If you’re an independent rental property owner who isn’t good with documentation, you can end up with a holdover tenant situation that works for both parties indefinitely. On the other hand, you may find yourself in a bind, unable to renovate the property or raise the rent because the holdover tenant refuses to go. Furthermore, as a buyer, you may inherit a holdover tenant, which could result in either a great position or a costly eviction. In this article, we’ll you’ll discover the rights of a holdover tenant and how to evict them.
What is a Holdover Tenant?
To determine if this type of tenant is beneficial or harmful, you must first understand how they came to exist. Simply put, a holdover tenant is someone who does not have a current lease yet continues to dwell in a rental apartment with no stated lease terms. They may not want to sign a new lease, or they may be completely content to do so if the landlord sends it to them. They could be striving to prevent a rent rise, or they could be paying fair market rent gladly every month, with no need for reminders. Also, they may believe they have a month-to-month lease when, in fact, they do not because the landlord did not include such a stipulation in the initial contract.
There’s a lot of information online on how to evict a holdover tenant – or how to get rid of one without evicting – yet many landlords have no issues with holdover tenants at all. They have, in reality, caused the problem. Have you done so?
What causes a Tenant to be a Holdover?
When a lease expires and no one bothers to renew it, you have a holdover tenant. For the tenant, it may appear to be a casual month-to-month arrangement. Obviously, this can be excellent for some tenants who intend to move at a later date. For landlords, however, it is not the same as a month-to-month arrangement because that should also be covered by a lease.
The issue with holdover renters is that they are not technically bound by any legal contract, so in the worst-case situation, they can become a liability by causing damage to the property, paying less rent than expected, bringing in unapproved pets, or any number of other things. While the landlord who allowed them to reach this level may turn a blind eye, others, such as the HOA, the building manager, or, especially, a buyer, may feel very differently. When there is no written lease agreement defining someone’s right to occupy someone else’s property, neither side is at ease.
However, and this is critical, as long as you collect rent from the tenant, they are legally permitted to be present. Accepting a month’s rent with no lease in several states results in a renewal of the prior lease terms. In others, it results in a periodic tenancy.
Is a Holdover Tenant Entitled to Rights?
Yes. If a lease ends and a tenant stays, it might be because the landlord stated they could, the lease is not renewed, and both sides agree on a monthly rent. It is illegal to accept rent without a lease. In this circumstance, the landlord may find himself in hot water. In a court of law, it is difficult to evict a holdover tenant who has been paying rent to the landlord.
It is illegal for a landlord to continue collecting rent after the lease has expired. If a landlord wants a tenant to continue renting, he or she should always renew the lease, even if it is on a month-to-month basis.
Only after delivering a notice of action on the holdover tenant can a landlord initiate eviction proceedings.
NOTE – Notices of action or proceedings differ from state to state, therefore you should consult an attorney about your state’s rules.
How Long Can A Tenant Stay After Their Lease Is Up?
New landlords who find themselves in a holdover scenario may ask how long a tenant can stay after the lease expires. This is usually done in the belief that the matter will resolve itself rather than taking any specific action.
Most states will recognize the tenant as having a tenancy equal to the rent payment period if the landlord continues to collect rent from holdover tenants without signing a new contract. For example, if a landlord receives rent from a tenant on the first of every month even after the term has expired, the tenant is often considered to be on a month-to-month lease.
In this case, either the landlord or the tenant may terminate the agreement with one month’s notice.
The duration of notice required to end such an arrangement is usually the length of the rent payment period. For example, if the rent is paid once a month, the landlord must provide the tenant with at least one month’s notice to vacate before the tenant is anticipated to move out. Most states demand that notice be given at least one year in advance if the rent is paid in a single yearly “lump payment.”
What Can I Do With a Holdover Tenant?
When you have a holdover tenant, it might be difficult to determine what to do next. It is critical to be aware of all of your options and to move fast so that you do not inadvertently end up in a more complicated scenario. So, if a tenant does not vacate at the conclusion of a contract, consider your main three possibilities.
Option 1: Allow the tenant to stay.
When a tenant does not depart at the end of their lease, the first thing you can do is let them stay at the property. You agree to this tenancy by continuing to accept their monthly rent.
Because there is no defined end date for the unwritten agreement, this may be regarded as a periodic tenancy or a month-to-month tenancy depending on your initial lease terms and local legislation. If your original lease did not contain such wording, it may be in your best interest to sign a new lease rather than remain in limbo.
Once you accept rent from a holdover tenant, you will no longer be able to evict them for failing to pay their rent on time. Accept no rent from a tenant until you are certain that you are happy with them living at the property for an extended period of time.
Option 2: Evict a Holdover Tenant
If you do not want the tenant to remain at the property but they continue to do so, it is time to file a holdover tenant eviction. The holdover tenant is viewed as a trespasser on your property during the eviction procedure in this type of eviction.
Accept no rent from tenants who overstay their welcome, as this can complicate eviction proceedings. Instead, refuse to accept rent and then serve an eviction notice for nonpayment of rent or for violating the lease conditions by overstaying tenure.
Following that, you must proceed with eviction proceedings in accordance with the norms and regulations of your local court system. You will be able to have the tenants removed from your rental property once you have obtained a favorable holdover tenant eviction judgment.
Option 3: Cancel the lease agreement.
If the tenant is overstaying the lease yet the lease agreement or local regulations allow for some length of holdover, you should cancel the lease. In most states, you can do so by giving a notice term equal to the rent payment period.
The tenant will have that amount of time to quit the property once they receive notice. If they don’t leave after the lease is formally canceled, you’ll have to file an eviction suit to retake ownership of the property.
Make a wise decision.
As previously said, you have several possibilities. Which approach is ideal for your business and rental properties will be determined by a variety of criteria. Before you do any of these measures, make sure you’re certain about your decision.
In most countries, landlords are obligated to choose whichever option they want. This implies you won’t be able to alter your mind and file for eviction as soon as you accept rent from a tenant. Take the time to flesh out your strategy before acting; you’ll be better off if you’re properly prepared.
How Can I Avoid Accepting a Holdover Term?
The simplest method to prevent inadvertently committing to a holdover term is to refuse to take any rent payment after the lease expiration date unless it is a payment for rent owed under the lease (for instance, payment for back rent).
If the lease expires on December 31, for example, the landlord should not accept a rent payment from a holdover tenant for January of the following year unless a new contract is negotiated.
Accepting rent indicates that the landlord is willing to switch the lease to a month-to-month or comparable arrangement.
Another thing you can do to avoid ending up in this situation by accident is to make sure your lease terms are very explicit about what will happen at the conclusion of the tenancy period. Some contracts include terminology that changes a lease into a month-to-month arrangement automatically. Whatever the contract states, be sure it is clear and aligns with what you want to happen if a tenant breaches their lease.
Clarity is essential at every level of the lease process, and that clarity may be quite beneficial if a tenant overstays their welcome. Ensure that your lease is kept up to date with the terms that are most appropriate for your needs.
When Purchasing, Exercise Caution
Are you thinking about investing in a rental property that already has tenants? It is critical to take some safeguards in this circumstance to avoid mistakenly taking on holdover tenants.
You should do more than simply inquire about the lease type from the existing owner. As previously said, landlords frequently use different terms to express the same thing, which can lead to confusion about what is really going on at the property. Rather than simply asking, it is preferable to obtain written information from all parties concerned.
You can specifically request that the seller’s agent have tenants sign an Estoppel Agreement. This agreement is a rental information declaration that will tell you of the lease terms, rent amount, and any additional agreements that the tenant believes are in existence.
Obtaining this information from the tenant before purchasing the property is a fantastic approach to acquiring a better understanding of the property’s condition, but tenants are not compelled to complete this disclosure. Some may not be on a lease or believe they are not compelled to reveal this information.
If a tenant refuses to sign an estoppel agreement, you should reconsider investing in this property because it could be a symptom of a tough landlord-tenant relationship. Before buying, at the very least, request documents of the lease that you will be taking over from the existing owner. This ensures that you will not be a holdover.
The simplest strategy for a landlord to avoid holdover tenants is to contact them 60 days before their lease expiration date. Check to discover if they intend to renew or leave. If they intend to stay, the landlord may request that they sign a lease renewal. If they want to leave, the landlord will have more time to find a replacement tenant.
Holdover Tenant FAQs
What does holding over a lease mean?
A tenant who continues to occupy its rented premises after the lease term has expired. Tenant holdover penalties are frequently imposed in leases.
Can a landlord evict you for no reason?
However, if you do not have a fixed-term tenancy, the landlord might ask you to leave without giving you a reason during the first six months. They must provide a valid written notice of termination, with a minimum notice period of 28 days.
What is an estate from period to period?
An estate from period to period (or periodic tenancy) is one that lasts for the length of time specified by the landlord and tenant in their agreement (usually year to year, month to month, or week to week). The month-to-month tenancy is the most prevalent periodic tenancy.