So you've finally found your ideal apartment and are ready to make the move. But hold on! Before signing a lease, you need to decide whether a fixed-term lease or a month-to-month lease is the one for you. Lease duration is one of the most important clauses in your agreement, and it’s going to outline exactly what the conditions of your new place include.
Are you unsure which sort of lease is right for you? We know it’s a lot to take in, so we’re discussing the pros and cons of a fixed-term lease vs a month-to-month lease right here. Agreements aren’t the most exciting part of moving house, but they are something you shouldn’t skip over, so take a minute to read this guide.
A fixed-term lease, also known as a term lease, is a rental agreement with a set start date and end date. Term lease agreements can last anywhere from six months to a year, although longer term lease agreements of up to three years do exist.
A fixed-term lease is a rental arrangement in which the renter commits to stay and pay rent for a specified period as written in the contract.
Rental rates are fixed
A property manager cannot change the rental rate in the middle of a fixed-term lease.
No changing lease terms
It is impossible for a property owner, property manager, or tenant to change any lease rules, terms, or circumstances during a term lease. Both the property owner and tenant must abide by the terms and conditions stated in the initial lease.
A property owner cannot force a tenant to leave in the middle of a lease term, as long as both parties are sticking to the terms of the lease agreement and following local and state property owner-tenant rules.
High renewal fees
While a fixed rental rate is a benefit of a fixed-term lease, most property owners reevaluate the rental rate at the end of the lease and raise the rent.
You won't be able to move if your situation changes
The life of a renter can be unpredictable. Employment loss, a new job opportunity in another region, a family emergency, a breakup, or a medical emergency are all reasons you might want to move before a term lease expires. Unfortunately, if a renter wants to move before their lease expires, they may have to pay a lease-breaking charge.
Sometimes personalities clash. That’s ok - it makes life interesting. It’s not so okay when you’re a renter that can’t get along with your property owner or your neighbors. Because personality issues aren't valid grounds to break a lease early, you'll have to put up with the unpleasant living condition until the lease expires.
This is true in both directions. If a property owner has a difficult, overbearing, or disrespectful tenant, they must continue to rent to them until the term is up.
****A month-to-month lease agreement is exactly what it sounds like: it specifies the terms and conditions of tenancy for one month at a time. Tenancy and lease terms often renew automatically at the end of each month in a month-to-month leasing arrangement.
The lease specifies how much notice a tenant or landlord must provide if they want to end the agreement. The notice period is normally 30-60 days, but this does vary by state.
Rent is the same as before
On a month-to-month lease, the landlord doesn’t have a definite end date that might make them consider raising the rent, so a tenant can go a while without an increase.
Easy move-in; easy move-out
With a month-to-month contract, if the renter wants to move out or if the property owner/manager wants the tenant to go, it's a relatively simple process. Either party simply provides the move-out date, ensuring they’re giving enough notice in line with the rules of the lease.
If the lease ends in the middle of the month, the tenant will normally pay a prorated rent as negotiated by management.
Can be expensive
Month to month leases are often more expensive than fixed-term leases. The difference between the two could be several hundred or several thousand dollars over the course of a year. If you are committed to staying in a particular area for a significant amount of time, you can save a lot of money by signing a longer lease.
Lack of security
Month to month leases also mean more flexibility for the property owner to end your lease on their own terms while you’re living at the property.
By weighing up all of your options and their financial impact, you will have an easier time deciding on whether a month-to-month lease or a fixed-term lease is right for you.