What is a Month-to-Month Rental Agreement?
According to its name, a month-to-month rental agreement is one where the tenant can use and occupy the premises only for one month, and the right to possession ends at the conclusion of that month. The tenant can occupy the premises for one more month under terms and conditions of the prior month, or may vacate at the end of the month, if desired.
The month-to-month tenant has no right to possession beyond the end of the month, nor any right to renew that term for another month. If the landlord wants to continue the tenancy beyond the end of the month, the landlord must request that the tenant stay another month, pursuant to the same terms and conditions of the prior month(s). The tenant is free to decline and move out.
In most cases, if the occupant were to stay beyond the end of the month, the landlord would accept the new tenant as an implied month-to-month tenant on the same terms and conditions as prior months.
The one-month "term" of the month-to-month rental agreement means that the rights of the tenant/occupant necessarily terminate at the end of the month, without any further action required by either party. This feature makes it different than a typical lease for a set period of time, such as a one-year lease.
A fixed-term lease is an agreement for a specific term, usually one year. It requires an affirmative act of renewal by the parties to extend that term in order to continue the tenancy after the expiration of that term. There is set termination date at which time the parties either affirmatively renew the lease under like terms and conditions, or the tenancy ends.
A month-to-month rental agreement is useful in many circumstances. It’s commonly used:
Under all of these circumstances , a landlord and a tenant may wish to avoid the formality and commitment of a fixed-term lease. Instead, the freedom of a month-to-month rental agreement is often utilized, with the understanding that the one party or the other may want to end the tenancy on relatively short notice.
When a party has the luxury of a month-to-month agreement, it can accept the flexibility of being on the premises for only one month, and can plan accordingly. The party can choose to stay one month and move on, or stay one month and renew for another month, or decline and move out.
Unlike the fixed-term lease where the parties must affirmatively commit to a renewal or new term, the month-to-month rental agreement requires no formal action from either party to renew the relationship for a new month. Rather, the mere residency of a tenant/occupant on the premises for a month gives rise to the presumption of a month-to-month status on the same terms and conditions as the prior month.
While not universally the case, the one-month term of a month-to-month rental agreement comes with a price. The passage of a calendar may trigger a rent increase every month, as opposed to negotiating (or including in the lease) an increase at the time the lease is renewed on an annual or semi-annual basis.
A one-month term also benefits the landlord who is carrying low or no equity in a property. Assuming the tenant is not protected by any local rent control measures, the landlord may be better able to negotiate a more favorable rent justifying the relatively short tenancy. In short, the flexibility of the one-month term benefits landlord and tenant alike, allowing both to revisit their rental goals.
California’s Legal Requirements
A month-to-month rental agreement in California is considered a periodic tenancy. The California Civil Code defines a period tenancy as follows: if the rental agreement is for a specified term, the lease is a term lease; if no term is stated, it is an estate at will; if the rent is payable in installments, the lease is from period to period; and any other lease is at will. (Cal. Civ. Code, § 1944.)
Under California law, a landlord is not required to put a rental agreement in writing to create a legally binding lease. A month-to-month rental agreement can be oral or implied and may be created by rent payments for each month with acceptance of those payments by the landlord. (Cal. Civ. Code, § 1947.) An oral or implied lease must satisfy the Statute of Frauds in California. The written portion of the Statute of Frauds provides that leases for more than one year must be in writing, signed by the party to be charged with the contract, show the capacity of the lessor required by law to lease the premises, and describe the premises with reasonable certainty. Any oral lease for less than one year is enforceable under common law, but, since not putting the lease in writing is risky for both sides, your best option is to put all agreements in writing.
Even if a rental agreement is not written down, both the tenant and the landlord have certain rights under California law. The tenant has the right to privacy in the apartment, the right to habitable living conditions, the right to notice of rent increases, the right to fair processing of grievances, and the right to a deposit refund. For instance, tenants must have one week’s notice if the rent is increased in a month-to-month lease. The landlord has the right to collect rent and to collect a security deposit. Under California shopping center laws, advertisements for vacant spaces, among others, are also covered.
The most unique state law that applies to periodic leases is the length of notice that must be given for a lease to convert to a fixed-term lease. There is no California law on how long notice must be provided prior to the end of a lease. State law permits a landlord and a tenant to set any length of time for notice. Even if a lease provides the notice to be given, however, if the landlord does not provide sufficient notice prior to renewing the lease, it will convert to an implied periodic tenancy. For example, if the lease provides that a 30-day notice is required prior to the lease expiration, but the landlord fails to give this notice, the lease converts to an implied monthly tenancy. Minimum notice for a periodic lease varies by state, but in general, it is as follows:
California Civil Codes are referenced throughout this section, so you may want to refer to this table of relevant Civil Code sections for more information on the application of the law.
Pros and Cons for Tenants and Landlords
For tenants, the main draw of a month-to-month rental agreement is flexibility. Maybe you need a place for just a few months; maybe you might move to pursue a different job or after a short assignment or internship. An additional benefit is being able to more easily find a home near your job than if you had to sign a year lease. For landlords, offering a month-to-month agreement to a tenant can be a good idea. You can potentially get a higher rent than in a lease situation, as well as have the flexibility to easily move the tenant out if you need to relocate your unit’s tenants for construction or remodeling purposes. However, there are drawbacks to month-to-month rental agreements for both parties. The big one is security. Whereas a lease tells the tenant that you’re with them for at least a year, a month-to-month agreement can be terminated at any time by either party with appropriate notice. The result can be a lot of uncertainty for tenants trying to plan their lives, even though they have a certain level of security that (a) improve with time spent in the apartment and (b) the landlord cannot raise the rent until the agreement is up. A big concern for tenants in California is the possibility of having their rent raised at a key time, such as when they are in the middle of an important project at work or have recently begun a new relationship and want to stay in the neighborhood. The one-year lease offers a lock-in at whatever price for the duration of the agreement, but the certainty of the one-year lease could mean that the tenant’s current apartment is not the right fit longer term. In rare circumstances, both parties could get stuck in a situation that neither can bear any longer. In this case, the process to evict a tenant in California typically requires a 60-day notice (as opposed to the 30-day notice required for a month-to-month agreement) but often can take around the same amount of time due to court availability and the like.
How to End a Month-to-Month Rental Agreement
In California, either party to a month-to-month rental agreement can lawfully terminate the lease by providing either party with a minimum of 30 days notice.
Instead of the 30 day notice period the landlord may give, a tenant may terminate a month-to-month rental agreement by giving 30 days notice in writing. If the tenant is a tenant at sufferance pursuant to a written lease that has expired, the tenant must give 30 days notice before the lease will terminate. Cal. Civ. Code § 1946.5(a). In the event a tenant is active-duty military, the tenant is entitled to terminate the month-to-month rental agreement 30 days after a notice is given (Cal. Civ. Code § 1946.5(b)), or upon the last date of lawful military service, whichever is sooner. Cal. Civ. Code § 1946.5(c).
If the tenant is behind on his/her rent, the landlord may send a three day notice to pay rent or quit (Cal. Civ. Code § 1161(2)), in which case a 30 day notice is not required. Further , if the tenant violates any term of the rental agreement (other than a payment for rent), the landlord may send a three day notice to perform a covenant or quit. Cal. Civ. Code § 1161(4). If the tenant is causing damages to the property or nuisance to the neighbors, the landlord is also entitled to a three day notice to cure or quit. Cal. Civ. Code § 1161(2) and (3). Unlike the 30 day notice, a three day notice does not require a day of service; meaning, the notice can be delivered to the tenant the same day the nonpayment, violation, or damage occurred, thus causing immediate termination of the month-to-month rental agreement.
Regardless of the notice that terminates the month-to-month rental agreement, once the notice is served, the landlord should file a summons and complaint in unlawful detainer to evict the tenant, including a judgment requiring the tenant to pay any unpaid rent. In addition to recovering rent due, an unlawful detainer allows the landlord to possibly retrieve the unit before the tenant actually vacates the unit.
Common Provisions to Consider Including
There are several important clauses to consider including in a California month-to-month rental agreement, including:
- Rent amount: This should be clearly stated and specify the amount of the rent each month. You may also want to specify the date the rent is due every month, as well as any late fees that are applicable. Late fees should fall within the number of days you’ve chosen for the rent to be paid. For example, if you’ve stated the rent is due the first of each month, late fees should start accruing on the second of each month.
- Payment terms: It’s important to specify where the rent is to be paid (in person or by mail) and how it is to be paid (either cash or a method that can be verified at a later date.) You may wish to make exceptions to this for May rent in the event the lease has been entered into prior to May. That way, you can specify what date this may be paid later in the month or when the tenant receives his or her first paycheck, or whichever is appropriate for the situation.
- Renewal: Specify what must happen in order for the agreement to be renewed, such as whether the rent amount will be subject to change. This clause can either be open-ended if you’d like, or if you have certainty of the cost of living adjustments, you can include that as well.
Tips for Drafting a Successful Month-to-Month Rental Agreement
When drafting a month-to-month rental agreement, here are some suggestions to ensure compliance with the law while minimizing future disputes:
• Use a written rental agreement: This is just a good habit to develop, even for month-to-month rentals. A written document is much more likely to define and clarify the relationship between lessor and lessee than an oral agreement, which can lead to uncertainty and misunderstanding.
• Include all terms and conditions: Does the property include a backyard or balcony? Is a parking space included? Does the rent cover all utilities or just some? Is laundry on-site? Be sure to address all of the topics that should ordinarily be included in a more traditional rental agreement, as failing to address them can lead to disputes down the road.
• Define the term clearly: A month-to-month agreement means the terms require one month’s notice to cancel or change them, but you and your tenant should still define the duration of the agreement in its opening clause or subtitle.
• Write simply: Use plain language and keep legalese to a minimum. If tenants cannot understand your agreement, they will be more likely to dispute it or refuse to abide by it .
• Check for compliance: Every element of the rental agreement should be in accordance with local, state and federal law. Read through the document carefully to ensure all legal requirements are met.
• Make changes where needed: If you and the tenant agree to make some changes to the contract, do so in writing. If modifications are made verbally but aren’t consistent with the written agreement, the former terms will be enforced unless the agreement stipulates otherwise.
• Make sure all parties sign the document: If there is a co-tenant, both of you must sign. It’s also helpful to get the signatures of all adult children living in the home, to limit any confusion regarding roles and responsibilities.
• Get a witness: Have a neutral third party sign the document to reinforce the fact that both you and the tenant understood the agreement and its terms. Invite this third party to read the contract in its entirety to minimize any ambiguity.
• Protect your interests: If uncertain whether to allow a pet or new roommate, include a clause stating that you retain the right to approve these circumstances at a later date.
• Keep copies: After signing, be sure you both have a copy of the contract.