When a houseguest overstays their welcome, a friendly hint or gentle nudge is usually enough to get them packing. When a commercial tenant overstays their welcome after the conclusion of their lease term, both the consequences and steps to get them out are more consequential and more complicated.
Holdover tenants are a common problem for commercial and residential lessors alike. But as with many other aspects of the landlord-tenant relationship, the laws that govern the eviction of commercial and residential lessees in New Jersey have significant differences. While residential tenants receive a bit more leeway than their commercial counterparts, strict compliance with the law’s requirements is essential in both cases. Failure to follow the letter of the law can further delay the departure of a commercial holdover tenant and even expose the landlord to liability in certain circumstances.
Holdover Tenancy Defined
Typically, when a commercial lease term expires, the tenancy becomes month-to-month if neither party provides notice to terminate or renew. However, if a tenant continues to occupy the premises without the landlord’s approval after the lease ends (and no new lease or extension has been agreed to), they are considered a holdover tenant.
Given that holdover tenancies, at least for relatively brief periods, are not uncommon, most commercial leases have provisions that specifically address this situation. A landlord evaluating its options with a holdover tenant should always look first at the lease terms before deciding on a course of action. These clauses typically provide for a steep rent increase, up to 150% or 200% of the base and additional rent while treating the tenancy as month-to-month. Most also allow for the landlord to initiate eviction proceedings notwithstanding the acceptance of any amounts paid by the tenant.
Even without such provisions, New Jersey law provides that holdover tenants are liable for double the rent provided for in the lease for however long they remain in possession of the premises after being served with notice, as discussed below.
First Steps Towards Getting a Holdover Tenant Out
One of the cardinal rules for a commercial landlord dealing with a holdover tenant is not to take matters into their own hands. Certainly, the landlord can engage in communications, discussions, and negotiations with the tenant regarding their vacation of the premises. But changing the locks or otherwise denying the lessee access to the premises, removing contents, and other forms of self-help can have disastrous consequences, exposing the landlord to significant liability. Instead, the landlord should start eviction proceedings and meticulously follow the specified rules and timelines set forth in the law.
As noted, two different sets of laws apply to residential and commercial tenancies in New Jersey. While the Anti-Eviction Act governs residential leases, the Summary Dispossess Act controls how commercial evictions proceed, including those involving holdover tenants.
The first step, and a required prerequisite to initiating an eviction of a holdover tenant, is to properly serve them with a written Notice to Quit and Demand for Possession. In most situations, where the tenant stays in the premises after the lease expires and the lease is treated as month-to-month, the notice must give the tenant 30 days to vacate the space.
The notice and demand must be personally served either upon the tenant or such person in possession by giving them a copy or leaving it at their usual place of abode with a family member above the age of 14. If service cannot be accomplished that way, the notice can be given to anyone occupying the leased premises. If that doesn’t work, service can be made by posting the notice on the door of the premises.
Initiation of Eviction Proceedings
Once 30 days have passed after proper service of the notice and demand on the tenant, the landlord can initiate an eviction case. Presuming the landlord complied with all pre-filing requirements and properly initiated the proceedings under the Summary Dispossess Act, as the name implies, the eviction action is designed to move expeditiously, in no small part to deter landlords from exercising any self-help remedies.
The eviction begins with filing a summons and complaint in the county where the leased premises are located. Once the tenant is properly served with these documents by the Court, the court will set a trial date, typically within 10 to 30 days after service.
Entry of Judgment for Possession and Exercise of Remedies
If the tenant fails to appear at the trial date, the court will enter a default judgment in favor of the landlord. If the tenant appears in Court, the judge will likely direct the parties to meet with a mediator in an effort to reach a negotiated resolution. If those negotiations do not bear fruit, and presuming the tenant has no legitimate defense, the court will enter a judgment for possession in favor of the landlord.
Following entry of judgment, the landlord can apply for a Warrant of Removal, which gives a sheriff or constable the authority to remove the tenant from the premises. Unlike in residential cases, the officer performs the eviction immediately upon service of the Warrant for Removal, forcibly removing the tenant if required and restoring possession to the landlord. The landlord is advised to have a locksmith on site at the time of the eviction to change all the locks barring the former tenant from further entry to the premises. If the lessee leaves property in the space after their removal, the property can be considered abandoned — either by the terms of the lease or by statute after providing the appropriate notice and the waiting period elapsing — permitting the lessor to remove or liquidate such property and apply the proceeds to any back rent or other unpaid amounts.
As noted, a commercial landlord wanting to retake possession from a holdover tenant should begin serving the notices required by New Jersey law as soon as possible after the conclusion of the lease term if no other arrangements, agreements, or extensions have been agreed upon with the tenant.
Given the critical importance of strict compliance with notice and service requirements, New Jersey commercial property owners should always retain experienced counsel before initiating efforts to regain possession from a holdover tenant — indeed, if the landlord is a corporate entity it is required to retain counsel to appear on its behalf in landlord-tenant Court.
If you have questions or need assistance regarding a holdover commercial tenant, please contact Anthony D’Artiglio at Ansell Grimm & Aaron.
