.
First, the month-to-month rental agreement form can include stricter rules than those provided for in the act itself. For example, if your homeowners association prohibits pets from being on the premises, you might want to address this "special" rule within your agreement. Second, if you want more notice provided for by the tenant/more time to give notice, or vice versa, it would be prudent to address those special circumstances in the agreement itself. Third, as is applicable, you could include a provision explaining how utility costs will be shared between the parties.
It is important to be proactive and thorough before entering into an agreement with either party by addressing what everyone’s expectations should be from the outset. After entering into an agreement, a best practice would be to document any changes to your general expectations, in writing, and agree upon them before taking action. Such documentation can include an e-mail, note or simple letter.
The best practices for creating a successful rental relationship include a proactive approach to payments, working with the other party to secure agreement, discussing any changes in the general agreement before implementing them, and keeping records. Here, being proactive means addressing payment methods at the outset so that you aren’t left with bounced checks or non-payment, guaranteeing that you will be able to access the security deposit, and agreeing upon what your expectations should be.
In addition to addressing the methods of payments in the beginning of your relationship, it is equally important to work with the other party to address changes in the general expectations. For example, the landlord may choose to rent a property that is furnished. If after a month the tenant has not yet determined that they want to buy their own furniture, the tenant and landlord could agree to keep the furniture until such time that the tenant is able to make that purchase. Documenting this in writing would be one way to address the situation.
This post sets out both the legal considerations and best practices for utilizing the month-to-month rental agreement form.
Amendments and Terminations
The month-to-month rental agreement form contains a section that deals with subsequent changes to the terms of the month-to-month agreement or termination of the agreement itself. It simply states the parties can agree to any changes in writing, and such changes can be evidenced by writing on the form. The form further states that either party can terminate the lease by giving separate written notice to the other and that tenants with rent controlled leases may not need to provide that notice.
In practice, the actual notice requirements and methods of termination are a bit more complicated. Apartment firms typically provide 60 days’ notice prior to termination of the lease term. Special notice rules apply to residents who have lived in the same complex for over 24 months. See Civil Code section 1946.1. After 24 months, apartment firms can terminate a month-to-month lease with 90 days addition or alternate termination notice for certain types of tenants . For tenants who have occupied a unit for at least one year but less than 24 months, the typical notice is 60 days. All notices must comply with Civil Code section 1946, and there are times when you can terminate the lease for less than the required notice periods.
Rent control laws prohibit a firm from terminating a residential lease agreement for reason other than failure to pay rent, breach of the covenant to maintain or repair, nuisance, unapproved assignment or sublet, refusal to renew the lease (under certain circumstances) in addition to other lawful reasons. See Civil Code section 1946.2.
Further, the form simply states that if a dispute arises between the parties regarding any future amendment to the lease agreement, Illegal Detainers are not the means to resolve that dispute or the failure to follow the amendment procedures stated in the rental agreement form requires an unlawful detainer lawsuit.