Pros and Cons of Short-Term Leases

Risks and Rewards for Landlords and Tenants

Two women consider a goldenrod-colored dress in a pop-up shop.
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Although common, landlords and tenants do not always have to sign a lease agreement for one year or longer. They can mutually decide to sign a short-term lease. Learn how short-term leases work and the benefits and disadvantages of both landlords and tenants.

Key Takeaways

  • Short-term rentals can be for as short as a few months to a few weeks or days.
  • Residential short-term leases are well-suited for vacation rentals,
  • Commercial short term leases may be a good match for start-ups and for seasonal, pop-up shops.
  • Short term rentals offer both landlords and tenants flexibility, but it comes at a cost for each party.

What Is a Short-Term Lease?

A lease agreement is typically considered short term if it is signed for a duration of six months or less. A month-to-month lease is a common type of short-term lease, but short-term leases can also be weekly leases or any random duration of time that both the landlord and tenant agree to.

The main difference between a short-term lease and a long-term lease is flexibility. The landlord can change the terms of short-term lease as long as they give proper notice. In a yearly lease, the terms, such as rent amount, are fixed for the entire year.

Advantages of a Short-Term Lease for Landlords and Tenants

There are several benefits of signing a short term lease agreement for both sides of the agreement.

Advantages for Landlords

Short-term leases benefit a landlord by giving them the ability to charge higher rents initially, the ability to increase the tenant’s rent often, and the ability to change the lease terms quickly,

  • Increase Rent: Since the rent amount is only fixed for the term of a lease, a landlord has the ability to increase the rent every time the lease renews. The landlord must still give proper notice to increase the rent, which will differ depending on state and municipal laws. For example, in Seattle, the landlord must give 180 days advance written notice for monthly increases, but in Hawaii, it’s 45 days written notice.
  • Update Terms: Short-term leases also give the ability to quickly change other terms of the lease. If the landlord wants to update the pet policy, security deposit terms, or move out inspection requirements, these can easily be changed by signing a new lease with the tenant.
  • Often Yearly Leases Become Short-Term Leases: In many jurisdictions, yearly leases can automatically become month-to-month leases once the original lease term expires unless the landlord and tenant sign a new yearly lease agreement.

Advantages for Tenants

The key advantage for tenants is that short-term leases give them the ability to move out quickly due to a job relocation, buying a new home, or desire to move to a new neighborhood.

  • Flexible Move-Out: The main reason a tenant signs a short-term lease is to have the flexibility of moving out quickly, as long as the tenant gives the landlord the proper notice of their intent to vacate the unit.
  • Great for Vacation Rentals: Most people are only looking to rent a vacation property short-term, whether it be a week or a month. This also gives landlords the ability to charge higher rents in the peak season and lower rents during the slow season.

Disadvantages of a Short-Term Lease for Both Landlords and Tenants

There are several negatives of short-term lease agreements that landlords and tenants should consider.

Disadvantage for Landlords

  • Lease Termination: Both the landlord and the tenant have the ability to terminate the lease quickly. With little notice, this uncertainty can be stressful as the tenant would have to quickly find a new place to live or conduct business or the landlord would have to begin the process of finding a new tenant.

Disadvantages for Tenants

  • Rising Rent: Since short-term leases are riskier, landlords will often charge higher rents. This benefits the landlord but is a negative for the tenant.
  • Changing Terms: The landlord has the ability to change the terms of the lease agreement, including increasing the tenant’s rent.

Sample Short-Term Lease Clauses

A short-term lease has most of the same clauses as a long-term lease agreement. The biggest difference is the length of the lease agreement. Below you will find three samples lease clauses. Actual terms will vary based on local law and regulation.

Lease Term

  • The Lease will begin on _______ and will continue as a month-to-month tenancy until either the Landlord or the Tenant terminate the Lease by giving the appropriate written Notice to Vacate.

Rent Increase

  • The Landlord may increase the Tenant’s rent by providing the Tenant with a Notice of Rent Increase at least 30 days prior to lease renewal.

Lease Termination

  • If the Landlord or Tenant wishes to terminate the Lease, the terminating party must give proper written notice. In the absence of a breach of lease, this notice must be made in writing 30 days prior to desired lease termination.

The Bottom Line

Short-term leases can benefit both landlords and tenants, provided they both understand the pros and cons. Landlords gain the ability to quickly reset terms, including rent, but at the cost of long-term stability. Tenants benefit from increased flexibility, particularly the ability to quickly relocate, but they'll often pay more in rent, and will have to accept some uncertainty about rent and other terms in the long term.

Article Sources

  1. Brixmor. "Short Term Commercial Lease & Pop Up Retail Space."

  2. Seattle Department of Construction & Inspections. "Rental Agreements."

  3. Hawaii Revised Statutes. "Chapter 521 Residential Landlord-Tenant Code Subsection 21(d)," Accessed Oct. 9, 2019.

  4. U.S. Department of Housing and Urban Development. "Housing Choice Vouchers Fact Sheet."