When a commercial lease expires and the tenant remains in possession, a holdover situation arises. Understanding how holdover clauses work, your rights during holding over, and the notice periods that apply under NSW law can help you avoid disputes, unexpected rent increases, and sudden termination.
When a commercial lease expires, and the tenant remains in the premises, the situation is known as a “holdover” or “holding over.” This commonly occurs when lease renewal negotiations are ongoing, or when a tenant simply fails to vacate on time. Understanding what a holdover clause is and how holdover tenancies work under NSW law is essential for both landlords and tenants.
A commercial lease holdover can create significant legal and financial uncertainty. Without a formal agreement in place, either party may terminate the arrangement with minimal notice. For tenants, this means potential eviction on short notice. For landlords, it may mean difficulty recovering possession or securing a new tenant.
In this comprehensive guide, we explain what commercial lease holdover means, how holdover clauses work, your rights and obligations during holdover, and the specific notice periods that apply in NSW.
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A holdover clause (also called a “holding over clause” or “overholding clause”) is a provision in a commercial lease that specifies what happens if the tenant remains in the premises after the lease term expires. This clause sets out:
A well-drafted holdover clause protects both parties by providing certainty about their rights and obligations if the tenant stays beyond the lease term. Without such a clause, the arrangement defaults to common law principles, which can be less favourable.le
“Holding over” (sometimes called “overholding”) means continuing to occupy commercial premises after your lease has expired. The legal meaning of holding over depends on whether the landlord consents to the continued occupation:
Situation | Legal Status | Consequence |
Landlord accepts rent | Periodic Tenancy | Month-to-month tenancy created; most lease terms continue |
Landlord does NOT consent | Tenancy at Sufferance | Tenant can be evicted; may face higher rent liability or damages |
At common law, if a tenant holds over with the landlord’s consent (typically evidenced by the tenant’s acceptance of rent), a periodic tenancy is created. For commercial leases originally over one year, this is generally a month-to-month tenancy that either party can terminate with one month’s notice.
Commercial leaseholdover in NSW is governed by a combination of common law principles and legislation, depending on the type of premises:
If the landlord fails to provide this notice, the lease is automatically extended for 6 months from when notice is finally given. The landlord’s notice may also indicate whether they intend to allow the tenant to remain in possession as a periodic tenant under any holdover provisions.
Non-Retail Commercial Leases
For commercial leases that don’t fall under the Retail Leases Act (e.g., offices, warehouses, industrial premises), common law and the terms of the lease govern the holdover arrangement. The Conveyancing Act 1919 (NSW) and Real Property Act 1900 (NSW) may also be relevant for certain procedural matters.
Rent during a holdover period (often called “holdover rent” or “occupation rent”) can be calculated in several ways, depending on what the lease provides:
One of the most important aspects of a holdover arrangement is understanding how much notice is required to terminate. The notice period depends on what the lease says and the type of periodic tenancy created:
Tenancy Type | Notice Required |
Month-to-month (most common) | One month’s written notice |
Week-to-week | One week’s notice |
As specified in the lease | Per the holdover clause terms |
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Landlords have several options when a tenant holds over, depending on their intentions and the terms of the lease:
Even though the original lease has expired, tenants holding over must continue to comply with most of the lease terms, including:
While holdover arrangements provide flexibility, they carry significant risks for both parties:
Risks for Tenants
Risks for Landlords
Disputes during holdover periods commonly involve rent amounts, notice validity, make-good obligations, or the tenant’s refusal to vacate. These disputes can be resolved through:
Whether you’re a landlord or tenant facing a holdover situation, a commercial property lawyer can protect your interests by:
Commercial leaseholdover situations require careful management to protect your interests. Understanding what a holdover clause means, your rights during holding over, and the notice periods that apply can help you avoid disputes and make informed decisions.
Whether you’re a tenant needing security of tenure or a landlord wanting to recover possession, early legal advice is essential. Contact CMI Legal’s commercial law team for a consultation about your holdover situation.
A holdover clause is a provision in a commercial lease that specifies what happens if the tenant stays in the premises after the lease expires. It typically covers whether the landlord’s consent is required, the rent payable during holdover, the notice period for termination, and which lease terms continue to apply.
“Holding over” means continuing to occupy commercial premises after your lease has expired. If the landlord accepts rent, a periodic tenancy (usually month-to-month) is typically created. If the landlord does not consent, the tenant becomes a “tenant at sufferance” and may face eviction.
For most commercial holdover tenancies in NSW, either party can terminate with one month’s written notice. However, the specific notice period depends on what the original lease’s holdover clause specifies. Always check your lease terms.
Holdover rent may continue at the original rate, increase by a percentage (commonly 105-150%), or be adjusted to market rent. The holdover clause in your lease will specify the applicable rate. If there’s no holdover clause, the previous rent typically continues.
Yes. If a landlord accepts rent from a tenant after the lease expires, a legally binding periodic tenancy is created under common law. Both parties have rights and obligations under this arrangement, though it can be terminated with appropriate notice.
Yes. Landlords are not obligated to allow holdover. They can refuse to accept rent and require the tenant to vacate when the lease expires. However, they must follow proper legal procedures and cannot use self-help eviction methods like changing locks.
If you fail to vacate after receiving a valid termination notice, the landlord can commence eviction proceedings through NCAT or the courts. You may also be liable for increased rent, damages, and the landlord’s legal costs.
If the original lease was covered by the Retail Leases Act 1994 (NSW), certain protections may continue during holdover. Notably, if the landlord failed to give 6 months’ notice about their intentions before the lease expired, the lease is automatically extended for 6 months under Section 44.
Holdover tenants must continue paying rent, maintain the premises, adhere to permitted use requirements, maintain insurance, and comply with make-good obligations when vacating. Most terms from the original lease continue to apply during holdover.
While not legally required, a lawyer is strongly recommended. Holdover situations can escalate quickly into costly disputes. A commercial property lawyer can explain your rights, draft proper notices, negotiate on your behalf, and represent you if matters proceed to NCAT or court.
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