Are Month-to-Month Leases Suitable for Long-Term Tenant Retention?

When considering the suitability of month-to-month leases for long-term tenant retention, opinions from both landlords and tenants vary widely. For my part, a month-to-month lease served as a temporary arrangement during a two-year stay in a fully furnished cottage. It worked well until it didn't. In essence, month-to-month leases can be advantageous for quick eviction and tenant turnover, but they might not be ideal for fostering long-term tenant relationships.

Why Tenants Prefer Year-Long Leases

As a tenant, I've always preferred year-long leases due to the sense of security they provide. Staying in a rental property with a year-long lease ensures financial stability and predictability. Tenants can plan their expenses with confidence, knowing that their place will be theirs for at least a year. Moreover, year-long leases usually offer an option to renew if both the landlord and tenant agree, providing a safety net for extended stays.

Landlord's Perspective on Month-to-Month Leases

From a landlord's standpoint, year-long leases are valuable for several reasons. They facilitate stable revenue streams, making it easier to budget for expenses and manage accounting. Additionally, year-long leases help attract tenants who have a track record of timely rent payments. As a landlord, I initially rent properties on a month-to-month basis for the first six months to gauge the tenant's reliability. If they prove to be responsible, I then offer a 12-month lease with renewal options.

The Current Rental Market

The current rental market is witnessing significant dynamics. With the shortage of rental properties, tenants might be evicted after just three months, especially if a property is sold or if new owners want to renegotiate existing tenant leases. These scenarios pose challenges for both landlords and tenants. From a landlord's perspective, month-to-month leases provide flexibility and a way to manage the risk of sudden tenant departures. However, tenants may perceive such arrangements as unstable and insecure.

Challenges and Solutions for Landlords

Landlords face several challenges with month-to-month leases, including the high costs and time-consuming process of evictions, especially when a tenant fails to pay rent. As a landlord, these issues can be particularly distressing, especially when one has a mortgage to pay. The financial strain can be significant, and the process can be legally and emotionally taxing.

Alternatives and Best Practices

One alternative that balances the needs of both parties is the 15-month lease. This term is becoming increasingly popular, as it offers the advantages of a long-term lease while remaining sufficiently flexible to avoid major disruptions. According to the findings of a nationwide study by the state’s apartment association, 15-month leases are the "most optimal" for both renters and landlords. This term strikes a balance between tenure and flexibility.

From a practical standpoint, month-to-month leases are most suitable for mid-term stays—essentially a period between a long-term lease and a vacation rental. These leases provide the flexibility of being able to leave without giving formal notice, akin to the ease of staying on Airbnb. For instance, booking a three-month stay on Airbnb allows tenants to make their final payment at the beginning of the stay and leave whenever they desire, provided the unit is still available.

Conclusion

In conclusion, while month-to-month leases offer flexibility and ease in managing tenant turnover, they may not be the best choice for long-term tenant retention. A balanced approach, such as offering 15-month leases, can provide a more stable and beneficial arrangement for both landlords and tenants. In the current rental market, it is crucial to tailor lease terms to meet the unique needs of each situation.