Tenant’s Lease Lengths to consider in Chicago Property Management for Maximum Return on Investment!
In the state of Illinois, and the City of Chicago, when a written lease for a specified term expires, the default rule is that the tenant is required to move out and may be evicted as a holdover tenant if he or she fails to do so.
If the tenant continues to pay rent to the landlord and the landlord continues to accept it, the terms of the written lease remain in effect until the tenant moves out. However, the lease does not automatically renew for the same duration as the original lease without the landlord and tenant executing a document in writing agreeing to this. Instead, the lease becomes a month to month lease, regardless of what the original term of the lease was.
We have previously detailed how tenant retention is the ideal scenario for Chicago property owners as this reduces/prevents vacancies and rent-less months. For this and other reasons, Lofty recommends only offering tenants annual, or 12+ monthly leases instead of month-to-month leases.
Cons of Month-to-Month Leases
With every pro comes a con, and month-to-month tenancy leases are no different. Although there are many benefits of offering month-to-month leases to your tenants, there are risks as well, including:
Lack of Stability
Although landlords may appreciate a month-to-month lease’s flexibility in some scenarios, it can also be a negative. Quality, long-term tenants often pay rent on time, take care of the rental, and pose less of a flight risk, whereas month-to-month leases can end at any time and therefore lack stability. This lack of certainty can make it hard to plan ahead to prevent future vacancies, which can be costly and time-consuming. It creates short-notice to accommodate maintenance or upgrades during a turnover, not to mention for marketing purposes.
Short notice for move outs
If you rent on a month-to-month basis, all your tenant is legally required to do to terminate this lease is provide you with proper notice. The length of their notice is typically 30 days if a tenant has resided at the property for less than 2 years, but check your state/local tenancy laws to confirm this. However, that doesn’t mean that the tenancy ends exactly 30 calendar days from the date the notice is delivered. Instead, it ends on the last day of the month, as long as it’s at least 30 days away. For example, if a landlord gives notice on August 1st, then the tenancy would be up August 31st. For example, if a landlord delivered notice on August 15th, the tenancy wouldn’t be up until September 30th. This is a strict requirement as Illinois courts have found that 29 days’ notice isn’t sufficient.
Short notice to find new tenants
Once you receive notice, you may find yourself scrambling to look for another tenant to prevent a vacancy. If you rush the process without proper tenant screening, your new tenant may not be the best fit for you and your property, and what’s worse than a vacancy is an eviction.
Risk of unexpected vacancy
Vacancies are the number one way landlords lose money, so if you can’t find a new tenant after your current one has moved out, remember that there are risks to leaving your rental vacant, on top of losing rental income.
It is highly recommended to consult a professional and experienced Real Estate Attorney if pursuing an eviction, or looking for legal advice on a specific situation due to continuously evolving Tenancy laws in Illinois, Chicago, and on a federal level.
At Lofty, we do not endorse nor encourage month-to-month leases due to the large array of problems they can create, in fact we actively discourage owners and tenants alike from pursuing them. If you are interested in month-to-month leases, we strongly advise you to do your research. If you would like help in transferring current tenants from month-to-month to annual leases, we have extensive experience and success in doing this!