When a fixed term lease expires, a tenant can continue occupying the premises if the landlord agrees. This is called ‘holding over’ or ‘overholding’. Most commercial and retail leases will contain a clause which refers to what happens if a tenant remains on the premises after the term ends. In these circumstances, your tenancy will be ‘held over’ on a monthly basis meaning either party can terminate the lease within one month’s notice.
Why Hold Over?
Both the landlord and tenant may want to hold over the lease for various reasons.
|No option term||If there is no option to renew the lease, holding over allows the tenant to stay on after a fixed term expires.|
|Negotiations for the renewal have not yet concluded||Where there is no option to renew, holding over allows the lease to continue while parties negotiate a new lease.|
|No commitment||A short term holding over arrangement means the tenant does not need to commit to a long lease and the landlord has flexibility if they need to remodel or demolish the premises.|
|Failure of the tenant to meet obligations under the lease/default||Usually, the tenant decides to remain in the premises and hold over the lease. In certain circumstances, however, the lease may contain provisions that allow the landlord to convert the lease to a monthly lease after a breach. The landlord may then force the tenant to hold over the lease.|
What are the Tenant’s Rights and Obligations?
Although it depends on the specific terms of the lease, in general, a tenant is expected to observe the same obligations as under a fixed term when holding over. This includes any obligations to:
- keep and maintain the premises in good repair and condition,
- continue all payments (including rent), and
- make good the premises before leaving.
The lease will address rent during the holding over period. Some leases provide that the rent will continue on the same basis as immediately before the commencement of the holding over period and other leases provide for an increase at the time a holding over term begins. Importantly, the landlord will retain discretion during any holding over period as to rent.
Terminating the Lease During Holding Over
It’s common for a lease to provide that either the tenant or the landlord will have the right to terminate a holding over period by providing notice to the other. The notice period is typically one month but can be as little as seven days. Neither party must provide a reason for termination.
If you have any questions about holding over your lease or need assistance reviewing your lease, get in touch with our specialist commercial leasing lawyers on 1300 544 755.
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