Reading time: 6 minutes, Category: Finance & Economics
What’s a fixed-term lease?
A fixed-term lease, or term lease, refers to a rental lease agreement with a designated start date and end date. Typically, term lease agreements range from six months to one year in length. However, term lease agreements can cover shorter or longer periods of time, depending on your landlord and specific situation
Pros of a Fixed-Term Lease
Fixed-term leases give landlords a little more security. They will have guaranteed occupancy and income during the course of the lease, which is usually around 6 months to a year. In addition, you won’t need to go through the hassle of finding a new tenant every time someone moves out.
Cons of a Fixed-Term Lease
Landlords will be unable to raise their rents during a fixed-term lease. If their utility expenses or taxes go up, they will have to wait until the end of the term to change rental rates.
In addition, you won’t be able to change the terms of your lease or find new tenants until the fixed-term period has ended.
What Is A Month-To-Month Lease?
In short, a month-to-month lease agreement allows you to alternate or terminate the lease each month. Your tenant will usually need to give 30 days of notice before they make a change.
Month-to-month leases are popular among tenants who aren’t sure how long they wish to stay in a certain neighborhood. Your renters won’t incur any penalty fees if they decide to pick up and move after a month.
Likewise, you as a landlord aren’t bound to keep your rental price the same for six months or a year. You can also change the terms of your lease with each new tenant.
Pros Of A Month-To-Month Lease
A month-to-month lease is also beneficial for landlords because they can raise their rent prices without losing tenants. It will also provide great control over whether or not you want to keep your tenants in a rental. You can simply choose to terminate their lease the next month if you are unhappy with them.
Month-to-month leases are more difficult for tenants to find, so you may be able to charge more or be more selective with the application process. It’s also possible to change your lease terms from month to month
Cons Of A Month-To-Month Lease
On the other hand, offering month-to-month leases could mean that you’re looking for new tenants every month. This can cost you a great deal of time as well as advertising money. The tenant screening process can also be stressful.
You will also deal with a less stable income with monthly rentals as there is no guarantee that your apartment will be occupied for the duration of a year.
So, which is better?
Both fixed-term and month-to-month lease agreements have pros and cons for both renters and landlords. Location, property type and types of tenants can all impact the type of lease term a landlord decides to offer his or her tenants.
Regardless of the type of lease term, renters always have the option to negotiate with landlords or property managers and ask to change the terms of the lease before signing the agreement. A property may be advertised as a year-long lease, but a renter can ask the landlord if they can sign a six-month or month-to-month lease instead. Not every landlord or manager will agree to your request, but you always have the option to ask for changes that will better fit your lifestyle.
FAQS
1. Which option is better for tenants?
Fixed-term leases are best for tenants who want stability, predictable rent, and long-term housing.
Month-to-month leases are ideal for tenants who value flexibility, like students, temporary workers, or those planning to move.
2. Which option is better for landlords?
Fixed-term leases work well for landlords seeking stable income and long-term tenants. Month-to-month leases are preferable for landlords who want the chance to raise rent more often or sell or renovate the property soon.
3. How much notice is required to end each type of lease?
Fixed-term: Usually ends automatically on the agreed date, but early termination may result in penalties.
Month-to-month: Typically requires 30 days’ notice from either side.
4. Final Verdict: Which is better?
It depends on your goals:
If you want stability and security, choose a fixed-term lease. If you want flexibility and short-term convenience, go for a month-to-month lease.
