Holdover Tenants in a Commercial Lease: Arizona Law
Arizona Law Governing a Holdover Tenant in a Commercial Lease Agreement
Absent a provision in a commercial lease agreement, how does the Arizona common law treat tenant holdovers? What are the basic rules of such holdovers?
Please note that, while this article accurately describes applicable law on the subject covered at the time of its writing, the law continues to develop with the passage of time. Accordingly, before relying upon this article, care should be taken to verify that the law described herein has not changed.
There are various types of leases available to a landlord and tenant as they are entering a lease agreement, including a periodic tenancy, tenancy for years, and a tenancy at will. While each of these tenancies differ greatly in their structure and the remedies available to both the landlord and tenant, they are common in the respect that there exists the possibility that the tenant will remain in the premises after the lease has expired with or without the consent of the landlord.
Under Arizona law, a holdover tenant refers to a tenant that still remains in the leased premises after the expiration of the lease. In Arizona, in the absence of any holdover or similar provision in a commercial lease, if a tenant retains possession of the premises without the express consent of the landlord, the tenancy will not be treated as a complete renewal of the previous lease term, but instead, it will be treated as a month-to-month periodic tenancy and will continue with the same rent amount. A.R.S. § 33-342. Additionally, after the creation of the new month-to-month tenancy, either party may terminate the month-to-month tenancy with 10 days’ notice to the other party. A.R.S. § 33-341. Additionally, it is important to keep in mind, that a “tenant who holds possession of property against the will of the landlord, except as provided in this section, shall not be considered a tenant at sufferance or at will.” Id.
It is important in drafting commercial lease agreements to make provision for what happens in a holdover situation. Sometimes a tenant may have made arrangements for a new location, but the new location is not ready or the tenant is not ready to move at the time a lease expires. If a landlord has a new tenant and new lease set to commence upon expiration of the expiring lease, it can present a problem for a landlord who cannot deliver possession to a new tenant. In such a situation a landlord can be exposed for damages in failing to make the premises available for a new tenant. Such a holdover situation can be dealt with by precluding holdovers or by providing for a holdover rate of rent that is greater than normal rental rates.
If a commercial lease agreement does not adequately address holdover situations, there are ways to address problems created by a tenant holdover, including an unlawful detainer action to remove the holdover tenant. Care should be undertaken to avoid any action which could be deemed a consent or acquiescence to the holdover.