Leases: Fixed Term or Open?

pros and cons

FIXED-TERM LEASE

A rental lease contains all the important terms and conditions for renting a property and  range from fixed-term to open or month-to-month.  

Which type of lease is best for you?  

A fixed-term lease refers to a rental lease with a designated start and end date. A term lease will begin on a specific date stated in the rental agreement.  At the end of the term, the tenant will either move-out on a specified date or the term lease will transition to a month-to-month lease. The lease should provide explicit details on what happens at the end of the term lease. Tenants may be offered a renewal option at the end of the lease term or even before. The renewal can be for a fixed-term, similar to the original lease, or the renewal can be for a month-to-month lease.  Lease renewals are often accompanied by a rent increase.

PROS OF A TERM LEASE

  • Fixed Rental Rate

During a term lease, a landlord cannot change the rental rate and tenants have full tenure to the property during the term even if the property is listed for sale or is sold.

  • Set Lease Terms

Rules, terms, or conditions cannot be changed.

  • Guaranteed Occupancy for the duration of the lease.

CONS OF A TERM LEASE

  • Complicated to move if your situation changes and you break the lease
  • You could be liable for any unrented months remaining plus buy out fees
  • Forced to live with bad…neighbors/management/appliances/etc until the lease ends

MONTH-TO-MONTH LEASE

In a month-to-month lease agreement, tenancy and lease terms typically renew automatically at the end of each month. The amount of notice required to change a lease term or to end tenancy is usually 30-60 days but vary from Province to Province.

PROS

  • Easy to Change the Lease Terms including rates with appropriate notice
  • Easy to Move or Ask a Tenant to Move Out with legal notice requirements

CONS OF A MONTH-TO-MONTH

  • Risk of Unplanned Vacancy which is undesirable especially during slow winter months
  • Rent IncreasesMonth to month lease more targeted for unexpected rent increases

FINAL THOUGHTS

Both fixed-term and month-to-month lease agreements have their pros and cons for landlords, booking/rental Agents and renters.

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