Understanding Holdover Tenants

Landlords generally fear their tenants will leave while the tenancy is still in effect. Sometimes though, renters can keep occupying the unit after the lease ends. Renters can actually stay long after the lease agreement is over, as long as the landlord allows it.

This period of tenancy is known as a “holdover tenancy” and might negatively impact you and your property.

Defining a Holdover Tenant

A tenant who continues to live in your rental property after the lease ends is called a holdover tenant. If rent payment continues, the tenancy changes to a month-to-month tenancy.

Holdover tenants can stay on without legal repercussions if the landlord approves of the arrangement and doesn’t take any steps to evict the tenant or make them move out.

The cream interior of an investment property’s living room is pictured, with a long gray couch, wooden shelves and clocks on the wall.

A holdover tenant might also be called a “tenant at sufferance,” which simply means that the tenant continues to occupy the rental unit as it’s tolerated by the landlord.

Potential Issues Holdover Tenants Pose

Even if it seems like having a holdover tenant is a good idea, it can be risky. Since the renter is staying on as is allowed by the landlord, this loose arrangement can create some issues.

Some issues holdover tenants might pose include:

Eviction Complications

If you’re going to perform an eviction procedure, you need to make sure you adhere to your local jurisdiction. It’s important to note that the eviction process differs for holdover tenants.

It’s best to review your state laws before taking steps on managing any landlord-tenant conflicts in regards to a holdover tenant.

Last Minute Property Vacancies and Financial Loss

Given that removing a holdover tenant can be considerably tough, you can’t control when the tenant leaves. You might be faced with a sudden vacancy to fill, which will cost you time and resources.

Increased Damage to Your Property

If you have a set schedule for property maintenance or renovations after the tenancy expires, you might have to wait until the tenant leaves to perform it. If a tenant decides to stay after the lease ends, this might mean facing a greater risk of property damage.

Limits on Rental Increases

There might be restrictions around increasing rental fees when you have holdover tenants, which can limit your return on investment or ROI.

How to Deal With a Holdover Tenant

You can handle a holdover tenant in one of two ways:

Allow the Tenant to Stay

When you let a renter continue to occupy your rental unit and pocket their rent each month, evicting them based on holdover is out of the question.

Evict the Tenant

Common reasons for evicting a tenant include tenants missing rent payments or being guilty of a crime. Since a holdover tenancy is on a month-to-month basis, you’ll need to serve a 30-day eviction notice to inform the renter they need to leave the premises.

A landlord signs an eviction notice with a black and gold pen, where the paper has ‘eviction notice’ in red capital letters stamped onto it.

In several states, the laws stipulate that landlords are locked in with the choice they make. There are also other ways to remove a renter besides eviction. However a landlord decides to move forward with removing a holdover tenant, they always need to double-check they’re not violating the holdover state laws.

It’s also recommended to schedule a consultation with a lawyer familiar with holdover laws to protect your interests and ensure that you adhere to current regulations.

How to Avoid a Holdover Tenancy

If you’re able, it’s advisable to not entertain a holdover tenancy so you won’t have to make any changes to your rental business procedures.

Inform your renter at least 60 days prior to the end of the tenancy that the lease is due to expire in the form of a move-out letter. You can also send another reminder when the expiry date is closer, so your renters will know the requirements for moving out of your rental unit.

If the tenant continues to stay on after the last day of the lease term, you can refuse the rent payment they hand out to you. Accepting rent would mean the tenancy is now converted into a month-to-month tenancy.

A landlord in a dark suit sits at a wood desk and gestures to refuse money from a tenant whose lease has ended.

You would no longer have the option of treating them as a trespasser and proceeding with an eviction. Until a signed lease renewal is available, no rent money should be accepted from your current tenant to prevent encountering restrictions.

Defining a Periodic Tenancy

You might also hear the words ‘periodic tenancy’ in discussions about holdover tenants. A periodic tenancy means a tenancy with no clear end date or fixed lease term.

The length of a periodic tenancy will depend on the agreed “period” of time or the rent payment period. For instance, if the tenant pays the rent each week, it means the periodic tenancy is on a weekly basis.

Bottom Line: Holdover Tenants

Should your tenants continue to occupy the rental unit after the leasing term expires, we suggest assessing whether this new situation is favorable for you and your rental business.

If you have a difficult relationship with the tenant, it’s best not to accept the rent payment when the tenancy ends so you have the choice to evict them.

If you have cultivated a great landlord-tenant relationship however, you might decide to let the renter stay on. You can choose between permitting a month-to-month tenancy or asking them to renew the lease and sign a new contract with you.

Remember that once you accept rent from your tenant after the lease ends, you need to send a notice period that would match the rent payment period before you’re allowed to evict the tenant.

You can also include a clause in your rental agreement that contains specific terms and conditions surrounding a holdover tenancy. This can reduce any future conflicts with the renter.

If you’re looking for a property manager to help you manage holdover tenants, as well as provide other vital property management services, contact Gifford Properties & Management today! You can reach us by dialing (888) 870-5070.

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