Every so often, you’ll hear the terms “Fixed Term lease” or “month-to-month” lease. In most sales the terms aren’t particularly relevant, but when you have that Buyer’s dream house where there’s a tenant inside and the seller-landlord says “it’s a fixed term lease,” you need to know what that means for your client.
Under ORS 90.100(17), a fixed term lease is “a tenancy that has a fixed term of existence, continuing to a specific ending date and terminating on that date without requiring further notice to effect the termination.” In other words, if the lease says “Lease term until February 28, 2025” you have a fixed term lease, because the end date is a specified day.
ORS 90.100(32), by contrast, defines a “month-to-month tenancy” as “a tenancy that automatically renews and continues for successive monthly periods on the same terms and conditions originally agreed to, or as revised by the parties until terminated by one or both of the parties.” You can sometimes see variations on this where the lease is week-to-week or year-to-year, but in all instances the lease is on a rolling, automatic renewal.
The importance of this distinction is found in ORS 90.427. If the lease is a fixed term lease, landlord can only terminate within the term “for cause” which means things like failure to pay rent, breach of the lease terms, etc. If the fixed term lease is for less than 1 year, the landlord can give 30-day notice to terminate the lease [this notice cannot be used to terminate the tenancy before the final day of the fixed term]. If the fixed term lease is for more than 1 year, the landlord cannot terminate the tenancy unless the termination is for cause (e.g. failure to pay rent or violation of the lease agreement) or is for one of four specified statutory reasons [such termination requires 90 days notice]. If the tenant signed something absurd like a 10-year fixed term lease, the Buyer needs to know that they’ll potentially have to wear that albatross for several years. If the fixed term is for more than 1 year and the lease expires without having been validly terminated, the fixed term lease becomes a month-to-month lease that continues into the future.
For month-to-month tenancies that have lasted for less than a year, 30 day termination can be given. For month-to-month tenancies where the tenant has been living there for more than a year, the landlord can only terminate for cause or with one of the 4 special “landlord qualifying reasons” in ORS 90.427(5). These are (1) landlord intends to demolish the property; (2) landlord intents to renovate the property and the renovation will render the property or dwelling unsafe or unfit for occupancy during repairs; (3) landlord or a family member of landlord intend to move into the dwelling and no other comparable spaces exist; and (4) landlord has accepted an offer to purchase from a Buyer who plans to live in the property and landlord has given tenant proof of that buyer’s offer within 120 days of accepting Buyer’s offer. If one of the above 4 reasons exists, landlord-seller can terminate the tenant with 90 day notice. If one of the above 4 reasons or a “for-cause” reason doesn’t exist, the landlord cannot terminate that tenant.
The scenario to consider: Buyer wants to purchase property that has a multiple year-long fixed term lease expiring in 4 months. Buyer purchases, thinking to themselves, “only 4 months, I can handle that.” Buyer forgets to send notice of termination 90 days before the end of the fixed term. The fixed term lease ends and Buyer learns they now have a month-to-month tenant. Buyer invokes ORS 90.427(5)(c) and explains that they want to move into the dwelling and no comparable space exists, but has to wait another 90 days before the vacancy.