Holdover Clauses in a Lease From the Landlord’s and Tenant’s Perspectives

Concerning holdover rental provisions, from a landlord’s perspective, the language should provide that if the tenant holds over its possession after the expiration or earlier termination of the original term, or any extended term, such holding over shall not be deemed to extend the term or renew the lease. However, any such hold over thereafter shall continue upon the covenants and conditions set forth in the lease, except that the charge for use and occupancy of such holding over for each calendar month or part thereof shall be the sum of 1/12 of the highest annual rent rate set forth in the lease, times 200% to 300%, plus all other additional rent due under the lease.

Tenants should at least attempt to make sure that they secure language which allows the holdover percentage to be 125% to 150% for the first 30 to 60 days of the lease. From a tenant’s perspective, if given a choice between being stuck with either an indemnity or rental penalty provision, that, choosing the rental penalty provision is more prudent. A landlord should be entitled to be compensated as a consequence of its tenant’s holdover. The goal on behalf of the tenant is to (a) remove the holdover indemnity language if the landlord is savvy enough to have it contained in the lease; and (b) ultimately agree to pay one and one-half, and if necessary, two times, the last rental called for in the lease. If the landlord insists on having two times or even three times the last rental provision, a tenant should request a carve out that allows it to pay “only” one and one-half times for the first two months of the holdover before graduating to penalty valued at two or three times the monthly rent.