Month to Month rent?

Question

Good Morning Everyone,I have a tenant of 2 years that would like to go month to month for this year because they plan to buy a house. They are not sure when they will purchase the house but she thinks in January 2017 but she wants to be month to month just in case it's earlier than Jan.How do I handle this situation? Thank you.

Roy N. · Answer

@Vonnie BradleyHow you ultimately choose to handle this scenario will rest with you, but I would suggest you extrapolate the current situation into a general practice you could follow across all, or a group of, your rentals and document it.We have properties where we primarily rent month-to-month (i.e. furnished rooms rented to students) and others which typically rent on an annual lease. When presented with a situation such as yours where a tenant wishes to switch to a month-to-month tenancy, we will accommodate them {unless they are a poor tenant and we see this as an opportunity to have them leave}, but charge a slight premium (5-8%, typically $50/month) for the additional risk of a month-to-month lease. If we are dealing with a longer term tenancy (3+ years) we would charge less of a premium (if any).In the end, a tenant is going to leave when they wish to leave regardless of the lease constraints. I find it better to work with them than inadvertently become another obstacle in the path to their goal. It is fine to take on the additional "risk" of a monthly tenancy, but is equally appropriate to be compensated for that risk.

Brandon Hicks · Answer

I don't make tenants sign a new lease every year. I have 45 units and self-manage, the thought of doing so is exhausting in itself. Not to mention all the extra maintenance requests I'd get for stupid stuff that doesn't truly need dealt with until the next turnover. My leases all convert to MTM after the initial 12 months. If you really insist on signing new agreements then bump the rate an extra $20 or whatever you feel it's worth to not have a fixed lease in place.

Roy N. · Answer

Long-term tenancies are greatly attributable to your clientele and your location in combination with your level of service and amenities. As an example, significant portion of our business is student rentals. As a population they are relatively nomadic and many will move annually, regardless of the "value" your accommodations provide, due to many factors. We've manage to increase the percentage of our students who stay 2, or more years, into the 35-40% range - given that a large portion of our students are international students (frequently only here for a semester or year) this has been more difficult than one might think. Only 15 - 20% of students remain for a third year and we have had one remain 4 or more years (he stayed with us after graduation).With this population we have found annual or term leases to work best when you have several housemates renting a flat or house on a single lease (helps the groups social cohesion). When renting by the room, we tend to use monthly tenancies.In the remainder of our business, most of our clientele fall into two principal groups: young professionals and working class families.We start our young professionals and families out with an annual or term lease, but usually move to a monthly tenancy afterward. The only exception might be if the building is to be refinanced (mortgage rolled over), we may roll tenants over to an annual term as it makes the lenders warm and fuzzy.The only place where we realize long-term tenants - here defined under legislation as a tenancy >5-years - is in our "working class" building. Legislation considers long-term tenants to be month-to-month regardless of what your lease says. We have two there (~9%) and possibly a third in the making. It's not a concern of ours yet, but I'm trying to look forward to see what would be the maximum ratio of long-term tenants one might want in a given building.

Dennys Passeto · Answer

@Vonnie Bradley I'm in Maryland as well and I just let my tenant got MTM. They have been awesome tenants and I haven't had any problems with them. Had they been a troublesome tenant, I never would have allowed it. I'm not sure what the ramifications are should some trouble arrive. When I did have them sign a lease for their 2nd year, I just used the GCAAR lease addendum, which was 1 page, I believe and sent it to them to sign it via Docusign. That's pretty easy way to take some of the pain out of doing up a new lease every year by not having to go visit them physically.

Missy H. · Answer

Hi @Vonnie BradleyI would say allow them to go month to month. If someone wants to move a break a lease, they are going to do so anyway. Re-write your lease so that it is month to month and then include that you will be permitted to show it once they have given you their 1 month move out notice. Please know that it should be at least one FULL calendar moth. If they give you notice on April 15, the next full calendar month is the end of May 31. If they give you notice on April 2, the next full calendar month is still May 31.Be sure to have the lease written to your advantage.Good luck

Jeff B. · Answer

I write a lease that is on cruise control: relatively short (3 months) to ensure they're serious and not transient, and then holding over automatically goes to M2M. Doesn't need to be resigned (aka cruise control) and yet I seem to be able to get long term tenancies (8-9yrs).

Edwin E. · Answer

If the tenant wants a MTM agreement I charge an extra $ 50 a montth.

Vonnie Bradley · Answer

Ok. Thanks.I will definitely check it out.

Vonnie Bradley · Answer

Thanks to everyone

Russell Brazil · Answer

I would let them go month to month. If you do not, they are just going to break the lease anyways, and if you end up in housing court over it there is a very good chance the judge will find in favor of your tenant in this situation .