Dealing with Holdover Tenants

Nov. 10, 2022

Usually, landlords are concerned about tenants leaving the rental home before the tenancy term ends. However, there are times when tenants choose to remain at the property even after the rental term has expired. When this happens, the tenant becomes a holdover tenant.

What is a Holdover Tenant?

When a tenant stays in the rental property even after the lease has ended, this is referred to as a holdover tenancy. A holdover tenant is a tenant who remains in the rental home after the lease term expires.

Technically, a holdover tenant is legally allowed to stay at the rental unit as long as the landlord lets them. If the landlord does not take action to remove the tenant, the tenant may continue to pay the rent on a month-to-month basis.

Holdover tenants are also known as “tenants at sufferance” because they are only staying at the property because the landlord does not take legal action against it.

How Can Holdover Tenants Cause Problems?

While holdover tenancy may seem harmless, it can result in a number of issues and disadvantages for you and your rental investment, such as the following:

● Eviction process: Should you decide to take legal action against the holdover tenant, you have to go through the legal eviction process in accordance with your state and local laws.

It’s important to note that laws governing eviction processes may vary for holdover tenants. To stay in compliance with your local jurisdiction, it’s best to check with your state laws.

● Vacancy: If you tolerate a holdover tenant remaining in your property, it may be difficult for you to get rid of them, which makes it also more challenging to control when your property will be vacant.

The holdover tenant could move out at any time they like. This can result in a sudden vacancy which is a disadvantage if you don’t have enough time to prepare to fill it in quickly.

● Damage: The longer the tenant stays at the property, the more likely they will cause more damage to the rental unit. The more damage a tenant causes, the more costly it will be to repair them.

This means that the security deposit may not be sufficient to cover the cost of repair, and you might encounter difficulty collecting the remaining balance from the tenant.

● Move-out maintenance: Usually, landlords schedule a move-out inspection and maintenance on the day after the lease expires. If the tenant refuses to move out of the property when the lease ends, the scheduled maintenance with your contractor may no longer be cancelled or postponed.

● Rent increase restrictions: In some cases, there may be restrictions that may prevent you from raising the rent on holdover tenants. You may not be able to increase the rent while the tenant remains in your property, or sometimes, even longer.

How to Handle a Holdover Tenancy?

If the tenant is generally a good tenant and is paying the rent on time, you may opt to let the tenant stay at your property even after the lease expires. You may continue to collect rent payments as usual.

However, it’s important to remember that if you do this, you won’t be allowed to claim holdover tenancy as grounds for eviction should you want to evict them in the near future.

In most cases, a holdover tenancy is considered a month-to-month tenancy. In order to evict the tenant, you should give them a written notice of eviction. Make sure to check with your local state’s law regarding the number of days of notice for holdover tenants.

Whatever option you choose, it’s important to think it over properly and choose what’s best for your business. In most states, rental property owners are bound to the option that they choose. If you are not sure, it’s best to work with a professional rental property manager to find out what your options are to remove an overstaying tenant while keeping in compliance with the law.

How to Avoid Holdover Tenants

As a landlord, you want to remain on good terms with your tenants. After all, they are your clients and a major source of your income. However, there are times when you have to make tough decisions that may not be in favor of what your tenants want.

If a tenant remains on your rental property even after the end of the lease term, it’s best to have the tenant vacate the premises as soon as possible to avoid holdover tenants.

This way, you don’t have to change any of your business plans (including not having to postpone or cancel your move-out inspection). It’s best to stay on schedule as much as possible so your business proceedings will flow smoothly as planned.

As a landlord, it is part of your duty to remind tenants that their lease will expire at least 60 days before the expiry date. This way, your tenants will have enough time to find another place. In addition, provide them with a list of requirements for move-out.

You can also send another reminder at least two weeks before the end of the tenancy to ensure that they are aware that the end of the lease term is drawing closer.

If the tenant remains at the property even after the end of the lease term, make sure to not tolerate the holdover tenancy. Refuse any rent payment from them because if you do, this will be treated as a month-to-month tenancy. As a result, you won’t be able to evict them based on holdover.

If the tenant is not a problematic tenant, you may ask them if they want to renew the lease instead. It’s best to ask tenants when you send the first reminder of the lease’s expiry date, at least 60 days before the lease ends.

Encourage them to sign the new lease at least a month before the lease term ends. Unless a new lease is signed, make sure not to accept any rent payment from them after the lease term ends.

Bottom Line

If you have a holdover tenant, you’ll want to know how best to handle the situation. Here at Innovative Property Solutions, we want you to have the best experience in property management. Get in touch with us today to find out how we can help!