The Austin court of appeals recently joined the Dallas Court of Appeals in concluding a holdover provision in a commercial lease agreement is not an unenforceable penalty.
The holdover provision in Kahn v. Meknojiya stated:
2.07 Holding Over. If Tenant does not vacate the Leased Premises upon the expiration or earlier termination of the Lease, Tenant shall be a tenant at sufferance for the holdover period and all of the terms and provisions of this Lease shall be applicable during that period, except that Tenant shall pay Landlord (in addition to additional rent payable under this Lease and any other sums payable under this Lease) as base rental for the period of such holdover an amount equal to two times the base rent which would have been payable by Tenant had the holdover period been a part of the original terms of the Lease (without waiver of Landlord’s right to recover damages as permitted by law).
The tenant argued that the holdover provision above represented an unenforceable liquidated damages provision in the form of double rent.
Following an analysis of the holdover provision in light of Texas law regarding unenforceable liquidated-damages provisions, the court concluded as a matter of law that the holdover provision above is not an unenforceable liquidated-damages provision.
Postscript: The commercial lease’s holdover provision in the Dallas appeal stated:
Any holding over by Tenant after the expiration or sooner termination of this Agreement shall be treated as a daily tenancy at sufferance at a rate equal to one and one half (1.5) times the Rent and other charges herein provided (prorated on a daily basis).