What is a Holdover Tenant?

Navigating tenant relationships is a vital part of your business, whether you’re an individual landlord or a property manager in a bigger company.

One situation that can surface is dealing with a holdover tenant. Knowing what a holdover tenant is, how it can impact your rental unit, and how to handle this type of situation is crucial to maintaining control professionally and reducing the chances of possible legal or financial risks. 

What is a holdover tenant? 

A holdover tenant is a person who stays in the rental property after their lease expires without renewing it or signing a new agreement.

In this situation, the renter continues to live in the unit past the lease term. However, the landlord hasn’t given specific permission for them to stay. Basically, the renter’s right to remain in the property has ended, but they haven’t vacated the premises.

Holdover tenants can lead to a gray area related to property rights, and property managers and landlords must tackle this scenario with a clear understanding of proper procedures and local laws to minimize any potential issues.

Common reasons why tenants stay on the property

 Here are some common reasons why renters may stay on your property as holdover tenants:

Difficulty finding a new place to live. One common reason renters may overstay their lease is trouble finding another rental unit. Some people may find it difficult to land a suitable new rental in time due to financial constraints or a competitive housing market.

Bad planning. In some cases, renters simply don’t plan their move carefully. They may not start their search for a new place early enough or miscalculate the time needed to pack, move, and prepare for relocating.

Financial issues. Unanticipated financial troubles, like job loss, health expenses, or other emergencies, may make it challenging for renters to move out. They may simply not have the resources for a security deposit on a new unit or handle overlapping rent payments.

Confusion about the lease. In some scenarios, tenants may be unsure about the terms of their lease—they may not actually realize that the lease has ended or misinterpret the end results of not renewing or leaving the property.  

Waiting to move into a new place. If the renter recently purchased a new home or signed a lease somewhere else, but there are delays like closing the sale, renovations, or availability, they may need temporary housing past the original lease term. Renters in this position may stay as holdovers until their new place is move-in ready.

Unwilling to move. Those tenants who are comfortable in your rental unit might be hesitant to move, even if the lease has come to an end. Some people may try to overstay, hoping that you’ll agree to let them stay, either monthly or by renewing the lease.

Issues with the move. Moving logistics, such as scheduling movers or coordinating storage options, can lead to delays. If renters are unable to coordinate their move-out due to timing issues, they could end up living in the rental unit longer than intended.

Holdover tenant rights

Even if a tenant has overstayed their lease, it’s important to understand that they still have certain legal rights. Make sure to familiarize yourself with these rights to steer clear of legal repercussions. If they continue to pay rent and you accept it, for example, you could establish a month-to-month lease by default. 

How to deal with holdover tenants

There are a few key factors landlords should consider when dealing with a holdover tenant. Here’s a glance at what you need to know:

As a property manager or landlord, you typically have two choices when dealing with a holdover tenant:

Accept the holdover tenant. If the renter is reliable and your relationship has been positive, you may opt to let them stay and continue renting as part of a monthly lease.

Start eviction proceedings. If you don’t want your renter to stay or would like a new tenant, you may need to begin eviction proceedings. Before proceeding, it’s essential to follow the right legal process, which typically includes sending a written notice to vacate the premises.

Pay attention to local laws and regulations

It’s no surprise that local laws can vary regarding handling holdover tenants. In some areas, landlords have the right to charge higher rent or start eviction proceedings right away – while in other locales, you must present specific notices before you can act. Make sure you fully comprehend the legal landscape in your geographic location, as it could determine the timing and options available.

Holdover rent

Property managers and landlords are entitled to charge a higher rent for holdover tenants in many geographic areas. The increase, designed to compensate for the inconvenience and possible financial loss caused by an unauthorized extension of the tenant’s stay, may be set at a percentage above the original rental amount or market value.

Steps to follow

Communicate early. Have a conversation about lease renewal with renters ahead of the expiration date to prevent a holdover scenario. Proactive communication can help shed light on whether your tenant plans to move or renew their lease. If they want to stay, now is the time to work out a new lease agreement. If not, be sure to remind them of their obligation to move out by the lease’s end.

Send a notice to vacate. If you find yourself in a holdover tenant situation, the first step is to send a formal notice to vacate, specifying a timeframe for the renter to vacate the rental unit. It may be as short as three days in some locations, while in others, it could extend to 30 days or more.

Consider negotiating. In situations where the renter is willing but unable to move out in a timely manner, you might consider negotiation. Perhaps offer them a lease extension under specific conditions, like an agreed-upon short-term lease or short-term rent increase.

Initiate eviction if necessary. You can start eviction proceedings if the tenant refuses to leave after the notice period. This is usually the final course of action because eviction can be expensive and time-consuming (learn how to prevent evictions here). Be sure to follow all legal steps to avoid possible claims of wrongful eviction, including filing an eviction lawsuit, attending a court hearing and getting a court order for tenant removal if they are refusing to leave.

How long does it take to evict a holdover tenant?

The time it takes to evict a holdover tenant is based on numerous factors, such as the jurisdiction, specific eviction procedures and whether the renter decides to dispute the eviction. 

The entire process, starting from the notice to vacate to the physical removal of the renter, can take anywhere from four to 10 weeks. And in cases where a tenant contests the eviction or appeals the court decision, it can take even longer. Read our blog post on speeding up evictions if you find it taking longer than the average timeframe.

How to avoid holdover tenants

To minimize the risk of holdover tenants, you can implement several proactive measures, such as:

Use clear language in your lease. Ensure that your lease agreement clearly states what happens if a renter stays past the lease term, highlighting obligations for penalties or holdover rent.

Advance notice for renewals. Send tenants reminders about lease renewals (or terminations) well in advance of the lease expiration date. This can give both you and the renter plenty of time to make necessary arrangements.

Regular check-ins. Maintain regular communication with your renters, especially toward the end of the lease. This can help you determine their intentions and ensure a smoother transition.

Final Thoughts

Many property managers and landlords face the challenge of dealing with a holdover tenant.  However, with the right approach, it can be more manageable. 

Understanding the legal process, communicating early with renters, and acting in a timely manner can help you better navigate this situation effectively.  

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