Monthly versus Yearly Rent Agreements

It is common practice among property management companies to require an initial 12-month lease agreement. This policy puts the owner at ease and ensures that the renter won’t move out after just a few months. Once that initial yearlong term is up, the question arises: should the owner oblige the renter to sign another 12-month agreement, or should they agree to a month-to-month lease? There is no right or wrong answer here. The best answer is dependent upon meeting the needs of both the renter and the owner.

Let’s look at the pros and cons of both situations. The most obvious pro of the consecutive 12-month agreements is that the owner can rely on a stable renter, thus a stable source of rental income, for 12 more months. Additionally, changes to the lease agreement can be worked out at this time before committing to one more year. This also gives the property management company the opportunity to the update the lease to the most current conditions. The cons of providing only the option for another yearlong lease include forcing the tenant to make a decision of whether they want to stay or move out immediately after the initial lease is up, which puts stress on the renter. Most renters feel they are entitled to a bit more freedom in terms of their lease agreement after one year, and at Drake Properties, we like to keep good tenants in the house as long as possible.

One con of offering a month-to-month lease is that lease renewals might result in an additional charge from the property management company to compensate for the additional work. And one pro is that the terms of the original lease agreement remain the same so long as that is what the owner wants. While the main con of offering a month-to-month lease is obviously that the tenant can move out at any time after a 30 day period with appropriate notice, the most important pro is flexibility for both parties. While the tenant has the option to move out at their convenience, the owner has the option to raise rent with only 30 days notice, change the lease agreement with only 30 days notice, and terminate the tenancy with only 30 days notice. Flexibility for both parties means a better partnership.

It is important to remember that giving the renter the freedom to move out as they please, does not mean they will move out. In our opinion at Drake Properties, we believe that a worthy renter—one who has paid rent on time and has taken care of the house—deserves the extra freedom that a month-to-month lease agreement provides. By not forcing your tenants into a rushed decision, it is more likely that they will in fact stay in the home longer.

When your lease is up for expiration or renewal, it is always a good idea to take time to consider both options and talk with all parties involved about what is best for everyone. Drake Properties works to ensure that everyone is happy with the agreement at the end of the day. With questions concerning your lease renewal and the best way to protect your investment by keeping your property rented, contact us today.