What is a holdover clause in an industrial lease?

What is a holdover clause in an industrial lease?

A holdover clause is a provision in a commercial lease that defines the tenant's status and obligations if they continue to occupy the premises after the lease expiry date without having executed a renewal or new lease. In the GTA industrial market, holdover is a common situation — tenants in lease negotiation that extends past expiry, tenants waiting on a new site to be ready, or tenants who simply have not made a decision by the lease end date can all end up in holdover. Under most GTA industrial leases, a tenant who holds over becomes a month-to-month tenant, subject to all the original lease terms except the holdover rent provision. The holdover rent is typically set at a premium over the final month's base rent — commonly 125% to 150% of the last month's rent, though some leases set holdover rent as high as 200% for extended holdover periods. The premium compensates the landlord for the uncertainty created by the tenant's continued unplanned occupancy and for any lost opportunity if the landlord had planned to relist or demolish the space. The holdover period is typically month-to-month, meaning either the landlord or tenant can terminate on relatively short notice — usually 30 to 60 days written notice as specified in the lease. This creates a significant operational risk for the tenant: a landlord who has a new tenant lined up can provide notice to vacate, leaving the holdover tenant with 30-60 days to find and move into new space. In a tight GTA industrial market with limited vacancy, 30-60 days is often insufficient time to execute a new lease and relocate. From a tenant's perspective, the critical planning point is to begin lease renewal negotiations 12 to 18 months before lease expiry — not 6 months before, and certainly not after expiry. Starting early provides negotiating time, site search time if relocation becomes necessary, and avoids the financial penalty and operational vulnerability of holdover entirely. Tenants who enter holdover without a clear plan face both higher monthly costs and the risk of forced relocation on the landlord's timeline. Some institutional landlords in the GTA industrial market include explicit no-holdover provisions in their leases, requiring the tenant to vacate on the exact lease expiry date and treating any continued occupancy as trespass. These provisions are most common in REITs and institutional portfolio owners who have planned capital programs, re-leasing timelines, or demolition/redevelopment plans for their properties. Michael Law advises GTA industrial tenants on lease renewal strategy, holdover avoidance, and new site searches across Durham Region, Halton Region, Peel Region, York Region, and the 905 corridor. Contact Michael at mlaw@lennard.com or (905) 917-2045 — ideally 12 to 18 months before your lease expiry.