Tenant Holdover – What if I Stay Past My Lease Term?
By Clint Wilson
Holdover Tenant’s Liability after Lease Term Expiration
Frequently we get calls from clients who realize their lease is due to expire and they need advice as to their liability if they do not surrender the leased premises upon expiration of the lease (i.e., holdover). In other words, they would like to know what is their liability as a holdover tenant.
A holdover tenant is a tenant who continues to occupy the premises after the term of the lease expires. The liability of a holdover tenant will depend on whether the tenant, who remains in possession of the premises after the lease expires, does so with or without the landlord’s consent.
A holdover tenant, who obtains the landlord’s consent to holdover, will be considered a tenant at will (likely a month-to-month tenant if rent was paid in monthly installments) subject to the same terms and conditions set forth in the lease including any rental amount applicable to such holdover period (commercial leases often provide for an increased rental amount, such as 150% to 200% of the prior rent, during a holdover period). As such, the only liability of a holdover tenant who obtains the landlord’s consent will be the rental amount (i.e., the holdover rent) owed during any such holdover period. The landlord’s consent to such holdover may be expressed (e.g., written consent) or implied. Consent may be implied if the landlord accepts rent from the holdover tenant at the commencement of the holdover period.
It’s worth noting that the lease may specifically provide that if tenant remains in possession of the premises after the lease expires without the landlord’s consent, then tenant will be considered a tenant at will or a month-to-month tenant rather than a trespasser (being deemed a trespasser is discussed below). Therefore, if tenant does not obtain the landlord’s consent to holdover it will still be considered a tenant at will or month-to-month tenant pursuant to the lease and will only liable for the holdover rent during the holdover period.
Without any provision in the lease to the contrary, a holdover tenant, who does not obtain the landlord’s consent to holdover, may be considered by the landlord as a trespasser. A holdover tenant, who is considered a trespasser, will be liable to the landlord for the fair rental value of the premises as well and any other damages that the landlord can recover from the holdover tenant (e.g., loss of a new tenant). Additionally, if the landlord entered into a new lease with another tenant for the premises, then the holdover tenant having knowledge of such new tenant, may also be liable to the new tenant for damages for loss of use of the premises. Lastly, if the lease includes an indemnification provision, which most commercial leases will certainly include, the holdover tenant may have to indemnify the landlord from claims arising against the landlord resulting from tenant’s wrongful holdover (e.g., claim by the new tenant against the landlord for its failure to deliver the premises as set forth in the new lease).
If a holdover tenant continues to trespass, then the landlord will likely have to initiate a special court proceeding known as an unlawful detainer action to evict the holdover tenant as the landlord cannot use self-help to evict the holdover tenant (e.g., changing locks and removing tenant’s belongings). If the court rules in favor of the landlord, then it will issue a writ of possession, which orders the sheriff to remove the tenant from the premises, but will give the holdover tenant five days to move voluntarily. If the lease provides for an attorneys’ fees clause, then the wrongful holdover tenant will be liable to the landlord for all damages as well as its attorneys’ fees.
In conclusion, a tenant who remains in possession of the premises after the lease expires with the landlord’s consent will only be responsible for the holdover rent (likely an increased rental amount during the holdover period), while a tenant who remains in possession of the premises after the lease expires without the landlord’s consent will likely expose itself to a range of liabilities, including damages sustained by the landlord (such as rent, lost tenant), the landlord’s attorneys’ fees, and possible damages incurred by the landlord’s new tenant.
Please Note: This document does not constitute legal advice. Please consult an attorney for legal advice on what to do in a particular situation.