If you own rental property, you have to deal with tenants. Or should I say, you most certainly hope to deal with tenants. The last thing any real estate investor wants is an empty apartment, office, retail, or warehouse.

Okay, so what is a holdover tenant? A holdover tenant is one who remains in your rental property after the original lease period expires. And in most cases, once the lease expires, the tenant remains in the property either with, or without your permission.

Holdover Tenants (Mutual Agreement)

In some cases, leases for holdover tenants automati­cally renew for the same period as the original lease and in other instances, the lease converts to a month-to-month tenancy.

Unless your rental properties are located in an area with strong peak and valley rental seasons such as college towns and vacation areas, you should consider leases that convert to month-to-month tenancies. Month­-to-month holdover tenants often end up staying for years. But even if they stay for only two to six additional months, you still gain because you’ve at least postponed your turnover. If, however, you require your tenants to commit for another year, you may precipitate a move that would other­wise have been delayed through procrastination.

Holdover Tenants (without Permission)

When tenants don’t move on schedule when their tenancy ends, you may encounter tenants who decide to hold over without permission. To reduce this possibility, and compensate for any problems this delay you should place a penalty clause in your lease for unauthorized holdovers.