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Tenant Holdover Tenancies in New Jersey

When a Tenant continues to occupy its leased premises after the Lease term has ended, it is said to “hold over.” Doing so creates a tenancy at sufferance, which may be either a tenancy at will or a tenancy for a period. In agrarian societies of old and even in today’s commercial societies, hold over tenancies are disfavored and many state’s statutes, including New Jersey’s, provide for some form of double rent as the financial remedy for the Landlord for so long as the Tenant remains in possession. New Jersey has the following two statutory provisions:

A. N.J.S.A. 2A:42-6. Willful holding over by tenant after expiration of term; notice to deliver possession; penalty. When a tenant for any term or any other person coming into possession of any real estate by, from or under, or by collusion with such tenant, willfully holds over any such real estate after the determination of such term and after demand made and notice in writing for delivering the possession thereof, given by his landlord or lessor, or by the person to whom the remainder or reversion of such real estate shall belong, the person so holding over shall, for and during the time he so holds over or keeps the person entitled out of possession of such real estate pay to the person so kept out of possession, his executors, administrators or assigns, at the rate of double the yearly value of the real estate so detained, for so long a time as the same is detained. Such amount shall be recoverable by an action in any court of competent jurisdiction.

—and—

B. N.J.S.A. 2A:42-5. Holding over by tenant after giving notice of quitting; double rent recoverable. If a tenant of real estate shall give notice of his intention to quit the premises by him held at a time specified in such notice, and shall not deliver up the possession of such real estate at the time specified in the notice, such tenant, his executors or administrators, shall, from such time, pay to his landlord or lessor, his heirs or assigns, double the rent which he should otherwise have paid, to be levied, sued for and recovered at the same times and in the same manner as the single rent before the giving of such notice could be levied, sued for and recovered. Such double rent shall continue to be paid during all the time such tenant shall continue in possession after the giving of such notice.

As penal statutes, they are strictly construed. The court in Lorril Co. v. La Corte, 352 N.J.Super. 433, 439, 800 A.2d 245 (App.Div.2002) stated, “[w]e believe that limiting the holdover penalty period to that period the tenants remain in the premises makes the most sense, given the legislative language and intent … . This construction is also consistent with the policy behind the legislation of encouraging orderly transition of tenancies in a way that would most ensure seamless continuity by penalizing those tenants who thwart the landlord’s ability to accomplish a seamless transition between tenants.” Therefore, the statutory doubled rent for holdover tenancies is owed only until the tenant vacates the premises, not until the end of the calendar month. This limitation can be modified by the terms of the Lease. Further, the enhanced rent charged by statute to Tenants who holdover in their occupancy only applies where the holdover is “willful.”

Landlords frequently seek to overcome the limitations of each statute by including specific holdover provisions in Leases. Here are some typical examples:

A. If Tenant retains possession of the Demised Premises or any part thereof after the end of the Lease Term (as extended pursuant to Section 1.2, if extended), by lapse of time or otherwise, Tenant shall pay Rent to Landlord at twice the rate payable for the year immediately preceding such holdover, computed on a per month basis, for each calendar month or part thereof that Tenant remains in possession. The provisions of this Section do not waive Landlord’s right of reentry or any of its other rights in this Lease or available by law. Any retention of the Demised Premises after the termination of this Lease or any extension thereof shall be considered as a month to month holdover unless otherwise agreed to in writing by both parties.

—or—

B. If Tenant, without the prior written consent of Landlord, holds over in possession after the expiration of the initial term or of any extended term, such holding over shall not be deemed to extend the term or renew this Lease, but the tenancy thereafter shall continue as a tenancy at sufferance whereupon Landlord, in addition to all other remedies available to it under this Lease or at law, shall be entitled to receive as liquidated damages, not as a penalty, an amount equal to the greater of: (a) the fair market rental value or; (b) two hundred percent (200%) of the Rent and Additional Rent payable by Tenant for the last month of the term of the Lease. In addition to any other liabilities to Landlord accruing from Tenant’s failure to surrender the Premises, Tenant shall indemnify and hold Landlord harmless from loss and liability resulting from such failure, including, without limitation, any claims made by any succeeding tenant founded upon such failure.

—or—

C. If Tenant retains possession of the Demised Premises or any part thereof after the Expiration Date (as may be extended pursuant to the terms of this Lease), by lapse of time or otherwise, Tenant shall pay Monthly Basic Rent and Additional Rent to Landlord at twice the rate payable for the calendar month immediately preceding such holdover, computed on a per month basis, for each calendar month or part thereof that Tenant remains in possession. Any such holdover tenancy by Tenant shall continue until terminated by Landlord, or until Tenant shall have given to Landlord, at least sixty (60) days prior to the intended date of termination, a written notice of intent to terminate such tenancy, which termination date must be as of the end of a calendar month. The provisions of this Section do not waive Landlord’s right of reentry or any of its other rights in this Lease or by applicable law. Any retention of the Demised Premises after the termination of this Lease or any extension thereof shall be considered as a month to month holdover unless otherwise agreed to in writing by both parties.

—or—

D. If Tenant holds over possession of the Premises beyond the Termination Date, or prior expiration of the Term, such continued occupancy shall not be deemed to extend the Term or renew this Lease but such holding over shall continue upon the terms covenants and conditions of this Lease as a tenant at will except that Tenant agrees that the charge for use and occupancy of the Premises for each calendar month or portion thereof that Tenant holds over (even if such part shall be one day) shall be a liquidated sum equal to one twelfth (1/12th) of: (a) one hundred fifty percent (150%) of the Base Rent; and (b) the Additional Rent required to be paid by Tenant during the calendar year preceding the Termination Date or earlier expiration of the Term. The parties recognize and agree that the damage to Landlord resulting from any failure by Tenant to timely surrender possession of the Premises will be extremely substantial, will exceed the amount of the monthly Base Rent and Additional Rent payable hereunder and will be impossible to accurately measure. If the Premises are not surrendered on or prior expiration of the Term (in addition to the use and occupancy charge set forth above), Tenant shall indemnify and hold harmless Landlord against any and all losses and liabilities(other than consequential damages) resulting therefrom, including, without limitation, any claims made by any succeeding tenant founded upon such delay (it being agreed that such claims by a succeeding tenant that are not themselves consequential damages of the succeeding tenant shall not be considered Landlord’s consequential damages). Nothing contained in this Lease shall be construed as a consent by Landlord to the occupancy or possession by Tenant of the Premises beyond the Termination Date or prior expiration of the Term, and Landlord, upon said Termination Date or prior expiration of the Term, or at any time thereafter (and notwithstanding that Landlord may accept from Tenant one or more payments called for by this Section, but Tenant shall be entitled to credit therefor), shall be entitled to the benefit of all legal remedies that now may be in force or may be hereafter enacted relating to the immediate repossession of the Premises. The provisions of this Article shall survive the Termination Date or earlier expiration of the Term.

Tenant’s, seeking to ameliorate the effect of such “Landlord” Lease provisions, frequently negotiate lower rent increases and more liberal hold over provisions. Here are some examples:

A. Any holding over after the expiration of the Term shall be construed to create a tenancy from month-to-month at the rental that would have applied had Tenant exercised its respective option to renew (or if no further option exists at the then current Minimum Rent) and shall otherwise be on the terms and conditions specified in this Lease as far as applicable. Landlord and Tenant shall each have the right to terminate any month-to-month tenancy upon thirty (30) days’ written notice to the other.

—or—

B. If Tenant remains in possession of the Premises after the expiration or earlier termination of the Lease Term, such holding over shall be deemed to have created and be construed to be a tenancy from month to month, terminable on not less than thirty (30) days’ written notice from either party to the other. Fixed Rent shall be payable at a monthly or daily rate, as the case may be, at one hundred ten percent (110%) of the Fixed Rent payable by Tenant immediately prior to the expiration or termination of the Lease Term plus such Additional Rent payable by Tenant as provided in this Lease, with the tenancy to commence on the first day after the end of the Lease Term; and the holdover tenancy shall be subject to all of the conditions and covenants of this Lease insofar as such covenants and conditions are applicable thereto.

—or—

C. Any holding over after the expiration of the Term shall be construed to create a tenancy from month-to-month at the rental that would have applied had Tenant exercised its respective option to renew [or if no further option exists at Twenty-Five Cents ($0.25) per square foot of floor area pf the Demised Premises more than the then current Minimum Rent] and shall otherwise be on the terms and conditions specified in this Lease as far as applicable. Landlord shall have the right to terminate any month-to-month tenancy upon thirty (30) days written notice to Tenant.

—or—

D. In the event, without Landlord’s written consent, which may be withheld in Landlord’s sole discretion, Tenant remains in possession of any part of the Premises after the expiration of the tenancy created hereunder, Tenant shall be considered a hold-over tenant subject to all of the conditions of this Lease insofar as the same are applicable to a hold-over tenant, except that the Fixed Rent payable by Tenant shall be an amount equal to one hundred and twenty-five percent (125%) of the rate of Fixed Rent payable by Tenant at the date of expiration of the tenancy created hereunder. Notwithstanding anything to the contrary contained herein, during any hold-over tenancy, Tenant shall vacate the Premises within ten (10) days of receipt of Landlord’s written notice (“Holdover Notice To Vacate”). If Tenant remains in possession of the Premises after the Holdover Notice To Vacate without the execution of a new lease, it shall be occupying the Premises as a tenant at sufferance, subject to all of the conditions of this Lease insofar as the same are applicable to tenant at sufferance, except that the Fixed Rent payable by Tenant shall be an amount equal to one hundred twenty-five percent (125%) of the rate of Fixed Rent payable by Tenant at the date of expiration of the tenancy created hereunder for the first sixty (60) days of such holdover and thereafter the Fixed Rent payable by Tenant shall be an amount equal to one hundred fifty percent (150%) of the rate of Fixed Rent payable by Tenant during at the date of expiration of the tenancy created hereunder. Nothing contained herein shall limit Landlord’s right to evict Tenant as allowed under New Jersey law. Tenant shall not interpose any counterclaim or counterclaims in a summary proceeding or other action based on holdover except for defenses or mandatory or compulsory counterclaims under the procedural laws of the state where the Shopping Center is located.

There is an unpublished case upholding a Lease provision calling for triple the last month’s rent as an acceptable liquidated damage. Mangano v. Cantor, A-1398-97T5 (N.J. Super. App. Div. 1998) (Unpublished, October 23, 1998).

Where there is nothing to show that a property owner actually had anyone interested in buying its property, it cannot recover damages for a lost sale from a tenant who failed to repair leased property after the term of its lease or failed to timely finish an environmental remediation. Star 72, Inc. v. Guardian Drug Company, Inc., A-6527-02T2 (N.J. Super. App. Div. 2004) (Unpublished, September 28, 2004).

When a commercial tenant remains in possession of its premises after the expiration of the lease and the landlord elects to continue the tenancy on a month-to-month basis, the tenant is still required to abide by all of the terms of the lease.

In New Jersey, pursuant to the Tenant Anti-Eviction Act, N.J.S.A. 2A:18:61.1, Tenants, other than those in owner-occupied building with not more than two rental units, are entitled to remain in their leased premises unless their Landlord can remove them pursuant to one of the expressly listed reasons in that statute. Therefore, all that a Landlord can do at the end of such a residential Tenant’s Lease term is to request a reasonable rent increase and request reasonable changes to the Lease. This is to be done by the sending of a Notice to Quit together with a Notice of Rent Increase / Lease Change. If such notices are properly sent, the rent increase (if any) is reasonable, the proposed Lease amendments (if any) are reasonable, and the Tenant does not accept the changes, the Landlord may seek the Tenant’s eviction. The factors to be considered in determining what constitutes a “reasonable” proposed rent increase are as follows: (a) the amount of the proposed increase; (b) the landlord’s expenses and profitability; (c) how the existing and proposed rents compare to rents at similar properties in the area; (d) the relative bargaining position of the parties; and (e) based on the judge’s general knowledge, whether the rent increase was shocking to a reasonable person.


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