In the recent case Greater Washington Endodontics, P.C. v. Plaza Office Realty I, LLC, No. 1092-22-4 (Va. Ct. App. Dec. 12, 2023), the Court of Appeals of Virginia upheld a lower court’s ruling that the presence of a tenant’s personal property in the premises after the expiration or termination of a lease constituted a holdover by the tenant under the lease.

Greater Washington Endodontics, P.C. (“Tenant”) and Plaza Office Realty I, LLC (“Landlord”) were parties to a lease agreement set to expire on December 31, 2019.  In October 2019, the Tenant informed the Landlord that it was selling its dental business before the end of the year and would be seeking an assignment of its lease.  In January 2020, the Landlord asked for a status update, informed the Tenant that it was in holdover, and advised Tenant that it needed to sign a new lease or an extension asap to avoid holdover fees.  In February, the Tenant informed the Landlord that the buyer backed out of the deal and that the Tenant would not be renewing its lease.  However, on February 18, the Tenant informed the Landlord that it sold the dental equipment and was coordinating with the purchaser to pick it up, and that it would complete removal of its other personal property by the next day.  The dental equipment was eventually removed on February 26^th.  On March 4^th, the Landlord discovered that the Tenant “left a bunch of items in their suite” consisting of filing cabinets, chairs, television monitors, computers, a telephone, a coffee maker, and other personal items.  On March 13^th, the Landlord sent the Tenant a demand letter for $49,419.07 in holdover rent.  Per the holdover provision of the Lease, the Landlord was entitled to 150% holdover rent for the first month and 200% holdover rent thereafter.  Eventually, after the Tenant ignored several communications, the Landlord removed the items on April 10^th and brought suit.

The trial court held that the continued presence of Tenant’s property in the premises after the expiration date until April 10^th constituted a holdover under the lease.  The court  rejected several arguments raised by the Tenant, including that holdover should not apply because the Tenant neither used nor benefitted from the premises after the lease expired.  At a minimum, there was evidence in the record that the Tenant saw patients until February 18^th.  Regardless, the Tenant left behind its dental equipment until February 26^th and the remaining personal property items were not removed until April 10^th.

The Court of Appeals upheld the trial court’s decision, citing to Carroll Indep. Fuel Co. v. Wash. Real Est. Inv. Tr., 32 A.3d 128, 140 (Md. Ct. Spec. App. 2011) which states that “there can be circumstances justifying a finding that a tenant is holding over even after the tenant has physically left the premises. The circumstances, however, must indicate the tenant’s continued control and possession of the premises, which interferes with the lessor’s use or possession of the premises.”  The Court of Appeals explained, “By leaving its property in the premises, [the Tenant] exercised continued control over the premises until the items were removed by [the Landlord] on April 10, 2020.  This continued control interfered with [the Landlord’s] right to exclusively possess the premises after the expiration of the lease.”

Interestingly, the Court of Appeals noted in a footnote that another provision of the lease which held that any property left behind was deemed abandoned and would become the exclusive property of the landlord upon lease expiration did not apply.  The Court of Appeals reasoned that the provision does not apply because the Tenant exerted control over the dental equipment until it was removed in February (it does not clearly address the other personal property items that were later removed in April).  The Court of Appeals distinguished another case which held that a tenant was not in holdover and not required to remove property it installed when a lease clearly states that the property would unconditionally become the property of the landlord (and may not be removed by tenant) upon lease expiration.

This case is a good example of steps a tenant should take to remove its property upon lease expiration to avoid paying substantial holdover rent or include a right to leave its property behind when negotiating its lease.