Month-to-Month vs. Fixed-Term Leases

Month-to-Month vs. Fixed-Term Leases: Legal Advantages and Disadvantages

Whether you’re a landlord or tenant, you’ve likely considered the benefits and drawbacks of both month-to-month and fixed-term leases while navigating the rental market. While there is no cut-and-dry answer about which type of lease is best for your specific situation, understanding the legal considerations of both types of leases can help you make the best decision for your particular circumstances.

Legal Advantages of Month-to-Month Leases

The primary legal advantage of a month-to-month lease is the flexibility it offers. On the renter’s side, this flexibility ensures that if you have to move for your job, break up with a partner that covers part of the rent, or you simply don’t like the landlord, you aren’t stuck in that location for 12 months. If things aren’t working out, you can provide the necessary amount of notice and cut your losses. On the landlord’s side, if a renter has unreasonable demands, smokes or uses drugs in the unit, or consistently breaks the terms of the lease, you can simply use the notice period to terminate their month-to-month lease. This is much easier than evicting them during a year-long lease, limiting your financial losses and legal fees.

Legal Disadvantages of Month-to-Month Leases

The same thing that makes month-to-month leases appealing can make renters and landlords think twice. For a renter, flexibility like this is good—until your landlord uses it to terminate your lease because their adult child is moving back to town and they want to give the unit to them, leaving you with 30 days to find a new place you like as much with the same amenities and in the same budget. 

That flexibility is not good for renters when their landlord plans to sell the place and ends their month-to-month lease because the new buyers want to reside there. On the landlord side, this can cause a lot of uncertainty and issues with cash flow. If your unit attracts renters who stay for a month or two before moving on, you’re spending a substantial amount of money advertising the unit, showing it, and cleaning it up between renters—all without any extra money for the work.

Legal Advantages of Fixed-Term Leases

There are lots of advantages that come with fixed-term leases. Obviously, they offer financial security to the landlord, who can (generally) count on receiving the same amount of rent every month. Renters get their rental fee upfront and don’t have to worry about it jumping up randomly every few months like they would in a month-to-month lease. The law also gives substantial protections to renters. If their landlord fails to keep the place habitable or address serious concerns, renters can take legal action to protect themselves from retaliation. It can be harder to exercise those rights in a month-to-month lease, as the landlord is likely to simply find a new tenant.

Tenants also know that they have the unit for the duration of their lease. Remember the examples we discussed above? Those can’t happen in a fixed-term lease, as the landlord cannot interfere with the tenant’s quiet enjoyment of the property. If they sell the property, the lease transfers with it, and the new owners must fulfill the terms of the lease. When tenants don’t have to constantly be ready to move out in 30 days, their quality of life is much higher.

Legal Disadvantages of Fixed-Term Leases

Leases can be fairly restrictive on both sides if things go wrong. For example, imagine you rent with a romantic partner. You break up two months into the lease, and because you’re both on the lease, you are both liable for the total amount of rent. If your ex doesn’t care about their credit or having an eviction on their record, they can take off and leave you to shoulder the whole bill—and your lease will likely require you to do the same. 

On the flip side, problem tenants are much harder to deal with when a landlord is stuck with them for a full year. It’s not uncommon for tenants to fall behind on rent or otherwise break the terms of their lease, get served with a pay-or-quit notice, and get just caught up enough to avoid eviction. The landlord is then stuck for the duration of the lease either chasing rent, trying to catch them violating the terms of their lease, and handing complaints from other tenants whose lives are disrupted by the bad tenants’ behavior.

As a Maryland tenant or landlord, it’s important to thoroughly consider the implications of whichever lease type you choose and discuss potential issues with a landlord-tenant dispute attorney.