Recently, in the case of Townhomes of Beverly v. Luangrath, the Appeals court answered this question.
In the Luangrath case, the court first looked to the plain language of the Lease. The court properly recognized the defendant as a “tenant at sufferance”, and noted that the correct measure of damages is the ‘then current fair rental value’ of the premises, unless, of course the Lease (contract) determines otherwise.
In the Luangrath’s case, the lease provided that a holdover tenant would pay the current market rate on a month-to-month basis, unless the landlord provided sixty days notice of a rate change. Fortunately, for the landlord, it provided proper notice of the increased holdover rent, so the court allowed the prior ruling in the landlord’s favor.
Although the landlord’s rate increase was upheld in this case, the facts underline the importance of a carefully crafted lease agreement. In many cases, the landlord / client may prefer to stipulate in the Lease itself a percentage increase in order to alleviate any future obligations to notify a holdover tenant or to at least reduce the likelihood of expensive litigation surrounding the matter. And, as a potential tenant reviewing the landlord’s Lease Agreement, this case serves as a reminder that careful evaluation of the Lease terms are critical, and that the failure to seek legal advice could be an extraordinarily expensive mistake.
