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 has been no word, that your landlord forgot. I guarantee you, this is not the case. Maybe you are thinking the landlord will allow you to go month to month. They probably will, as you will most likely be charged significant holdover fees for doing so—something you are probably not aware of!
What IS a holdover fee? Let’s talk it out. 99% of the leases I have reviewed have a holdover 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% holdover fee, that cost will skyrocket up to $2,000. Even if you are just a day over your expiration date. Most leases do not prorate holdover 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 is not a lot of time to find a new space, and most likely, the rate they are quoting will be over market. They may tell you to go ahead and move, but do not forget—going even one day over will cost you significant holdover fees.
Our advice? Plan ahead. Start searching for a new space 6 months to a year ahead of your expiration date even if you do not plan on leaving. You need to know your options to play the market right and you do not want to end up paying a last minute gotcha!
Source: Compass Commercial Blog
Photo Credit: “Punctuality” by Gualberto107 FreeDigitalPhotos.net