Month-to-Month Tenancies

Zona Law | Mark Zinman

Most leases in Arizona provide that when the lease expires, it automatically goes month-to-month (“MTM”). A lot of property owners don’t think about what that actually means and how to strategically proceed toward the end of the lease.

Technically, when the lease ends, if neither party has served a non-renewal notice, then the lease continues on under the same terms – the rent is the same as with all other charges and terms of the original lease. The parties do not need to sign an addendum as the MTM tenancy occurs as a matter of law. When a tenant goes month-to-month, it’s common that landlords charge more in rent per month. This is done because the landlord has no certainty how long the tenant will stay, and the tenant is effectively paying for the ability to leave on a month’s notice. 

To ensure it is done legally, it is imperative that the tenant be given at least 30 days written notice before the rent increases to the month-to-month (“MTM”) rate. It doesn’t matter if the landlord has a policy of charging an MTM rate, the tenant must be served notice of the change OR it must be written in the lease (in that case, the lease itself is the notice that the rent will increase when it expires). However, when it’s in the lease, the lease should set forth a specific dollar amount of the increase, it cannot merely say that the rent will increase when it MTM, and it can’t say that it will go to market-rent, because “market-rent” is not a specific amount that the tenant can calculate).

For example, it is possible to put a provision in a lease that if the tenant stays past the expiration of the lease, the lease will roll over month-to-month at $200.00 more per month. When there is nothing in the lease, then a 30-day notice is required (don’t forget to add 5 days if notice is being sent via certified mail). The notice acts as an offer to rent at the higher rate, and if the tenant doesn’t want to pay the higher amount, their option is to serve a non-renewal and move out before the new rental rate starts. If they stay in the unit, they are then automatically liable for the new MTM rental rate.

While the law only requires a 30-day notice, we suggest landlords create a policy and procedure for sending out renewal notices between 60 – 90 days before lease expiration and asking what the resident would like to do. Outline the different options available to the resident, such as: (1) leaving at lease expiration, (2) signing a new lease or (3) going month-to-month. With the latter two, the landlord should inform the resident what the cost would be for each of the options. The resident should be given a date, somewhere around 45 days before the lease ends, to inform the landlord of which option they want and sign any documents, if needed. If the resident doesn’t respond in time or doesn’t sign a new lease, then the landlord can decide if they want to non-renew or give notice of a rent increase. If no action is taken, of course, the lease is likely just renewed upon the same terms and conditions. 

It’s also important to note that managers do not have to let residents go to MTM. If you do not offer MTM rent, it’s fine to simply terminate a tenant who refuses to sign a new lease.