Holding Over After a Commercial Lease: Tenant and Landlord Rights in Australia

Commercial leases don’t always end neatly on the expiry date.

Maybe your fit-out took longer than expected, your new premises aren’t ready, or you’re still negotiating the renewal terms. Or, as a landlord, you might have a new tenant lined up but the current tenant hasn’t moved out yet.

When a tenant stays in the premises after the lease expiry date, you’re in “holding over” territory (also commonly called a holdover situation).

This situation can feel informal and “temporary”, but it can carry real legal and financial consequences for both sides. The key is understanding what holding over means, what rights and obligations you each have, and how to document the arrangement properly so your business isn’t exposed.

What Does “Holding Over” Mean In A Commercial Lease?

A holding over situation generally refers to where:

• the fixed term of a commercial lease ends (the lease “expires”); and
• the tenant remains in possession of the premises; and
• the landlord does not immediately take steps to remove the tenant (and may accept rent).

In plain terms: the lease term is over, but the tenant is still there.

Holding over can happen intentionally (both parties want a short extension while they finalise renewal terms) or unintentionally (everyone is busy, and the expiry date slips past without a signed new lease).

Is Holding Over Automatically A New Lease?

Not always - but it can create a new legal arrangement.

What the arrangement looks like depends on:

• the wording of the original lease (many leases have a “holding over” clause);
• whether rent is paid and accepted after expiry; and
• communications between the parties (for example, whether the landlord consents to the tenant staying).

Common outcomes include an agreed periodic tenancy (often month-to-month) where some lease terms continue to apply, or a short “overstay” scenario where the tenant remains in occupation without the landlord’s consent. The labels can vary across states and leases, and the practical effect matters most: what notice is required to end it, what rent applies, and what other lease terms continue.

Why Small Businesses Should Take Holding Over Seriously

If you’re a tenant, holding over can put your location, trading continuity, signage rights, fit-out arrangements, and even your ability to sell the business at risk.

If you’re a landlord, holding over can disrupt your leasing plans, create disputes about rent and outgoings, and complicate your ability to bring in a new tenant.

Even if it’s only meant to be “for a few weeks”, it’s worth getting the legal position clear early.

What Happens If A Tenant Holds Over After Lease Expiry?

There’s no single rule that applies to holding over across Australia. The outcome depends heavily on the lease terms, what the parties do after expiry (especially around rent), and whether the lease is covered by retail leasing legislation in the relevant state or territory (as retail lease regimes can change notice requirements and practical options).

That said, there are several common scenarios we see.

1) The Lease Allows Holding Over (And Sets The Rules)

Many commercial leases include a holding over clause that says something like:

• if the tenant stays after expiry, the tenant becomes a month-to-month tenant; and/or
• the tenant must pay holding over rent (sometimes higher than the normal rent); and/or
• the landlord can terminate with a short notice period.

These clauses are there to reduce uncertainty - but they can also be harsh on tenants (for example, significantly increased rent if the tenant doesn’t vacate on time).

If you’re unsure what your lease says, it’s usually worth having it reviewed before the expiry date. This is exactly the kind of issue a Commercial Lease Review can flag early, while you still have room to negotiate.

2) The Landlord Accepts Rent After Expiry

If the tenant continues paying rent and the landlord accepts it, that can be strong evidence that the landlord has consented to the tenant staying on some kind of ongoing basis.

Often, this results in a periodic arrangement (like month-to-month), where many of the original lease terms may continue to apply as far as they make sense.

However, it’s rarely as simple as “everything stays the same” - especially around termination rights, rent review mechanisms, and options.

3) The Landlord Does Not Consent (And The Tenant Overstays)

If the lease expires and the landlord does not agree to ongoing occupation, the tenant may be considered to be occupying without consent.

In practice, this can escalate quickly, particularly if a new tenant is due to move in or the landlord wants to refurbish or redevelop the premises.

At this point, both parties should get advice early. Landlords may need a clear strategy and documentation around ending occupation (including avoiding conduct that could be interpreted as consent), and tenants need to understand their exposure.

If you’re dealing with an end-of-lease dispute, getting Lease Termination Advice can help you avoid missteps that increase cost and conflict.

4) Negotiations For Renewal Are Still Ongoing

This is one of the most common reasons for holding over. You might be:

• negotiating rent and incentives;
• agreeing new fit-out works;
• waiting for finance approval; or
• finalising the “lease” document while you keep trading.

When this happens, the safest approach is usually to document a short-term arrangement (even if it’s just a properly drafted letter agreement) that confirms:

• the start and end date of the interim period;
• the rent and outgoings payable during that period;
• whether either party can end it early and on what notice (noting notice requirements can differ depending on the lease wording and whether retail leasing laws apply);
• insurance and maintenance responsibilities; and
• whether any new lease will be backdated or start from a future date.

Key Risks Of A Holding Over Lease (For Tenants And Landlords)

Holding over might feel like the “easy option”, but it can create blind spots. Here are the main risks we see for small businesses and property owners.

Risks For Tenants

• Sudden loss of premises: If you’re on a periodic arrangement (or the landlord hasn’t consented), you may be required to vacate on short notice. That can disrupt operations, staff rosters, and customer expectations.
• Higher rent or penalties: Some leases impose holding over rent at a higher rate (for example, 125% or 150% of normal rent).
• Options may be lost: If your lease had an option to renew and you didn’t exercise it correctly (and on time), holding over does not necessarily “revive” that option.
• Uncertainty about repairs and make good: If your lease expires, you may still have make good obligations. Holding over can complicate timing and responsibility for repairs.
• Problems selling the business: If you’re planning to sell, buyers usually want lease certainty. An expired lease with a holding over arrangement can make a sale harder, or reduce value.

Risks For Landlords

• Delays re-leasing the premises: If a tenant holds over, you may be unable to deliver vacant possession to an incoming tenant.
• Disputes about what terms apply: Without clear documentation, it can be unclear whether outgoings, rent reviews, and other conditions continue after expiry.
• Increased conflict and enforcement costs: If the relationship deteriorates, disputes can escalate quickly (and cost time and money).
• Insurance and compliance gaps: If the lease is expired, you still need confidence the premises is properly insured and maintained, and that responsibilities are clear.

The overarching risk is uncertainty - and in business, uncertainty tends to become expensive.

How To Handle A Holding Over Lease The Right Way (Practical Steps)

Whether you’re the tenant or landlord, the best time to manage holding over is before the lease expires.

Here are practical steps that usually reduce risk and help keep negotiations calm and commercial.

1) Check The Lease For A “Holding Over” Clause

Start with what the lease actually says. Key questions include:

• Does holding over create a month-to-month arrangement?
• Is holding over rent payable (and at what rate)?
• How much notice is required to end the holdover period?
• Do the other terms of the lease continue to apply?

If the lease is unclear (or you suspect it’s one-sided), it’s worth getting it reviewed so you can plan your next move with confidence.

2) Confirm The Arrangement In Writing (Even If It’s Short-Term)

We often see disputes because both parties assumed something different. A short written agreement can prevent that.

This doesn’t always need to be a full new lease. Depending on your situation, it might be:

• a short-form “extension” document;
• a deed of variation; or
• a letter agreement that clearly sets out interim terms.

The goal is to reduce ambiguity about rent, outgoings, the end date, and termination notice.

3) Be Careful About Accepting (Or Paying) Rent Without Clarity

Rent payments after expiry can influence the legal character of the arrangement. If you’re a landlord who wants the tenant out, accepting rent without documenting conditions can muddy the waters.

If you’re a tenant, paying rent doesn’t guarantee you have long-term security - you still may be on a short notice period.

4) Plan For Make Good And Handover Early

If you’re likely to vacate, start planning your make good obligations early. This includes:

• what condition the premises must be returned in;
• removal of signage and fixtures;
• repairs; and
• timing for inspections and key handover.

If you need to exit quickly, it’s also worth understanding your options around ending the lease and negotiating an orderly departure - issues that often come up when breaking a commercial lease agreement becomes the practical reality.

5) If You’re Negotiating A New Lease, Consider A “Bridging” Arrangement

If both parties want to continue but need time, a bridging arrangement can help.

Typical inclusions are:

• a defined bridging period (for example, 4-12 weeks);
• the rent amount and any outgoings;
• an agreement that the arrangement ends automatically if no new lease is signed by a certain date; and
• clear termination rights.

This gives the tenant confidence to keep trading and gives the landlord clarity on timeframe and risk.

Common Lease Clauses That Matter During Holding Over

Holding over often turns into a dispute because one party assumes the “old rules” apply and the other doesn’t. These are the clauses that commonly matter most.

Rent, Outgoings And Rent Reviews

Key questions include:

• Is the tenant required to keep paying outgoings during holdover?
• Does the rent increase during holding over?
• Do rent review clauses apply if the lease term has ended?

Even where the lease terms “continue”, rent review timing can be contentious if the fixed term has already ended.

Termination And Notice Requirements

One of the biggest practical issues is: how much notice does either side need to end the arrangement?

Some leases specify a notice period for holdover, while in other cases the position may depend on the wording of the lease, the nature of the tenancy created (if any), and the rules that apply in your state or territory. It also matters whether the premises are covered by retail leasing legislation, which can affect how endings and disputes are handled in practice.

If you’re trying to line up a new site or secure a new tenant, the notice period can be the difference between a smooth transition and operational chaos.

Assignment And Selling The Business

If you’re a tenant planning to sell your business, the buyer will usually want a lease assignment or a new lease.

If you’re holding over, a buyer may be reluctant to proceed unless the landlord agrees to a fresh lease (or at least a documented extension).

Where an assignment is part of the plan, you’ll often need a Deed of Assignment of Lease so everyone is clear on who is responsible for what going forward.

End Of Lease, Surrender And Mutual Exit

Sometimes both parties want to end the relationship cleanly, especially if negotiations for renewal break down or the tenant’s business is changing direction.

In that situation, a documented surrender can help avoid ambiguity about end dates, make good, and final payments. This is where a Lease Surrender Agreement can be a practical way to capture the exit terms and reduce disputes later.

Key Takeaways

• A holding over situation happens when a tenant stays after the lease expiry date - and it can create a new legal arrangement depending on the lease terms, the parties’ conduct (including rent), and whether retail leasing rules apply.
• Holding over isn’t “informal” in a safe way; it can affect rent, termination rights, options to renew, make good obligations, and business sale plans.
• Rent payments and acceptance after expiry can change the legal position, so both landlords and tenants should act carefully and document what’s agreed.
• The safest approach is to confirm any holding over arrangement in writing, especially around rent, outgoings, notice periods, insurance, and the intended end date.
• Small issues can escalate quickly during holding over, so getting the lease terms checked early can prevent expensive disputes later.

If you’d like help with holding over, negotiating a lease extension, or documenting an exit, contact Sprintlaw on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.