Managing a rental property comes with several responsibilities and challenges. A common one is having to deal with a tenant who refuses to abide by the terms of the rental agreement. Such issues can have a negative impact on your rental income and cash flow. Needless to say, resolving them as quickly as possible is imperative. In this article, we will go over some of the legal guidelines for how to deal with a holdover tenant. We will also outline the course of action that a landlord must take to remedy the situation.
What Is a Holdover Tenant?
A holdover tenant is a renter who refuses to vacate the rental property after the end of the lease agreement. This is also known as a tenant at sufferance. The holdover period starts when the lease expires and ends when the landlord asks the tenant to leave. The legal particularities of holdover cases can be quite challenging to navigate. This is even more so the case if you happen to be a first-time landlord.
Distinguishing Holdover Tenancy from Other Types of Tenancy
A common point of confusion is the distinction between holdover tenancy, tenancy at will, and periodic tenancy. The confusion is not aided by the fact that a lot of people in the real estate industry use these concepts interchangeably. Nonetheless, the legal distinction between them is subtle and far from inconsequential. Here is a brief definition of the two terms that are often mistakenly included in the standard holdover tenant definition.
Tenancy at Will
This is the opposite of a tenancy at sufferance. A tenancy at will comes into effect when a tenant remains on the premises with the consent of the landlord. This is a verbal agreement that either party can end at any time. The terms are usually quite simple and merely require the parties to abide by the basic landlord-tenant laws.
This is a tenancy that doesn’t have a defined ending date. As a matter of fact, the lease can keep rolling over until both parties reach an agreement. This occurs when either party neglects to provide enough notice or when a landlord continues to collect rent after the end of the lease. The periodicity of the tenancy depends on the terms of the initial lease.
What Can a Landlord Do About a Holdover Tenant?
When faced with a holdover case, you generally have two ways of tackling the issue.
- Letting the tenant stay: If a landlord continues to accept rent payments after the end of the lease, the tenant can remain in the rental property. The landlord can no longer seek eviction and the tenancy converts to a month-to-month agreement (periodic tenancy).
- Seeking eviction: If the parties fail to reach an agreement, the landlord can treat the holdover tenant as a trespasser. The eviction process must follow a specific set of steps depending on which jurisdiction is handling the case. It is important to note that retaining the right to evict the tenant requires the refusal of any rent payments throughout this period.
Landlords and owners of rental properties have to follow through with whichever option they choose. Backtracking is not permitted in most jurisdictions.
The Steps That You Have to Follow to Evict a Holdover Tenant
This process necessitates an understanding of landlord rights and obligations, state law, and local law. The guidelines for evicting a holdover tenant might vary from one state to another. However, their content shares the same structure. You can find a more in-depth look at the eviction process in each state by clicking here.
Here are the three essential steps that a landlord must follow in most jurisdictions:
Step 1. Sending a notice to cure: Before holdover proceedings can begin, the landlord will need to provide the tenant with a notice to resolve the issue. After receiving this notice, the holdover tenant can agree to make rental payment and establish a new lease. A landlord can begin looking for a new tenant the moment the tenant fails to respond to this notice.
Step 2. Sending a notice to vacate: If the tenant hasn’t responded to the notice to cure, then the landlord should send a notice to vacate. The method of serving the tenant varies from state to state. This notice should allow the tenant one month to vacate the real estate property.
Step 3. Taking the case to court: If the tenant refuses to vacate the premises a full month after receiving the notice to vacate, the landlord can file to evict. The court will then notify the tenant of the eviction during the trial and a tenant who doesn’t pay rent will be ordered to vacate the property. The court might also order the tenant to make rent payments for the entirety of the holdover period.
Failing to respect these steps can impede the case and cause it to be thrown out before reaching trial. As a landlord/real estate investor, you should ensure that each step is completed in accordance with the law. For this reason, we recommend seeking the assistance of an attorney.
Understanding the Rights of the Tenant
Even though a tenant is occupying the premises without the consent of the landlord, the tenant’s rights are still applicable. A failure to respect these rights can result in a wrongful eviction case. Besides the notice periods, below are some of the basic rights that a holdover tenant should have during a holdover period:
- The right to a safe and habitable dwelling
- The right to file a complaint about any health or safety violation
- Notice before the landlord can enter the premises
- The right to utility service
Inexperienced landlords need to be careful when dealing with a holdover tenant. In fact, some problematic tenants will try to undermine the landlord’s case by actively looking for the smallest of violations. Having a firm grasp of tenant’s rights is the only way to avoid an unnecessary wrongful eviction claim.
Holdover proceedings can be quite tedious for real estate investors. Having said that, this shouldn’t deter you from buying an investment property. Making money in real estate requires taking a few risks and this is simply one of them. You can find the best investment properties in your area by using Mashvisor’s property finder.
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