How often are you auditing holdover status on retail tenants before you acquire, because the rent roll will not tell you

This turns up constantly on small retail. Take a six unit strip with a rent roll showing $114,400 annualized, everything current, the broker calling it stabilized. Three of those tenants turn out to be month to month holdover, one of them a nail salon eleven years in the space where a renewal conversation never once happened. The asking price gets built on a 7.2 cap against that income as though it carried a weighted average lease term. It does not. The thing that has never worked is relying on the estoppel to catch this. Tenants sign what they are handed, they do not flag their own holdover status, and half the time the estoppel is drafted off the original lease anyway, so the expiration date carries forward unchallenged. What surfaces it is pulling the original lease and the first amendment if there is one, then doing the date math yourself against rent commencement rather than against what the rent roll calls the term. That gap is where the exposure lives. On a deal in that shape the usual outcome is two leases renegotiated before close and a price reduction on the third, because a holdover tenant that comfortable will not sign anything longer than six months. The cap rate that gets people to the table is rarely the cap rate the deal closes on.

What is the plan when a holdover tenant gets notice and simply does not leave?

Month to month holdover on a NNN anchor reads fine on the rent roll but it tanks refinance options. A lender will discount holdover space heavily when it computes weighted average lease term. Take a strip where two holdover tenants cost 18 months of WALT, and the DSCR math falls apart at that point. The audit worth running is lease commencement plus original term against closing date, every tenant, before looking at the financials seriously. It takes maybe two hours on a six unit strip if the estoppels are clean. What shows up repeatedly is sellers pricing on in place income without discounting for renewal risk, and the gap between their cap rate and a disciplined buyer's cap rate on those holdover spaces is usually 40 to 60 basis points.

Rent rolls earn less trust than they get. Take a seven tenant center where three of the tenants are on month to month holdover past 14 months and the OM calls the occupancy stable and long term. Nobody in that chain has to lie for the number to be wrong. The tenants are paying, so the income line is real, but price in the re-leasing risk and the TI exposure if any of them walk and the yield can compress by almost 90 basis points. On a $2.1M center that is not a rounding error. The part that actually costs people is the comp selection. The sales used to support that cap rate almost certainly carried actual term behind their income, so two bad assumptions end up stacked on each other.

Seller's broker not volunteering it is the charitable version. I've seen listing packages where the lease summary column literally says "current" next to a tenant whose lease died 14 months prior, and that word does all the heavy lifting nobody wants to examine.

The thing I've never seen work is catching this during the walkthrough or in conversation with the owner. They genuinely do not know half the time, or the number in their head is what the lease said in 2019. You find it in the actual document with the expiration date, or you don't find it.

I'm in Phoenix markets right now and I've started pulling every lease abstract myself before I even run numbers, because a holdover tenant in a 12k square foot inline space with no signed renewal is priced like a 5-year term by whoever built that pro forma.