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Holdover Hangar Tenants: The Cost of Expired Leases

T

The Hangar Direct Team

hangardirect.com

lease managementrevenuetenant management

A holdover tenant is one whose lease has expired but who is still in the hangar, still paying, and still being accepted. It feels harmless, since the rent keeps coming in. In practice, holdover status freezes the rent, the insurance requirements, and the rules at whatever the old lease said, often for years. City auditors in San Diego have flagged it repeatedly. The fix is a plain calendar discipline and a holdover clause that costs the tenant something.

Most airports do not decide to let leases lapse. A renewal letter does not go out, the tenant keeps paying, the check gets deposited, and five years later someone notices the lease expired in 2021. This post covers what holdover status usually means legally, what it costs, what audits have found, and the order in which to clean it up.

Holdover rules come from state landlord-tenant law and from your lease, not from the FAA. This is a general explainer, not legal advice. Your airport attorney is the authority on how your state treats holdovers, and your FAA Airports District Office is the authority on any federal obligation questions.

What Holdover Status Usually Means

The basic pattern. The lease term ends, the tenant stays, and the landlord keeps accepting rent. San Diego's City Auditor puts it simply: a holdover occurs when a tenant keeps occupying the premises after the lease term ends, and if the landowner keeps accepting rent, the tenant can continue to legally occupy the premises.

The legal result depends on two things. The first is what your lease says happens after expiration. The second is your state's default rule when the lease is silent. Many leases and many states land on a periodic tenancy, often month-to-month, on the same terms as the expired lease. Some do not. Ask counsel which applies to you before you rely on it.

What "same terms" means in practice. In many holdovers the old rent, the old insurance minimums, the old indemnity language, and the old use clause all keep governing. That is the core of the problem.

What It Costs

Rent stops tracking the market. San Diego's 2022 citywide lease audit found that allowing a lease to go into holdover "can prevent the base rent from aligning" with current values. Rent keeps following whatever path the old lease set, so a lease with weak or no escalation falls further behind market every year.

Parity problems with new tenants. Order 5190.6C, Section 9.2.d, allows different terms for tenants "whose leases have expired." It recommends making new rates effective when all similarly situated tenants can move together. A pool of holdovers at old rates next to new tenants at current rates is exactly the uneven picture that section is meant to prevent. It invites a discrimination complaint from the tenant paying more.

Stale insurance and use clauses. If your current form requires higher liability limits, a hangar use certification, or commercial-use disclosure, a holdover tenant on a 2009 lease may not be bound by any of it.

Missing escalation. Section 9.5.e says ground leases of five years or more "should contain a provision for periodic adjustments based on a recognized index," and Section 12.3.b(4) says "all leases for a term of more than five (5) years should contain provisions for periodic adjustment of rates." A holdover rolling forward on an expired lease that never had an escalator compounds the gap every year.

Accounting changes. A holdover can change the lease term you report under GASB 87, so finance needs to know. See our GASB 87 post.

What Audits Have Found

San Diego, 2015. The City Auditor's performance audit of the Airports Division, which runs Montgomery-Gibbs and Brown Field, found that "Many airport leases have been in holdover status for long periods of time." Of the division's 29 leases, the auditors identified 11 (about 38 percent) in holdover. The audit also found that "Rent adjustments have been completed, but with some errors," and that aircraft parking, landing, and storage fees "have not been reviewed and adjusted, as required by Council Policy and Administrative Regulation."

San Diego, 2022. The citywide lease management audit led with the finding that "The City allows a much higher share of leases to remain in holdover than other jurisdictions." At the time, 101 of 421 active leases (24 percent) were in holdover. It tied holdover directly to rent falling out of line with market value.

San Diego, 2025. A City Auditor audit of the Mission Bay and regional parks funds found that 11 of 31 Mission Bay rental agreements (35 percent) were in holdover. It said this "may be leading to foregone revenue for the City and potential or perceived favoritism amongst lessees." The auditors noted that some of the agreements call for "the assessment of two-times fair market rent," which is the kind of clause that only works if someone applies it.

San Diego airports, 2026. It keeps happening. Minutes from the City's Airports Advisory Committee in April 2026 note that a restaurant tenant's lease "expired in December 2025, and tenant is now in holdover" after negotiations on a new lease had been finalized.

The pattern is not limited to one city. It shows up wherever expiration dates live in a filing cabinet. The lease audit findings post covers the broader set.

Holdover Done on Purpose: Boulder City

Not every month-to-month arrangement is drift. Boulder City, Nevada, shows a deliberate version.

  • The lease. According to the City's 2020 appraisal, a group of privately built hangars sat on a ground lease that began in July 1989 for 20 years plus one 10-year renewal, "set to expire July 2, 2020."
  • The reversion. The Boulder City Review reported a city statement that 28 hangars were "reverting to the city on July 2, 2020, under the terms and conditions of the lease agreement," after a court denied the owners' request for an injunction.
  • The month-to-month rate. The City Council then approved a month-to-month rental agreement "charging tenants $4 per square foot for the hangars," the market rate recommended by the City's appraiser, which the appraisal states as an annual rate.
  • Later rates. Later reporting describes rents of "$4.56 per square foot annually" and "$4.84 per square foot per year."

The point is not the rate. Boulder City knew the date was coming, had an appraisal in hand, and set month-to-month terms by council action. That is the opposite of a lapse.

Write a Holdover Clause That Works

If your lease form is silent on holdover, add a clause at the next revision. Elements to discuss with counsel:

  • No implied renewal. Acceptance of rent after expiration does not renew or extend the lease.
  • Month-to-month by default. Either party can terminate on stated notice.
  • Holdover rent. Set it at a stated premium over the last rent or over current market. Some San Diego agreements use two times fair market rent. Whatever you choose, apply it.
  • Current terms apply. During holdover, the tenant must meet your current insurance minimums, rules and regulations, and hangar use policy.
  • Surrender and removal. Spell out what happens to the tenant's aircraft and property if they leave or are told to leave. This pairs with your state's abandoned aircraft law, if it has one.

Cleanup Order of Operations

If you already have a stack of holdovers, work through them in this order.

  1. Build the list. Record every lease or rental agreement, its end date, any options, current rent, and whether rent has been adjusted since expiration.
  2. Sort by exposure. Put first the largest rent gaps, the oldest expirations, any commercial use, and any tenant below current insurance minimums.
  3. Read each expired lease's holdover language. Then confirm your state's default with counsel.
  4. Decide the path for each tenant. Options are a new lease on the current form at current rates, a month-to-month agreement on current terms, or notice to vacate.
  5. Send written notice. State the expiration, the current terms offered, and a deadline.
  6. Move similarly situated tenants together. Section 9.2.d favors rate changes that apply to everyone in a class at once.
  7. Fix the calendar. Set renewal notices 180, 120, and 60 days before every expiration, with a named owner.
  8. Tell finance. New terms can change GASB 87 reporting.

What This Means Practically

  • Pull every expiration date into one list this week. Include month-to-month rentals.
  • Count your holdovers. If more than a handful of leases are past term, treat it as a project, not an inbox item.
  • Compare holdover rents to current rates. Write down the annual gap.
  • Check insurance on each holdover. Measure against your current minimums, not the old lease.
  • Add a holdover clause to your form. Include premium rent and current-terms language.
  • Set renewal reminders. Put them in a system someone checks, not a personal calendar.
  • Apply the holdover rent you already have. If your lease says double rent, bill it or amend it.

Holdovers are a tracking problem before they are a legal one. Hangar Direct keeps lease end dates, renewals, and month-to-month status visible so they get handled on time at platform.hangardirect.com.

Sources

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