Most tenancies go as planned; when the lease period ends, the majority of tenants either choose to move out or sign on for another year. In some cases, though, you may have a tenant who chooses to remain in the rental beyond the official tenancy period—also known as a “holdover tenant.”
Understandably, having a holdover tenant can be a stressful and complicated situation. Read on to learn more about this unique situation and what your options are.
What is a Holdover Tenant?
A holdover tenant is defined as a tenant who stays at a rental property after their lease has expired and without the landlord’s explicit permission. Typically, a holdover tenant can remain on the property legally as long as the landlord doesn’t take steps to remove them. However, like most landlord-tenant laws, how the tenancy is defined can vary from state to state.
Holdover tenants are often confused with “tenancy at will” and “periodic tenancies;” although these terms are often used interchangeably, there is legal differentiation between them.
With a tenancy at will, the landlord agrees to allow the tenant to remain on the property after the end of the lease. The tenant or landlord can dissolve the agreement at any time and need only to follow their state laws on the process. Similarly, a periodic tenancy is a type of ongoing tenancy with no set end date. The lease continues to be in effect until both parties agree to end it. This type of lease agreement is usually decided on once the initial lease period ends.
Holdover situations generally occur when a lease expires and the landlord doesn’t have the tenant sign a new one. The important thing to understand is that although the expired lease terms may roll over month-to-month (depending on your state and local laws), you may not have the same protections for your property as when you had an official lease agreement.
Although the holdover period can be welcome to some tenants because of the flexibility, you should have a signed lease for every rental you own. Without an active lease outlining the rules of the tenancy, the tenant could become a liability or start causing problems, like adopting unapproved pets or failing to pay rent. These issues could be difficult to resolve without an official lease.
How Long Can a Holdover Tenant Stay at the Property?
If you end up with a holdover tenant, how long can they stay after the lease expires? This depends on whether you are continuing to collect rent from them. Most states recognize the tenancy as being equal to the rent payment period. So, if you collect rent from the tenant on the first of the month, even after the lease has expired, most states would see this as a month-to-month tenancy.
The notice to terminate a holdover tenancy generally must be the length of the rent payment period. In the above example, either you or the tenant could agree to terminate the tenancy with one month’s notice. If the rent was paid in one yearly lump sum, most states would require you to give the tenant notice at least one year in advance.
Your Options for Handling Holdover Tenants
Fortunately, you do have several options when it comes to holdover tenants:
- Let the Tenant Stay
One option you have with a holdover tenant is to let them stay on the property. All you need to do agree to this is continue to accept their monthly rent payments. Depending on the original terms of the lease (and your local laws), the tenancy may actually be considered a periodic or month-to-month tenancy. Check your original lease; if there’s no set end date for such an agreement, it may be best to have the tenant sign a new lease.
Keep in mind that once you’ve accepted rent from the tenant, the tenancy is seen as an official agreement, and you won’t be able to evict them for staying past the lease period. If you’re not sure you want a tenant to continue staying at your property, don’t accept any rent from them until you’ve had time to make a decision.
- Eviction
If you don’t want the tenant to stay at your property, eviction is another option. In a holdover tenant eviction, the tenant is essentially treated as a trespasser. If you choose to evict the tenant, though, make sure you don’t accept any rent payments from them, as this could make the eviction process more complicated.
If the tenant tries to pay rent, refuse to accept it. Then, send a notice to vacate for either nonpayment of rent or for violating the terms of the lease. After you’ve done that, you’ll need to follow the process laid out by your local court system.
- Terminate the Lease Agreement
If your tenant stays at the property past the end date of the lease but the lease agreement or local laws allow for a holdover period, you can officially terminate the lease. Although the process for this can vary based on where your property is located, generally all you’ll need to do is provide the tenant with notice that’s equal to the rent payment period. Once they receive the notice, they’ll have until the designated date to vacate the property. If they continue to live at the property past this date, you’ll need to file for eviction to get them to leave.
Before deciding how to approach a holdover tenant situation, take some time to consider which option is best for your business and rental property. In most jurisdictions, you’ll be bound to your decision. This means that if you accept rent and allow a holdover tenancy, you won’t be able to change your mind and immediately file for an eviction.
Keeping Your Property Protected
As you’ve seen, holdover tenancies can be complicated. However, one of the best ways to avoid stress or confusion is to make sure your lease includes clear terms on what will happen when the lease period ends. For example, you could include a clause stating that the tenancy will automatically convert into a month-to-month agreement at the end of the official lease period. Just be sure that your terms are in line with all applicable state and local laws; if you’re unsure, it’s always a good idea to consult with a local lawyer well-versed in landlord-tenant law.
Whatever you decide, make sure the language in your lease is clear and follows what you would want to happen if you end up with a holdover tenant.
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