contract-law rental-property rent
How does a hold-over clause in a lease work?
<p>I'm confused by hold-over clauses as they apply to the rental of a property. What is the intent? </p>

<p>Originally I thought they were so the landlord can increase the rent to a very high amount to put pressure on the tenant to hurry up and move out. Though I sometimes see hold-over where the rent and the lease is the same.</p>

<p>So what's the difference between a hold-over an an auto-renewing lease, or a lease that automatically switches to month-to-month after a certain date?</p>

<p>If a lease clearly indicates that the tenants must vacate the property on a certain date, and they do not do so, this is already a violation of the contract so what's the point of having a holdover clause? </p>

<p>In Canada it's extremely difficult to physically remove a person and their possessions (a judge is required to appoint a bailiff). Out of curiosity, in the US (in places like Texas) is a court order needed to physically remove a person after the lease ends? </p>

<blockquote>
  <p>Originally I thought they were so the landlord can increase the rent
  to a very high amount to put pressure on the tenant to hurry up and
  move out.</p>
</blockquote>

<p>Sometimes this is the intent. </p>

<p>For example, this was the intent the lease from the office I moved out of earlier this month where the holdover clause doubled the rent during a holdover period. In this cases, it provides a less messy and more flexible alternative to an eviction action to get a tenant to leave voluntarily, while compensating a landlord, without court action, when the tenant just can't leave quite on time for some reason like an inability to get movers scheduled by the lease termination date. </p>

<blockquote>
  <p>So what's the difference between a hold-over an an auto-renewing
  lease, or a lease that automatically switches to month-to-month after
  a certain date?</p>
</blockquote>

<p>There isn't a difference. Those are just different varieties of holdover clauses.</p>

<blockquote>
  <p>If a lease clearly indicates that the tenants must vacate the property
  on a certain date, and they do not do so, this is already a violation
  of the contract so what's the point of having a holdover clause?</p>
</blockquote>

<p>Most of the time, a landlord and a tenant with a fixed term lease intend the lease to continue indefinitely and establish an end of the lease term primarily to give the parties an opportunity to renegotiate the terms of their mutual arrangement without either party having a status quo advantage. A conversion to a month to month lease does basically the same thing.</p>

<p>In that kind of context, neither party wants to force the termination of an otherwise fruitful economic relationship simply because someone didn't bother to check the fine print of a several year old lease in somebody's desk drawer.</p>

<p>The purpose of a fixed lease term is that: (1) it allows the landlord to sue for lost rent until the premises can be released if the tenant leaves early, and (2) it allows the tenant to know that they can be secure in their right to use the property so long as the tenant complies with the lease term allowing the tenant to invest (in terms of marketing, tenant finish, etc.) in the premises. Once those mutual expectations are met, there is no need for a fixed term and a month to month, or autorenewing lease is fine.</p>

<blockquote>
  <p>In Canada it's extremely difficult to physically remove a person and
  their possessions (a judge is required to appoint a bailiff). Out of
  curiosity, in the US (in places like Texas) is a court order needed to
  physically remove a person after the lease ends?</p>
</blockquote>

<p><strong>It Is Not "Extremely Difficult" To Physically Remove A Person And Their Possession From Rented Premises When A Lease Is Breached, Even In Canada</strong></p>

<p>The process you describe in Canada is essentially identical to the process in almost all U.S. states and it isn't that difficult. </p>

<p>You give notice in compliance with statutory formality requirements to the tenant demanding that they move out and they don't. You file an eviction action in court (usually a local court of limited jurisdiction where filing fees are lower and the court docket moves more swiftly). The tenant has an opportunity to contest the eviction by a certain deadline which is fairly short, but has no viable legal grounds to do so if the rent wasn't paid or the lease term has ended, and the court orders the eviction either by default or following a short hearing that is held on an expedited basis. You make arrangements with the bailiff or equivalent official to remove someone pursuant to the court's order, and the job gets done. </p>

<p>It takes maybe 4-10 hours of lawyer/paralegal work plus the cost of making arrangements to physically remove the tenant's possessions from the premises, if there is no bona fide dispute over the end of the lease term or the fact that rent is owed.* Usually, those costs can be added to the amount that the tenant owes for unpaid rent and damages to the premises. Not infrequently, a tenant, seeing the inevitability of the situation, will consent to an order of possession in exchange for some extra time to move out or a waiver of some of the money owed to the landlord (as the tenant often has no ability to pay anyway and otherwise would have renegotiated the lease and paid the rent).</p>

<ul>
<li>As a senior lawyer, I spend very little time at all on routine cases where there is no bona fide dispute as to whether rent is owed or the lease term is terminated. Something like 90%-95% of my time that is devoted to landlord-tenant cases goes towards the 2%-5% of cases where there is a bona fide dispute concerning these matters, which can get messy, be protracted and is costly. For example, a recent landlord-tenant eviction case I handled had five copies of the lease floating around with different rents and different terms - four of which were forgeries, there was a dispute over whether rent was paid related to allegations that rent money had been embezzled, not all of the leased property was turned over to the tenant when the lease was commenced, there was a forebearance agreement which may or may not have been suspended, the landlord was being foreclosed upon for not paying its mortgage and was in bankruptcy as well, a key participant was a lawyer who had previously been disbarred for fabricating documents, and there were breaches of fiduciary duties related to the execution of the lease, all concerning a fifteen unit apartment building worth several million dollars that was sublet to individual tenants by a master tenant.</li>
</ul>

<p><strong>Evictions Without A Court Order</strong></p>

<p>The predominant process to remove someone from leased premises is to get a court order in this fashion to evict someone after the lease ends, if they don't move out of their own free will. </p>

<p>In a minority of U.S. states it isn't automatically unlawful to evict someone for non-payment of rent or the termination of a lease term without a court order, if it can be accomplished without a breach of the peace. But, in practice, the benefit of having a court order that provides a safe harbor against criminal and civil liability for a wrongful eviction is almost always worth it to a landlord, even when it is not legally required.</p>

<p>Usually, even in states where evictions are allowed without a court order in some circumstances (e.g. Florida), this is only done in practice where the property has been abandoned by the tenant who may have left some possessions there but hasn't been in the premises for ages.</p>

<p><strong>Benefits Of Not Having A Holdover Clause</strong></p>

<p>This said, if you draft a lease without a holdover clause for a fairly short term, like a few months or a year, it does make the eviction proceeding more straight forward and certain, because it is unnecessary for the landlord to prove that rent is owed or another lease term was violated at the end of the term of the lease, in order to evict them. All that the landlord has to do is prove that the lease was entered into and that the term has expired, while the tenant would have to prove a modification or renewal of the lease (something that would ordinarily require the landlord's signature) to prevail. The landlord can then pursue any other monetary amount owed by the tenant separately once the tenant is gone.</p>

<p>Also, if you have a fixed term lease with no holdover clause, the requirement that the landlord give notice to the tenant to vacate as the landlord would have to in a month to month lease, or in a case where rent is not paid, is often waived by statue or by a common law interpretation that the lease itself provides the notice in that context. So, this can remove one step from the eviction process in addition to making proof of the right to evict much simpler.</p>
