The length of a lease shapes almost everything else about it: the rent, how easily you can leave, and how secure you are in the space. Small office landlords often offer more than one option, so it’s worth knowing what you’re choosing between.
Month-to-month
A month-to-month lease rolls over each month until either side gives notice to end it.
What it’s good for
- Trying out an office. If you’re leaving a home office for the first time, a month-to-month lease lets you find out whether an office suits you without a big commitment.
- Uncertain plans. If your business might move, merge, or grow quickly, flexibility has real value.
- Short projects. A contract that runs for six months doesn’t need a two-year lease.
The trade-offs
- Less security. The landlord can usually end the lease or raise the rent with the notice period in the agreement. If you print business cards and update Google with a new address, that matters.
- Often a higher rate. Landlords take on more risk of vacancy with a month-to-month tenant, so the monthly rent may be higher than for an annual lease on the same office.
Annual (or longer)
A one-year lease fixes the rent and your right to the office for the full term.
What it’s good for
- Stability. You know where you’ll be working and what it costs for the whole year.
- Businesses that depend on their address. If clients find you by your address, or it’s printed on everything, you want it to stay put.
- Better rates. A longer commitment often earns a lower monthly rent or other concessions.
The trade-offs
- Less flexibility. If your plans change, you’re usually still responsible for the rent until the lease ends, unless the lease says otherwise.
- More at stake if things go wrong. If a personal guarantee is part of the deal, a longer lease means a larger potential obligation.
Questions that matter for either type
How much notice is required to end the lease? For month-to-month, this is the key term. For annual leases, it matters at the end of the term.
What happens when an annual lease ends? Some renew automatically for another year, some switch to month-to-month, and some simply end. Know which one you’re signing.
How and when can the rent change? A month-to-month lease can change with notice. An annual lease usually fixes the rent until renewal, when it may go up.
Is there an early exit? Some annual leases allow you to leave early with notice and a fee. If it’s not in the lease, assume you can’t.
Which one fits you
A month-to-month lease tends to suit you if:
- It’s your first office and you want to try it
- Your business is less than a year old
- You’re likely to need a different size of office soon
An annual lease tends to suit you if:
- You’ve worked from an office before and know it works for you
- Clients find you by your address
- A lower, fixed rent matters more than flexibility
A middle path
If you can’t decide, ask whether a shorter first term is possible, with an option to renew for a year at an agreed rate. You get to test the office, and you know what staying will cost before you commit.
Whatever you choose, read the whole lease, including the notice and renewal clauses, before you sign. Our list of questions to ask before leasing covers the rest.
When you’re ready to talk about terms for a specific office, request a tour.