Many of the office equipment leases that were in place prior to Covid19 will be coming to term shortly. Those were leases that would have started from 2017-2019 and were termed for 60 months.
We're all familiar with the Evergreen Clause and those of us that are pro's in the business understand why we ask for a copy of the original lease. We're looking for the language for the return of the equipment to the leasing company.
Evergreen Clause
There is an Evergreen Clause on most office equipment leases. The Evergreen clause can be different for each lease, however what I see most is that the lessee needs to contact the lessor not less than 90 days and not more than 120 days prior to the end of the lease. In addition if the lessor is not notified the lease will renew for 12 months. Egads!, can you image a client being held hostage because they did not notify in time?
COVID19 Trap
What I call the Covid19 trap is not intentional from the lessor or the dealer that help procure the language of the lease. The trap was created when COVID19 reared it's ugly head. With businesses closed and funds were not flowing many leasing company offered a furlough of the lease payments. Those furloughs were usually two to three months where the lessee did not have to make a payment(s). Of course the payment did not go away but was added to extend the lease by additional months.
Thus with reps asking a copy of the lease, there are many of us (including me) that are may not have asked the client if they accepted a furlough of the lease during COVID19. The furlough really comes into play when we're attempting to upgrade a competitors devices. Thus when we are advising the client for the terms and notification of the Evergreen clause we could be off by two to three months of when the client needs to send the lease return notification to the lessor.
Avoid the Trap
A few helpful tips for upgrading those leases
- Ask the client/lessee if they had a COVID19 furlough of the lease
- If they did, you need to ask for documentation of the furlough
- If they did not, you may want to add a covenant to the order doc that they stated there was no furlough in place
- Ask the client/lessee to call the leasing company an verify the dates for lease return notification. Of course get this in writing via email or document to cover your ass
- I believe it's always a best practice with all leases to always get the notification (furloughed or not) to get documentation from the leasing company for the dates that the return letter will be accepted
Notification of Lease Return
While I was doing my research I spoke to a rep in the leasing business and two tenured sales reps. Everyone gave me a different interpretation of the notification date. Of course we were not talking about a lease that had a COVID19 furlough applied.
- Was it 90 days prior to the date that the lease was signed?
- Was it 90 days prior to the date the lease delivery and acceptance was signed?
- Was it 90 days prior to the date the the leasing company counter signed the lease (this usually happens when the lease is counter signed by the lessor)?
I want to believe the date we need is when the lessor counter signed the lease. Of course I would like to hears from others to verify.
One interested note was brought up by a Print4Pay Hotel member. He stated that the leasing companies do not tell the client how to notify them. Whether by fax, in writing (snail mail), or certified mail.
Hope this helps others, pleas hit the reply section for comments!
-=Good Selling=-
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