Property Management Blog

Is a Month-to-Month Lease Better for Landlords?

System - Thursday, April 14, 2022

A month-to-month lease is a document that legally binds a landlord and a tenant. It runs month to month without a specific end date. It automatically renews until either party chooses to end it by giving the other a proper notice. 

As a landlord, before opting for a month-to-month lease agreement, it can be worthwhile to know everything that it entails.

In this article, we’re going over the pros and cons of a month-to-month lease.

Pros of a Month-to-Month Lease Agreement 

1. You get the opportunity to raise rent. 

Unlike a year long lease, you may be able to make changes to your lease terms more often. And that includes charging a higher rent. The only downside to this is that there is risk that the tenant might choose not to renew their lease after the rent hike. 

2. You can keep your options open. 

A month-to-month lease is more flexible than a long-term lease. For instance, in a market where rent is rising rapidly, you may be able to terminate the existing lease. Then, rent out the property to a tenant who can pay a higher rent – assuming the existing one can’t afford the new rent. 

The end dates of a month-to-month lease are also flexible. This can make things easier, especially if you’re planning to make major repairs on the property or even looking to sell it. 

lease agreement

3. There is no penalty for breaking a month-to-month lease. 

As long as you have provided your tenant proper notice, you won’t incur any penalty for breaking the lease. After all, with a short-term lease, it’s usually expected that either party will break it at some point. 

As a landlord, you can end a short-term lease at any point you see fit. However, landlords tend to prefer ending the lease in the summer. At this time, demand for rentals tends to be high and you may find it easier to find a good tenant.  

4. You can retain a great tenant. 

With a long-term lease, you’ll be stuck with a tenant for the entire term of the lease, which can be anywhere between 6 months and a year. Now, imagine if that tenant is a difficult one? That would be stressful.

On the other hand, with a short-term lease, you have great leverage over the type of tenant you rent to. You’ll be able to end leases of difficult tenants and extend those of quality tenants with ease. 

Cons of a Month-to-Month Lease 

1. There is uncertainty. 

To terminate a month-to-month lease, all your tenant has to do is provide you a proper notice. In Colorado, the notice period ranges from 7 days to 90 days, depending on the length of the tenancy.  

In an area where rental demand is seasonal or occupancy rates are lower, a month-to-month lease may not be the most appropriate. That’s because you may have difficulty finding and/or retaining tenants. 

signing a lease

2. Finding a tenant on short notice can be stressful. 

After a tenant notifies you that they will be ending their lease, you may only have a short time to find their replacement. That can prove stressful as you’ll be working under pressure. 

And besides the stress, operating on a limited timeframe can also have a negative impact on your tenant selection process. 

3. You may not have a stable rental income. 

The uncertainty in a month-to-month lease may also mean a less stable rental income for you. 

How does a Month-to-Month Lease Work in Colorado? 

In Colorado, a month-to-month lease can be established either orally or through a written document. After the lease becomes active, both you and your tenant obtain certain rights and responsibilities under the Colorado landlord-tenant law

For instance, you obtain the right to enter their rented unit, charge a security deposit, and enforce the lease terms.

On the other hand, your tenant obtains the right to live in a habitable property, live in peace and quiet, and to be treated fairly, for instance. 

rental lease agreement

How Much Notice is Required to Terminate a Month-to-Month Lease? 

With a short-term lease, either party can end it by serving the other a proper notice. The following are the notice periods required to terminate a lease in Colorado as per CO Rev Stat § 13-40-107. 

  • For a tenancy lasting at least one year, you must provide the tenant with a 90 days’ notice. 
  • For a tenancy lasting anywhere between 6 months and one year, you must provide the tenant with a 28 days’ notice. 
  • And for a tenancy lasting anywhere between a month and 6 months, you must serve the tenant a 7 days’ notice. 

Do you Need to Provide your Tenant any Notice to Raise Rent? 

Generally, in a short-term lease, you must wait for the current lease to end in order to renegotiate the terms. However, this isn’t the case in the state of Colorado.

If your lease states that rent may increase, you are required to provide your tenant a 7 days’ notice in order to raise rent or change any other lease term. 

If there’s no written lease, and the tenancy between 1-6 months, you must provide your tenant with a 60 days’ notice. 

showing documents

How Do you Deliver a Notice in Colorado?

There are notice delivery requirements in the state of Colorado.

The following are the options you have:

  • Leaving a copy with the tenant. 
  • Leaving a copy with an individual who is at least 15 years old if the tenant is unavailable. 
  • Posting the notice on a conspicuous place on the premises. 

Bottom Line

Whether or not to use a month-to-month lease depends on your goals. If looking for flexibility, then go for it. But if you’re looking for a more stable income, a long-term lease may be the most appropriate option. 

If you're a new landlord, or if you have further questions, feel free to reach out to Onsite Property Management

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