Holding over on a commercial lease: should you spend on the premises or borrow while you wait?

What does it mean to hold over on a commercial lease?

You hold over when the lease term ends, you keep trading from the same premises, and the landlord lets you. There’s no new lease. In practice you’re on a month-to-month footing, usually on the old terms, and either side can typically end it with about a month’s notice. The NSW Small Business Commissioner describes the same pattern and recommends getting the landlord’s agreement to the arrangement in writing.

For an owner with no property of their own, that’s a strange place to be. You’re trading normally, your customers have no idea anything has changed, and yet the ground under the business could move in four weeks. This guide is about the money side: what’s sensible to fund while you hold over, what isn’t, and how to use the time.

How did you end up holding over?

It matters, because it tells you how much leverage you still have.

• The option window passed. Many tenants miss the date to exercise a renewal option. In Victoria, the landlord must give written notice of the last exercise date no later than three months before the option lapses. If they don’t, the deadline is pushed out by three months from the date notice is actually given. If you’ve missed a date, check whether the notice was ever properly given before assuming it’s gone.
• There was no option. For Victorian leases without a renewal option, the same commissioner page says the landlord must notify the tenant 6 to 12 months before expiry, either offering renewal or saying none is planned. A late notice extends the lease by six months from the notice date.
• Negotiations dragged on. Rent review talks run past the end date and nobody wants to sign. This is the safest version of holding over, because both sides intend to land somewhere.
• The landlord is keeping its options open. It may be thinking of selling, redeveloping or finding a higher-paying tenant. Here the month’s notice is a real risk.

State rules differ, and the Victorian protections apply to retail premises under that state’s retail leases law. Check your own state’s small business commissioner for what applies to you.

What are the real risks of holding over?

Four things change quietly when the term ends.

1. Notice. You can usually be given a month. A fixed-term lease gave you years.
2. Rent. With no fixed term, the landlord may charge more. Ask for the figure in writing.
3. Renewal. Holding over doesn’t guarantee a new lease. Law-firm commentary points to cases where a month-to-month tenant was refused one.
4. Make-good. The make-good clause generally still applies when you finally leave. Our guide on make-good at the end of a lease covers how to cost it, and it’s worth doing now, not on notice day.

Which spending is safe while you hold over?

Here’s the rule we’d give any tenant without property: match what you fund to how long you can prove you’ll be there. If you can only prove a month, fund things that survive a move.

Spend	Safe while holding over?	Why
Stock and inventory	Yes	Moves with you
Wages, marketing, working capital	Yes	Not tied to the premises
Movable equipment (coffee machine, tools, shelving on wheels)	Mostly	It comes with you, but check you could use it elsewhere
Built-in joinery, plumbing, extraction, signage fixed to the building	No	Becomes the landlord’s or must be removed
Cosmetic refresh	Only if cheap	Brings in sales, but you may never see the payback
Make-good reserve	Yes, build it	Cost arrives whenever you leave

The same logic applies to borrowing. A multi-year term loan for fixed fit-out on a month-to-month tenancy leaves you repaying for something that may be sitting in a building you’ve left. If the works are essential, our guide to fit-outs as a tenant shows how to stage them.

How do lenders read a premises with no lease term?

Calmly, in most cases. Unsecured lenders size a limit on your turnover, your trading history and your bank statements, which is the whole idea of what an unsecured lender reads in your statements. The building isn’t the security, so an expired lease isn’t an automatic problem.

What they do ask is a question you should answer first:

• Are you staying, renegotiating or moving?
• If you move, will trading be interrupted, and for how long?
• Is the loan for something that stays with the business?
• Does the repayment period outrun your likely tenure?

A short plain-English note covers it. For example: “Lease expired in September; we’re in talks on a three-year renewal, and the funds are for stock and wages.” That reads far better than a lender discovering the expiry from your documents. For a general view of how the lease sits within your application, see our page on leased premises.

If the money you need is for something that’s safe to fund, check your options here. It takes about a minute.

Example: the physio clinic month to month

This is an illustrative example, not a real business. A physiotherapy clinic’s five-year lease ended in August. The owner is holding over while the landlord decides whether to sell the building. Trading is steady. The owner wants $60k for two new treatment tables, a software upgrade and a few months of marketing.

Worked through with the table above:

• Tables and software are movable or portable, so they’re fine to fund over a short term.
• Marketing is working capital and doesn’t depend on the building.
• A planned $40k refit of the reception area is parked until there’s a signed lease.
• The owner puts a monthly amount into a make-good reserve and gets a rough make-good quote.

The loan is sized to the clinic’s turnover, and the term is kept short enough that it would be repaid even if the clinic had to relocate within the year. The owner also uses the time to ask for a written holding-over arrangement and a draft of the renewal terms. Nothing about the plan relies on the building lasting.

What should you do in the first 30 days?

1. Find the lease and read three clauses: holding over, make-good and the option. Note dates.
2. Ask for the holding-over terms in writing: the rent and the notice period.
3. Check for a notice you never received. If you’re in Victoria, compare against the commissioner’s rules above.
4. Get a make-good estimate from a builder or your property manager.
5. Open the renewal conversation. Offer a term you can afford. A landlord with a tenant who’s paying on time often prefers certainty.
6. Pause fixed spending until there’s a signed lease or a decision to move.
7. Line up funding for the move you hope you won’t make: a relocation can need a new bond, fit-out and overlapping rent. Our guide on a forced move walks through that cash.

When is it smarter to move than to stay?

If the landlord won’t offer more than month to month, if the rent has jumped, or if your fixed works are about to be wasted, a planned move on your timetable usually beats an unplanned one on theirs. Start looking while you still have the premises. A lender will also read a planned relocation, with a lease offer or heads of agreement in hand, much better than a business that’s suddenly been served notice.

For short-term cash during the transition, a flexible facility can bridge the gap; see unsecured working capital for how those are sized and repaid.

Holding over with no property: see where you stand

A month-to-month tenancy doesn’t have to freeze the business. Plenty of owners without property keep trading and funding sensibly while they sort out the lease, as long as the loan fits the tenure they can prove.

Telling us about your business takes about a minute, and asking won’t touch your credit file, because nothing is checked unless you decide to go ahead. Your details stay with us rather than going out to a pile of lenders, so there’s no flood of calls. A real person reads your situation, including the lease position, and phones you to talk through what fits. Please answer the form accurately, including how long you expect to stay in the premises and what the funds are for, so we can point you to the right option first time.

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