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What is a holdover clause? And why does it matter?

January 22, 2020

 

The holdover clause in general says that if the tenant stays in the space it is leasing after the lease expires, then the tenant must pay an increased rent above the rental rate at the time of lease expiration.

Sometimes the increase is by 150%, 200%, or even more.

Some commercial real estate holdover clauses state that the lease becomes month-to-month at the new increased rent,  others may state that the tenant must vacate at the end of the lease, but if not, the lease becomes month-to-month at the increased rent.

Tenants should pay close attention to the terms and conditions of the holdover clause when they negotiate the original commercial lease, or risk huge rent increase as well as damages.

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