HOLDOVER TENANTS: MANAGING END OF LEASE LIABILITY
Real Property Probate & Trust Section
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Sometimes the most
peaceful landlord/tenant
relationships lead to the
largest holdover liability.
T
he end of the lease
term may be the last
thing on your client’s
mind when negotiating
a commercial lease, but standard
holdover provisions that double,
or otherwise increase, rent for
holdover tenants can create
substantial liability for tenants, as
well as headaches for landlords.
Section 83.06, Florida Statutes,
gives a landlord a statutory right to
demand double rent as a penalty if
a tenant refuses to surrender
possession at the end of the lease
term. In Lincoln Oldsmobile, Inc. v.
Branch, 574 So. 2d 1111, 1113
(Fla. 2d DCA 1990), the Second
DCA affirmed that notice was
required before a tenant could
become liable for double rent
under section 83.06.
But Lincoln Oldsmobile only
applies to a demand for double rent
as a penalty under section 83.06.
Commercial leases with terms
lasting for more than a few years
almost universally provide for an
automatic increase in rent over the
term of the lease, and frequently
provide for an additional automatic
increase or a penalty rental rate
for the holdover tenant. Lincoln
Oldsmobile does not address
automatic increases that are built
into the lease.
Section 83.06 is not a bar on
the parties setting their own lease
terms to govern holdover: “The
character, terms, and conditions
of a holding over may be governed
by an express provision in the
original lease.” Rosamond v. Mann,
80 So. 2d 317, 319 (Fla. 1955)
(quoting 32 Am. Jur. Landlord &
Tenant § 948).
So what happens when a tenant
holds over after the expiration of
the lease term, sometimes for years?
Take a hypothetical lease that
provides for an annual increase in
rent at a set rate for each year of
a ten-year term. Our hypothetical
lease further provides for an
automatic 25 percent increase in
rent if the tenant holds over. Is the
automatic increase a penalty that
requires notice or is it an increase
in rent that the tenant is
automatically liable for without
notice from the landlord? Case
law does not provide a standard
to determine when an automatic
increase becomes a penalty and
therefore subject to the statutory
notice requirements.
Further, the tenant cannot rely
on landlord’s acceptance of the
tendered amount as a defense to
liability for the increase. See Tropical
Attractions, Inc. v. Coppinger, 187 So.
2d 395, 396 (Fla. 3d DCA 1966).
Most leases provide that acceptance
of partial payment does not
constitute waiver of all amounts
due under the lease.
When negotiating, drafting, and
litigating rent due from a holdover
tenant, parties need to consider
whether the lease language
provides a penalty for a holdover
tenant or merely an automatic
increase. Because this issue can
arise after a tenant has held
over for a long period of time,
sometimes the most peaceful
landlord/tenant relationships lead
to the largest holdover liability.
Ultimately, signing a lease renewal
with defined rent terms is a tenant’s
best defense, and a landlord will be
best positioned if they give notice
of any rent
increases —
even automatic
increases built
into the lease.
Author:
Brian C. Willis -
Shumaker, Loop
& Kendrick, LLP
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