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What is the Difference Between a Month-by-month Lease and a Fixed-term Lease?

Depending on your needs as a renter, you may prefer either a month-by-month lease or a fixed-term lease. Each has its advantages and disadvantages, but the type of lease you choose typically is determined by how much flexibility and mobility you desire. This article covers the basic differences between the two, in order to help you make an informed decision when selecting a rental property.

See FindLaw's Landlord Tenant Law subsection for related articles and resources, including Tenant Lease Agreement FAQs and Ending a Lease or Rental Agreement FAQs.

Month-by-Month Leases

A month by month lease (also referred to as a month-to-month lease) is an arrangement in which the lease may be altered or terminated by either party after giving notice, typically at least 30 days in advance. This type of a lease offers you more flexibility since you will not have to pay a penalty or lose a deposit if you decide you want to live elsewhere. However, the landlord may raise your rent, change the rental terms, or even evict you for any reason, with a similar minimum advance notice.

Contracts may be either written or oral, and rent is paid each month. Some rental units, including residential hotels, may offer week-to-week leases.

Fixed-Term Leases

A fixed-term lease is a type of rental agreement in which the renter agrees to stay and pay rent for the period of time indicated in the written contract. Renters who break their lease typically lose their deposit and, if applicable, their pre-paid rent for the final month of the lease. Further, renters who break a fixed term lease early may be held liable, to varying degrees, for the amount of time and rent left on their contract.  However, the law typically limits this liability to the amount of rent due for the time it took for the landlord to find a replacement tenant, or the rent for a time deemed reasonably sufficient to find a new tenant.

Example: Rob, the renter, broke a 1-year Fixed-Term Lease he made with Larry, the landlord, after only 6 months.  Larry found another tenant to rent the place after a 3-month search. In this scenario, Rob would likely only be liable for 3-months of rent to Larry.

The trade-off for this long-term rental commitment is that the landlord may not change the terms of the lease, raise rent, or terminate the lease until the lease period has ended.

While month-to-month agreements allow for more flexibility and often require less of a deposit, the fixed-term lease usually is the best option for tenants who do not plan on moving for at least a year (or whatever the lease term happens to be).

Find a landlord-tenant lawyer in your area if you have additional questions or need help resolving a dispute.

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