Understanding Month-to-Month Rental Agreements
The concept of a month-to-month rental situation is simple. A landlord or apartment owner gives the right to a tenant to reside in the dwelling for one month at a time, unless the landlord or tenant gives notice to terminate the relationship. They are very flexible and work well with a variety of different tenancy situations, such as if a tenant is looking for a short-term lease, if a person is considering replacing a roommate who has recently moved out , if someone needs to fill in a gap in employment or if a person simply wishes to help someone in need. They are popular in California despite their other downsides compared to fixed-term rental arrangements.
Sometimes there is a perception that this type of arrangement is preferable because it lacks the commitment needed in a traditional lease. However, as described above, such tenancies are much greater than a simple handshake and are restricted by California law in several important ways.
Californian Association of Realtors
The California Association of Realtors (C.A.R.) has played a significant role in providing standardized documents throughout California. These documents allow all involved parties to be on the same footing and provide stability in negotiating agreements. This is especially important when it comes to rental agreements.
The C.A.R. Month-to-Month Rental Agreement is available for download on the C.A.R. website and is current with many of the laws governing landlord-tenant relationships in California. However, this agreement may not be appropriate under all circumstances, such as when the rent is not paid by the tenant with the rent control exemption.
Under California law, landlords of rental properties must subscribe to at least one property rental program, like the C.A.R. Month-to-Month Rental Agreement. The C.A.R. Month-to-Month Rental Agreement includes important provisions required by California law that are not commonly found in other rental agreements, such as:
By using the C.A.R. Month-to-Month Rental Agreement, landlords can have peace of mind knowing that they have used a property rental program that has been customized by lawyers who concentrate their practice on landlord-tenant law. It also provides that any notice required by law is provided to the parties in the manner and time stated and avoids many of the pitfalls that do-it-yourself rental agreements often contain.
Features of the CAR Month-to-Month Rental Agreement
Key Features of the California Association of Realtors Month-to-Month Rental Agreement
A month-to-month rental agreement in California is organized in a clear and linear fashion, starting with terms for the lease itself and later detailing the rules and additional features of the agreement.
Lease Terms – Section 1 of the California Association of Realtors Month-to-Month Rental Agreement contains all relevant lease terms. Both parties are required to initial the page containing these terms to indicate approval. The lease duration terms are as follows:
Rent Utility payments Pets Parking
Each paragraph in this section provides details for that specific term.
Rules and Regulations – Section 2 consists of options and clauses that landlords can use as necessary to tailor the agreement to the needs of both parties. Landlords can choose to include paragraphs regarding:
After Section 2, the agreement continues by providing contact information for the landlord and tenant, followed by details regarding rent payment and overdue rent guidelines in Section 3.
CA AR Rental Insurance Requirement -Section 4 of this agreement requires tenants to obtain and maintain a rental property insurance policy that covers personal liability. The coverage must begin the first day of the lease and will extend throughout the lease. Failure to purchase required insurance may be grounds for termination of the rental agreement within 3 days. This type of insurance covers damages caused by tenants to the rental unit and other units (in a multi-family building) and provides some liability protection for accidents on the rental premises.
Pros and Cons for Renters
The flexibility of terminating the agreement on short notice can be a major advantage for tenants. Should you choose to leave your apartment before the end of the long-term lease term, you could face penalties in the form of a fee for the early termination of the lease, risk losing your deposit, or both. For instance, you could be responsible for the cost of finding a new tenant to take your place, or paying the rent until a replacement has been found. A California Association of Realtors Month-to-Month Rental Agreement is devoid of penalties for early termination of tenancy. You simply need to give your landlord 30 days notice of your intent to vacate. On the downside, the flexibility of the agreement has the potential to leave you in a state of flux. Even though you are able to give the required notice period, your landlord can initiate the same process to terminate your tenancy for any reason. In order to entertain the idea of a long-term rental, you will need to decide quickly whether the property suits your needs or not.
Benefits and Drawbacks for Landlords
There are both plusses and minuses to using a month-to-month rental agreement. On the plus side, you have the utmost flexibility. You can terminate the tenancy with 30 days notice rather than the 60 days that is generally required with a long-term lease. Plus, you have flexibility as to increasing the rent.
On the bad side. If you rent in an area of the state that has rent control, the law may require that you have a lease of a stated length (typically 12 months) to take advantage of any exemptions in the rent control statutes. Otherwise, you are required to follow a set formula to raise the rent, which may limit your flexibility. In addition , because you do not have long-term leases, you have much more tenant turnover, which means more empty apartments for you.
Then there is the issue of short term rentals. The month-to-month rental agreement is a short-term rental. Therefore, if you have a tenant that only wants a lease for a few months, it might be more appropriate to use a month-to-month rental agreement. However, lessors need to be aware that short-term rentals of over 30 days must comply with the Rent Stabilization Ordinance and the hotel registration requirements of the City. You still need to file due diligence with the City, and you will need to include the hotel fee in your rental rate.
Legality Considerations and Tenant Rights
The California Association of Realtors Month-to-Month Rental Agreement comes with specific legal obligations for landlords and tenant rights that need to be understood by both parties to ensure compliance and avoid disputes.
Eviction protections: In addition to the three-day notice for non-payment of rent as provided in the Form, a landlord seeking to evict a tenant under an agreement for a period of less than one year must comply with Civil Code section 1946.5 in which a landlord must give at least 30 days prior written notice of intent to terminate, if rent is paid on a monthly basis, or 60 days prior written notice, if rent is paid on a quarterly or yearly basis of the landlord’s intent to terminate the tenancy and in most circumstances a landlord may NOT recover possession of any real property after three days of notice unless the notice is executed pursuant to applicable provisions of law. CCP Section 1174.2 requires 60 days notice be given to tenant before a judgment awarding possession of the premises can be executed if the landlord "has accepted rent from the tenant during or after the notice period" or if the landlord has given a 30 day notice to tenant and the tenant gave a 90 day written notice to vacate to the Landlord or the landlord and tenant entered into a written extension of the rental agreement for a period of at least 30 days at the time the rental agreement was entered into. In Los Angeles City, a rent control law requires a rental increase notice of at least 30 days be given to a tenant and if a rent increase would raise the rent above the rent stabilization ordinance’s rent adjustment just cause evictions provisions, a rent control tenant can only be evicted for "just cause." Just cause evictions are those where the tenant fails to pay the rent, breaches a material term of the rental agreement, habitually uses of the unit for an illegal reason, causes or permits a nuisance, maintains the unit in untenantable condition, refuses to allow reasonable access to the unit in violation of the C.A.R. Month-to-Month Rental Agreement, refuses or intentionally fails to renew a written rental agreement, is convicted of a crime that mandates removal, or converter a portion of the unit to a different use. Other important prerequisites to an eviction include a prohibition on retaliatory evictions (Civil Code section 1942.5 prohibits a landlord from taking retaliatory actions against a residential tenant who exercises their legal rights, such as making complaints regarding the rental unit’s habitability, joining a tenant organization, or exercising other legal rights) and a prohibition on scope of application to owner-occupied units with no more than one other unit if the owner provides certain notice and follows certain procedural requirements.
From Fixed-Term to Month-to-Month: How to Make the Change
The process for transitioning from a fixed-term lease to a month-to-month term is relatively simple. Once the lease reaches the end of its term, instead of requesting both parties sign a new lease, the landlord can simply inform the tenant that the lease will become a month-to-month and is continuing as if it were never terminated.
A month-to-month can only be created by express agreement between the landlord and the tenant, or by an implied agreement of the parties. A landlord and tenant may agree to a month-to-month rental either as an express term of the lease or by agreeing after the expiration of the lease term. If the lease does not state that it will automatically convert to a month-to-month rental, and the parties do not agree to the conversion, then the terms of the lease apply until the parties agree to terminate the lease and replace it with a month-to-month rental. The landlord and tenant may modify the lease to create a month-to-month rental agreement by signing a new lease or by amending the existing lease to take the place of the expired lease.
If the landlord has given proper notice to vacate the premises, the landlord can terminate the month-to-month tenancy by the requisite 30 or 60 days’ notice pursuant to Civil Code Section 1946. If the landlord has not given a proper notice to vacate and the lease is converted to a month-to-month tenancy, the landlord will be bound by the terms and conditions of the expired lease, including the rental amount, unless the landlord has properly increased the rent by the amount set forth in the expired rental agreement.
If the landlord and tenant agree to a periodic rental payment other than one (1) month, the parties can agree to a different period of time, such as a two-week rental payment, pursuant to Civil Code Section 1947. In such a case, the notice time periods specified above would run concurrently.
Negotiating Strategies
Tenants are not the only ones who can negotiate favorable terms in a month-to-month rental agreement. Owners, landlords and property management companies also have an interest in negotiating and being proactive regarding the rental rate charged for the property and the terms of the month-to-month rental agreement. The following are some tips and examples as to how a tenant or landlord can successfully negotiate terms in the month-to-month rental agreement:
Your best chance to negotiate the rental rate is if you have a good track record of paying your rent on time and treating the property well. If you have had a prior poor rental history, you will find that a landlord may justifiably raise the rental rate because a tenant has a history of late payments. The timing of your request to negotiate the rental rate is also crucial; if you request a rental reduction during high season, you risk being turned down more often because the market demand supports the rental rate being charged. Every now and then, a tenant benefits from the rent being reduced after they made numerous requests for maintenance. Such a situation often presents itself as a win-win because the tenant is able to pay rental rate that is more commensurate with the rental value of the property and the landlord does not have to incur the expense of the requested repairs to the property .
You not only want to protect yourself from a cost increase in your monthly rent, but you also want to make sure that you are receiving notices from your landlord in a timely manner. By extending your notice time frame, you are also protecting your co-tenant from costs increasing because it will take more time for both of you to find a replacement or agree to the increase. In that same vein, be careful about offering a concession to a prospective tenant. You may ask for an extra month free of rent from your landlord, but it is risky to ask a potential tenant for the same incentive. If you are able to negotiate your extra month free because you paid an extra month rent up front, you may still be within your rental budget. If you offer a prospective tenant the same, they may struggle to keep up. In the same fashion that a landlord cannot place you in financial strain, neither should you place a burden on your co-tenant.
Do not think that because you were granted a one-year lease that you are stuck in that lease for the duration that you are able to negotiate out of it as well. You are not stuck with the terms of the one-year lease, but if you do not negotiate exiting the lease because you need to leave for school or sale, you may be stuck for the duration of the one-year lease paying and/or obligating your co-tenant to pay the one-year lease unless the landlord relieves you with sublease terms.