Glossary / Lease terms and deal stages
Also known as: Holdover, holding over, tenant at sufferance
A holdover tenant is a tenant that stays in its space after the lease term expires without signing a new lease. Leases often charge a higher holdover rent, and a holdover can delay the move-in of the next tenant, which can affect when a broker on that deal is paid.
Cornell LII defines a holdover tenant as "a renter staying in the property after their lease terminates without signing a new lease." The landlord can pursue eviction or bind the tenant to a new tenancy, and LII notes that accepting rent after expiration can renew the lease in many jurisdictions. Rules vary by state.
Leases usually set holdover rent above the expiring rent. In an Illinois Lawyer Now article, attorney James Moorhead writes that landlords commonly ask for 200% of base rent and that a diligent tenant can often negotiate it to 125% to 150%. A Mondaq article notes that Florida law lets landlords demand double the monthly rent from a holdover tenant.
Holdover rent is usually not commissionable. A Grubb & Ellis commission agreement excluded "rentals payable upon continuation of a tenancy on a month-to-month, or statutory, or holdover basis" from its commission base.
A holdover also affects timing for the next deal. If a new tenant cannot take possession until the holdover tenant leaves, the Lease commencement date may slip. If your agreement ties an installment to commencement or occupancy, your payment can slip with it. For a renewal, a tenant that holds over instead of signing an extension may delay any renewal commission.
If you are working on the replacement deal, ask the landlord early whether the current tenant has given notice to vacate, and build any possible delay into your own cash flow plan.
If your new deal depends on an existing tenant leaving, track the holdover risk because it can move your commencement-based payment.
