What follows are our own general observations and opinions about holdover provisions in California commercial leases. It is not legal advice, and it is not a definitive statement of California law. Every lease is drafted differently and every situation depends on its own facts.
If you stay in a commercial space after the term ends, what happens is whatever the holdover clause says happens — and in most Los Angeles leases we read, what it says is that your rent jumps to 150% or 200% of the last month’s rent, that no new tenancy is created, and that you indemnify the landlord for everything that goes wrong as a result. The rent multiplier is the part tenants notice. In our experience it is not the part that does the damage.
The provision that actually carries the risk is the consequential damages language sitting underneath the multiplier. If your landlord has signed a lease with an incoming tenant who cannot take possession because you are still there, that indemnity can expose you to that tenant’s damages, the landlord’s lost rent, and the landlord’s legal costs. We have seen that number dwarf the holdover rent by an order of magnitude, and it is the clause we spend the most time on when we review a lease.
What a typical holdover clause does
Most of the commercial forms circulating in the Los Angeles market do four things at once, and it is worth separating them:
- Escalates rent. Commonly 150% of the last month’s rent for an initial period, stepping to 200% after that. Read carefully whether the multiplier applies to base rent alone or to base rent plus operating expenses and CAM, because applying it to the fully loaded number is a meaningfully different bill.
- Disclaims any new tenancy. The clause will usually say that holding over creates no month-to-month tenancy and no renewal, and that your occupancy is at sufferance and terminable at will.
- Preserves eviction rights. Nothing in the clause is meant to stop the landlord from moving to recover possession.
- Adds an indemnity. The consequential damages piece — the one worth reading twice.
On the second point, there is a background rule worth knowing about. Our reading of Civil Code section 1945 is that where a tenant remains in possession after the term and the landlord accepts rent, the parties are presumed to have renewed on the same terms, for a period capped at one year. Commercial leases almost invariably contract around that presumption with express language, which is exactly why the “no tenancy is created” sentence is in there. But when a lease is silent or sloppily drafted, or where a landlord’s conduct is inconsistent with its own paperwork, that default becomes relevant — and we have seen it argued both directions.
How quickly a landlord can move
Commercial unlawful detainer in California is a fast process by design, and our understanding of Code of Civil Procedure section 1161 is that a tenant continuing in possession after the expiration of a fixed term is squarely within its reach. Commercial tenants do not get the layers of protection residential tenants have — no just-cause requirement, no rent-stabilization overlay, and no relocation payments. A commercial tenant who holds over without an agreement is, in our view, in a considerably weaker position than most business owners assume.
Why Los Angeles tenants end up holding over
Almost nobody plans to hold over. In the cases we see, it happens for a small number of recurring reasons, and most of them are local and predictable.
The largest one by far is that the replacement space is not ready. Tenant improvement work in Los Angeles routinely takes longer than the schedule everyone agreed to, and plan check and permitting through LADBS is a common source of that slippage — more so for a change of use, for any work touching the building envelope, or where the Fire Department has to sign off on occupancy or life-safety systems. Restaurants have it worst, because the health department layer stacks on top. A certificate of occupancy that arrives six weeks late turns into six weeks of holdover at 150%, plus whatever the indemnity brings with it.
The second reason is a missed renewal option. Renewal options typically require written notice a fixed number of months before expiration — nine or twelve months is common in Los Angeles office and industrial leases — and in our experience those deadlines are enforced strictly. A tenant who intended to renew, missed the window, and is now negotiating from inside the building has very little leverage.
What we generally suggest negotiating
Before signing, this clause is usually negotiable, and it is far cheaper to fix on paper than to live with. The points we raise most often:
- A graduated multiplier. Rather than 150% from day one, something like 125% for the first thirty or sixty days, stepping up after that. Landlords generally accept that a short, good-faith overlap is different from an indefinite squat.
- Cap or condition the consequential damages. Our preferred position is to strike the indemnity entirely; where that is not achievable, we suggest conditioning it on the landlord having actually signed a lease with a successor tenant and having given the tenant written notice of that fact by a specified date. An indemnity for losses a tenant had no way to anticipate is, in our view, the least defensible part of the clause.
- Confirm what the multiplier applies to. Base rent only, not base rent plus CAM and operating expenses.
- Add a short extension right. A one-time option to extend the term by thirty to ninety days on written notice, at a defined rent, is often easier to get than a softer holdover clause — and it solves the same problem more cleanly.
If you are already at the end of a term, our practical suggestion is to start the conversation early rather than late. A negotiated written extension at an agreed rate, signed before expiration, is almost always cheaper than the holdover clause and removes the indemnity exposure. Landlords are usually receptive when the alternative is an eviction action and a vacant suite. Once you are past expiration and in possession without an agreement, the leverage has shifted, and it is not coming back.
Being candid about the risk
We would rather set expectations honestly. If your lease contains a well-drafted holdover clause with a broad indemnity, and the landlord has a real successor tenant with real damages, that is a difficult position to argue your way out of. The arguments that exist — that the landlord’s conduct waived the clause, that the damages are speculative or unproven, that the multiplier operates as an unenforceable penalty rather than a reasonable estimate of harm — are fact-intensive and by no means sure things. The reliable protection here is negotiated in advance, not litigated afterward.
Talking it through
If you are reviewing a commercial lease before signing, or you are approaching the end of a term in Los Angeles and want to understand what the holdover language actually exposes you to, we are glad to look at it with you. Our office is at (310) 556-9692. Lease review and negotiation of this kind is transactional work, so we handle it on an hourly or flat-fee basis depending on scope — not on a contingency — and we set the arrangement out in writing before starting so there are no surprises.
Related reading: Commercial lease review and negotiation · Why a lease review before signing matters · Personal guarantees in commercial leases · Assignment and subletting clauses · CAM charges explained
As above, this reflects our general opinions and observations only. It is not legal advice, it is not a definitive statement of California law, and reading it does not create an attorney-client relationship between us. Holdover provisions vary considerably between leases and the consequences turn on the specific wording of yours, so we would encourage you to have your actual document reviewed before relying on any of this.
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