Seasoned landlords want to keep their renters on periodic leases, but occasionally you run into a holdout tenant who continues living at the property after the legal tenancy period has ended. This situation can have both positive and negative results.
Find out what a holdover renter is, why these circumstances are special, and what your choices are if you have a tenant who is unwilling to leave after their lease is up in this article.
What Is a Holdover Tenant?
A holdover tenant is an occupant who continues to live on the premises beyond the expiry of their lease and without the owner's explicit consent. A holdover tenancy (also known as a "tenancy at sufferance") may remain in the residence as long as the owner fails to take any concrete measures.
Holdover renters are a typical issue in the property sector, but how they are addressed varies from jurisdiction to jurisdiction due to changes in state regulations. Keep this in mind as you continue reading about holdover tenants.
What Leads to a Holdover Tenant?
Every time a lease ends and you don't have your renters sign a new one, you end up with holdover tenants. Based on state regulations, the expiring lease terms might convert to a month-to-month arrangement; however, this does not entitle you to identical safeguards for your property.
Most renters value the holding period because it permits them to stay in the rental without committing to a long-term lease. Landlords will generally prefer that they sign a new lease as soon as possible. Although this arrangement is similar to a month-to-month rental, it is ideal to always have a tenancy agreement in effect.
Tenants may easily turn into liabilities or cause issues if there isn't an active lease that spells out the conditions of the rental. Whenever you're faced with a lingering tenant, problems like letting in pets without authorization or paying rent improperly can be challenging to settle.
How Long Can a Tenant Stay After the Lease Expires?
This is a question that many new landlords find themselves asking when dealing with their first holdover tenant. Many new landlords wait for the problem to go away on its own rather than taking specific action.
Many states will consider the holdover tenant to have a tenancy for the duration of the rent payment period provided the landlord continues to collect rent from them without drafting a new lease.
For example, when a homeowner begins to collect money from a renter beyond their lease's expiration date usually on the first date of each month, the lessee is usually considered to have a month-to-month tenure.
In this situation, either the owner or the tenant may give one month's formal notice to discontinue the agreement. To terminate such an arrangement, the length of the rent billing cycle is usually acceptable as a notice period. For instance, if the rent is paid monthly, the landlord has to give the tenant notice to vacate at minimum one month before the lease is scheduled to end.
Several problems might arise from a tenant continuing to occupy the rental property after the lease has ended, including:
For holdout renters, the legislation concerning eviction procedures and other initiatives taken in landlord-tenant conflicts are often different. To make sure you are in compliance with local laws, carefully verify your state legislation.
You will be unable to re-rent the apartment to new tenants. When it is challenging for you to locate a new tenant and negotiate a new contract, your tenant can leave.
You may have to put off scheduled property maintenance that is typically done after a tenant vacates. Additionally, while the tenant is still in the rental, there is a chance that they will do more damage to the property.
For the duration of the tenant's stay, and occasionally even longer, restrictions on holdout renters may limit you from increasing the rental rate.
What Action Can I Take with a Holdover Tenant?
It can be challenging to know what to do after encountering a lingering renter. To avoid unintentionally getting yourself into a more complicated position, it's critical to be aware of all of your options and take prompt action. Consider the three options listed below if a tenant doesn't vacate at the end of a lease.
Option 1: Allow the Tenant to Stay
Allowing a renter to remain at the property after their lease expires is the first action you could do. You consent to this tenancy by continuing to accept rent payments.
Since there isn’t a clear exit clause with an implied contract, based on your initial lease conditions and local legislation, this might be treated as a periodic tenancy or a month-to-month lease.
If you receive rent from a holdover renter, you won't be able to ask them to leave for exceeding their lease term again. Until you are certain that you are okay with a tenant paying rent for a longer period of time, do not take any rent from them.
Option 2: Holdover Tenant Eviction
You can also consider a holdover tenant eviction if you don't want the renter staying on the premises. In this kind of eviction, you approach the former tenant as a trespasser while you carry out the eviction procedure.
Accepting rent from renters who stay longer than expected will make it more difficult to enforce an eviction. You must proceed with eviction in accordance with the procedural requirements of your regional judicial process. The tenants might be evicted from your rental property if you receive a favorable eviction judgment.
Option 3: Dissolve the Lease Agreement
You should formally break the lease if the renter is beyond the lease period but the lease agreement or local regulations permit some holdover. In most states, you can do this by giving notice that is equivalent to the time between rent payments.
The tenant will have that much time to vacate the premises after receiving notice. After the lease has been formally canceled, if they still refuse to vacate, you will need to file for an eviction in order to reclaim ownership of the property.
When a holdover first occurs, the main problem for most landlords is that they are unsure of what to do. If you don’t want to deal with the complexities of self-managing your rental property, get the help of a professional property management company.
For the benefit of our clients, Pinnacle Property Management handles every aspect of management, including dealing with holdover tenants or evictions. Most importantly, we pride ourselves on handling each property as though it is our own.