Month-To-Month VS Year-To-Year Leases In Low Income Areas
So I decided to write this article after someone in a real estate investor group asked whether or not they should use a month-to-month or year-to-year leases in Baltimore City. As a lawyer I’m often inclined to give the general default answer. And I think in general, of course it’s better for landlords to lock in their tenants. But is the general rule best for each situation?
The Benefits of Month-To-Month Leases in Low Income Areas
1. It’s Easier To Evict Tenants
The main benefit of year to year leases is locking in tenants. But if the tenant is locked in, so is the landlord. A landlord’s obligation to their tenants does not end if their tenants stop paying rent. The nightmare is to have a tenant that uses the lease and abuses the legal system to stay in possession of the property. Even if the tenant is not paying the rent, the landlord can be fined for the conditions of the property.
With a month-to-month lease, a landlord can evict a tenant by sending them a 30 (or 60 day notice depending on the Jurisdiction) and then filing a tenant holding over action against them.
2. You Might Not Be Able To Collect Money You’re Owed Anyway
Another awesome benefit of year-to-year leases is that if the tenant leaves earlier, you can attempt to sue them for the remainder of the lease term for breach of contract. For month-to-month leases you can only sue for the periods that the tenant occupied the property.
But a money judgment against a tenant is just a piece of paper. In order for you to take judgment collection efforts against the tenants, then they have to have money for you to collect. Attempting to collect money from low income tenants maybe more trouble than what it’s worth.
But Why Rent If You Feel The Need To Use Month-To-Month Leases?
So, let’s say I’m thinking about renting to someone and I decide that I’m more comfortable renting to them using a month-to-month lease agreement. So, I ultimately made the decision that the ability to get rid of the tenant is greater than locking them in.
If that’s the case, than wouldn’t it make more sense to either sell the property or find a tenant that I feel comfortable renting to year-to-year with?
In that same vein, if I don’t think I can collect from a tenant after getting a judgment against them, then I won’t be renting to that tenant.
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