The Last Minute Gotcha!

The Last Minute Gotcha!

Your business is doing well, and you are happy with your current landlord. You may or may not notice that your lease is expiring in less than a year. You might think, since there’s been no word, that your landlord forgot. I guarantee you, this is not the case. Maybe you’re thinking the landlord will allow you to go month to month. They probably will, as you will most likely be charged significant hold over fees for doing so—something you’re probably not aware of!

What IS a hold over fee? Let’s talk it out. 99% of the leases I have reviewed have a hold over fee of 125% to 200% or MORE. Which means that on a lease that is $1,000 a month, if you stay even one day past your expiration date, you will pay $1,250 for that ENTIRE MONTH. If you have a 200% hold over fee, that cost will skyrocket up to $2,000. Even if you’re just a day over your expiration date. Most leases don’t prorate hold over fees, so a day can cost you more than an entire month’s rent.

Sneaky, right? This is what we call the last minute gotcha! Your landlord often counts on you not noticing these sorts of clauses in your lease, and most will contact you just a month before your lease expires, offering you a renewal option. This isn’t a lot of time to find a new space, and most likely, the rate they’re quoting will be over market. They may tell you to go ahead and move, but don’t forget—going even one day over will cost you significant hold over fees.

Our advice? Plan ahead. Start searching for a new space 6 months to a year ahead of your expiration date, even if you don’t plan on leaving. You need to know your options to play the market right, and you don’t want to end up paying a last minute gotcha!

About the Author

Lynn Drake’s status is well known in the industry: She’s the commercial realtor focused on maintaining “true north” for her corporate clients. It’s a reputation built on 35 years of commercial real estate experience. Lynn became a commercial realtor in 2001 after 15 years in corporate real estate. Thus far in her career, Lynn has successfully completed over 1,500 real estate transactions ranging from small business tenant leases to the sale and purchase of industrial complexes.