Do I charge more rent if my tenant wants month-to-month lease?

[Todd Moriarty]

Hi All,

My tenant has been in my rental for 5 years now. He has been paying the rent and keeping it clean. After the one year lease expired 4 years ago, he asked to do a month-to-month lease which I agreed to and it's been that way ever since. I kept the rent the same, initially, because I liked him. My question is, should I have charged more for a MML (month-to-month lease) or refused his request for a MML and done a yearly lease? I have heard recently that most landlords charge more for a MML. I'm in the Detroit metro area in SE Michigan.

Thanks.

[Account Closed]

normally I would say yes, but in your situation, tenant has been good and is long term and taking care of your property, so I think with that situation, it would be a mistake

[Steve Vaughan]

Hi @Todd Moriarty.  For a new tenant that wants a m-m, I do charge a little more and have a deposit forfeit schedule that reduces to 0 at 6 months.  For instance, if they vacate within 3 months, their deposit is 100% forfeited, 50% forfeited at 4 months, 25% at 5.

It is custom in my area to not renew leases.  In a lot of areas it is different and renewals are expected.  

For a five-year tenant I would not raise rent just for the fact they didn't renew.  I do raise most rents a little bit every year regardless.  Hope this helps!

[Wes Brand]

It depends on your specific market. Where I live now it's customary for leases to automatically become month to month after 1 year with no rent change(no new lease, written into the original, not all do this, but most do). In places I've lived before its customary for your lease to be up unless you sign a renewal. Regardless I'd raise the rent slightly every year.

[Todd Moriarty]

Thanks for the replies.

[Ashley Whidby]

Hi Todd,

In my experience it is absolutely normal to charge extra for a lease that is month to month. At the end of the initial lease if it is not renewed and no notice is given to vacate the property the lease will automatically renew on a MTM basic which results in an additional charge.

In your case since you have allowed the tenant to go 4 years without a MTM charge and the tenants has paid and been a good tenants I would leave it be, but in the future yes definitely charge a MTM fee.

[Gino Barbaro]

@Todd Moriarty

HI Todd

do you know what the current market rent is for the unit.  If he has been there 5 years, he may be ready for a rent bump.

Gino

[Robert Melcher]

I send a renewal offer for a year's renewal and include the MTM rate in the offer.

If they can drop notice anytime (like in the winter) I want a premium for the privilege of making my planning and marketing more difficult.

[Account Closed]

I'd say that if your tenant refuses to sign another year lease, then he probably thinks he might leave within that amount of time anyway. I don't think you have anything to risk by raising rent, it sounds like he might already be on his way out.

I would give them the option, you can resign another 1 year at the same rate, or you can pay more month to month. It is an extra burden for you to deal with, therefore, you deserve more money.

[James Wilcox]

@Account Closed normally you would charge a bit more for a mtm like stated above. However, since you have a good relation with this dude I would not worry about it too much. Do see what the Detroit metro market is telling you to do however! Vacancy can really hurt your cash flow. I would open up the conversation and see what his thoughts are on doing another yearly lease or being charged a bit extra for mtm. You can explain your costs have went up slightly in his stay there and if he could handle a bit of it for a mtm option you would be happy to have him stay on as a tenant. Many tenants remain on mtm after their year term because they like the option of leaving if need be. Some of them (like in your case) don't leave as quickly as they "think" they will. Yet to have the mtm option available to them, it would normally come with a small increase in rent. We do a standard $5 for mtm, but it all depends on your market and your tenant relationship. I wave the fee sometimes for the best tenants.

[Todd Moriarty]

Funny you should ask. I raised the rent on him in '12, in '15, and I'm preparing a letter now to mail him with another rent increase for '16.

[Candice Williams]

Since he's been there an additional four years mtm and he's a good tenant, I wouldn't charge him extra. I'd just do a rent increase as you've said you planned to do.. 

[Kimberly H.]

Normally mnm is more, but in this case with his track record i wouldnt charge more just because it in mnm, but just make sure to increase it some so u dont get to below market

[Christine Mwai]

More important to me than a rent increase would be the move out notice time they give me... I would get that in writing.. 2 months in my view...then they can do a month to month for 3 months or 5 more years...

[Linda Liberatore]

I would assess and confirm the current rents in the area and request a reduced increase amount to compensate for his long term relationship.  Our clients attempt to establish a policy on increases and MTM rates that change based on the fluctuating market on rents. Our concern would be the additional risk you hold if they give notice to move during a more difficult season for filling a vacancy. A MTM lease amount is generally higher as a form of compensation for that risk and freedom to vacate on short notice. 

[Ronald Perich]

Leases in our area are typically one year long. Month-to-month usually yields a higher rent payment. Even with a month-to-month lease, I include a charge of $200 if they vacate before the 11th month of residency. There are so many start-up costs when renting to someone new that I feel very justified with that extra charge. It's actually too low if you ask me.

[Account Closed]

Charging more for month to month could be considered discrimination--be very careful.  (It doesn't matter if you're discriminating--if it appears you are, you are guilty until proven innocent.)