Building a successful property management business means becoming well-versed in various scenarios that non-landlords rarely have to consider. For example, most people assume that tenants always move out once their lease expires – but that’s not always the case.
Enter: the holdover tenant.
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What is a Holdover Tenant?
A holdover tenant is a renter who remains in a unit after the expiration of the lease. If you elect to keep accepting rent payments, the holdover tenant can continue to legally occupy your rental property, and federal and state laws will determine the length of that tenant’s new rental term. In some cases, the original lease will convert to month-to-month tenancy.
However, it may not work for you to have the tenant stay. In that case, do not accept any monthly rent payments. Per Investopedia, “if the landlord does not accept further rent payments, the tenant is considered to be trespassing, and if they do not promptly move out, an eviction may be necessary.”
We’ve discussed the eviction process before, but let’s walk through what you would need to do if you suspect holdover tenancy is imminent.
Setting Up Eviction Proceedings: A Crash Course
Before the end of the lease, your tenant should have either elected to sign a new rental agreement or provided a notice of termination to end their relationship with you. Most states require either the landlord or the tenant to provide a minimum amount of notice regarding their plans post-contract. If your state doesn’t outline a minimum notice, we recommend touching base with your tenant at least 90 days before your written lease expires.
If the lease agreement ends and you don’t know your tenant’s next move, reach out to them. Are they planning to vacate the property on your established date, or are they interested in renewing their lease?
Let’s say your tenant doesn’t respond to your reach-out attempts or doesn’t have an answer about when they’ll leave; your next step is to serve them with a notice of termination yourself.
Typically, a notice of termination will detail:
- The reason for the termination
- The date that the renter must move
- The consequences if the tenant doesn’t comply by the date listed (usually legal action)
The requirements for this notice vary state by state, so seek out legal advice as needed.
Once you’ve provided written notice to terminate your rental agreement, your local landlord-tenant laws will dictate when you can initiate holdover proceedings. Investopedia says a holdover proceeding is “an eviction case that is not based on missed rent payments. This is a process that is usually handled in eviction or small claims courts.”
The notice itself may be enough to prompt your tenant to act. If it isn’t and you experience nonpayment of rent, either reach out to a real estate attorney or contact your local eviction court for more information about setting up a court date. Once you have a court date established, the eviction proceedings can begin. But be warned – it can be a costly experience.
Holdover Tenant Rights
Despite the fact that you may want the tenant out immediately, you can’t take any action to evict them outside of the allowable, legal means outlined in your state and local eviction laws. In other words, a self-help eviction is never the way to go in these situations, as even holdover tenants have rights.
However, you don’t have to simply accept a holdover tenant forever, particularly since they’re no longer bound to a lease agreement. Instead, holdover tenants engage in tenancy at sufferance, which Cornell Law School defines as being created “when a tenant wrongfully holds over past the end of the durational period of the tenancy (for example, a tenant who stays past the expiration of their lease). In this case, the landlord can hold over the tenant to a new tenancy, and collect rent for the period the tenant has held over.”
So, while you’ll need to follow your state’s guidelines for evictions if a proper notice doesn’t encourage your holdover tenant to leave, you could potentially collect (or sue to collect) rent for the holdover period.
How to Avoid Holdover Tenants
Prevention is the name of the game when it comes to avoiding holdover tenants. We’ll detail the steps you should take both before and after the lease is signed.
Before the Lease is Signed
- Clearly detail what will happen when the original lease expires. Landlords usually allow long-term leases to become month-to-month arrangements if a new long-term lease hasn’t been signed before the original contract ends.
- Highlight how much notice your tenant will need to give you if they want to renew their lease and how much notice you’ll expect if they choose not to renew their lease. Many states require renters to give 90-120 days notice before the lease ends, so align your request with your local laws.
- If your local landlord-tenant laws allow it, outline the consequences of not providing notice to renew or terminate their lease.
If you currently have a tenant under a lease that doesn’t provide this information, consider adding a lease addendum to your existing contract.
After the Lease is Signed
- Reach out to your tenants 90, 60, and 30 days before their “decision” date, aka the day by which they either need to tell you they’d like to renew their lease or that they’d like to move out. Remind them that you need to receive their notice by X date, then tell them the best way to share their decision (via email, TurboTenant message, text, etc.). We recommend getting their notice in writing rather than over the phone or in person, just in case you need the documentation for eviction court.
- Once you know their decision, you either need to set a date to inspect the property for the move-out process or send over an updated lease. If your tenant is on the ball and knows what they’ll do 90 days out from their decision date, simply make yourself a note to follow up two to three weeks before they’re due to move out or start their new lease.
Holdover tenants cause stress and anxiety, but you can set yourself up for smooth sailing by preparing your lease (either before it’s signed or through an addendum) and staying in contact with your tenant as your rental agreement comes to a close. Should you find yourself with a renter who doesn’t want to leave, you can choose to evict them or convert your arrangement to be month to month. Whatever you decide to do, TurboTenant’s all-in-one landlord software can help you feel confident about all your property management decisions.