Holdover: Overview, definition, and example
What is holdover?
A holdover refers to a situation in which a tenant remains in possession of a property after the expiration or termination of a lease agreement. The tenant continues to occupy the property without a new lease in place, often on a month-to-month basis, and the landlord may continue to accept rent payments. Holdover can occur either with the landlord's consent or without it, and it may lead to renegotiation of the lease terms or even eviction.
For example, if a tenant's lease ends, but they remain in the apartment and continue to pay rent, they are considered to be in a holdover situation.
Why is holdover important?
Holdover is important because it addresses the legal implications and responsibilities of both the tenant and the landlord when a lease term ends but the tenant continues to occupy the property. It helps ensure that the landlord is protected from the tenant staying without proper agreement or arrangement, and it sets expectations for continued rent payments and property usage.
For businesses and property owners, understanding holdover clauses in lease agreements helps ensure clarity and avoid disputes when a lease term expires. For tenants, it can provide flexibility while also highlighting the risks of staying beyond the lease agreement without a formal extension.
Understanding holdover through an example
Imagine a commercial tenant who leases office space for a year. The lease expires, but the tenant continues to occupy the space for an additional two months without signing a new lease agreement. The landlord accepts rent payments but is uncertain about whether they will continue to lease the property or seek a new tenant. This holdover period allows the tenant to remain in the space while the landlord decides on the next steps.
In another example, a residential tenant has a lease for a one-year apartment rental. After the lease expires, the tenant does not vacate the apartment and continues paying rent. The landlord then must decide whether to negotiate a new lease or evict the tenant, depending on the holdover terms outlined in the lease agreement.
Example of a holdover clause
Here's an example of how a holdover clause may look like in a contract:
"If the Tenant remains in possession of the premises after the expiration of the lease term without the Landlord’s consent, the Tenant shall be considered a holdover tenant and shall pay rent at a rate of [X]% above the original rent for the holdover period. The Tenant agrees to vacate the premises upon notice from the Landlord."
Conclusion
Holdover refers to the situation where a tenant remains in the property after the lease term ends. It is important to define the terms of a holdover period in lease agreements to avoid confusion and ensure that both the tenant and landlord are clear on their obligations, including the continuation of payments or potential eviction. Having a holdover clause in a lease agreement helps protect both parties and sets clear expectations in case a tenant stays beyond the lease term.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.