Holdover

Holdover

Holdover refers to a tenant that occupies the premises after the conclusion of their lease without the permission of the landlord. Many leases state that if a tenant holds over, they will have to pay twice the rental cost. Technically, the holdover tenant is a trespasser. A tenant that holds over is also subject to a lawsuit for eviction. Often leases allow a victorious landlord to get attorney fees.

This can be important when businesses are seeking to move. Many leases require a build-out; the process by which the landlord builds out the space so that it is suitable for the new tenant. For instance, a law firm’s layout would be different than an architect’s office. It takes time to complete a build-out, and often there are delays. A tenant moving into a new space might be told a week before moving day that the new space is not ready, but the existing landlord might be waiting for you to move out so they can begin a buildout for the new tenant.

The matter can get more complicated and costly if the tenant holds over and the landlord is impeded from meeting their build-out obligations to their new tenant, either losing the new tenant or incurring damages to the new tenant for the delay.  Depending on the lease provisions, the holdover tenant might have to indemnify their landlord for damages they sustained to their new tenant or for the loss of that tenant.

The soon to be ex-landlord has all the leverage in that situation. Make sure there is no chance for a delay in getting into a new space or talk to your landlord early about getting a short extension.

Good Communication Can Reduce Risks

There have been cases where a tenant substantially moved out but left some equipment in the space, and the landlord charged holdover rent, arguing that the tenant was still occupying the premises. Good communication and documentation can reduce this risk. Warn the landlord if something is not going to be removed along with everything else and decide what to do about it. Even if you do not like the landlord’s response (“Remove it on time at your expense”), it is better to know what it is than get ambushed with a holdover charge.