Managing an evergreen clause may not be as hard as you think. Below are a few pointers.
LeaseQ, one of the leading providers of equipment financing and leasing options in North America, is offering tips on how lessees can manage evergreen clauses. These tips work for both small businesses and large corporations.
One of the biggest challenges that many businesses in the financing and leasing business need to overcome is failure to read the fine print in their contracts. Evergreen clauses are found in leasing and financing contracts and they are designed to make customers commit to an agreement beyond the agreed term.
Based in Boston, LeaseQ helps business owners understand how the evergreen clause works. It is a clause in a leasing agreement that simply implies the lease will automatically renew unless one party gives a notice in advance that they do not wish to renew the lease. The notice should be given no less than a month before the end of the lease.
Wording Used In An Evergreen Clause
There is no specific way or manner that the wording on evergreen clauses should be organized but all clauses have one thing in common: they make a contract last longer and provide a way out of the lease regardless of how nebulous it might be. Some of these clauses may create serious problems which must be tackled in order for the contract to be nullified.
Evergreen clauses are meant to benefit the lessor rather than the lessee. These clauses can become a problem for many business owners because most people hardly ever take their time to review their lease agreements months or years into the term. As a result, the clause is in effect before the business owner realizes what is happening.
It is important that business owners identify evergreen clauses and only include them in a lease agreement if they are going to benefit them in one way or another. One of the benefits of an evergreen clause is locking in a rate or a price. However, LeaseQ still maintains that it is best to avoid the clause by either refusing to sign a contract that has it or simply having it removed.
How To Negotiate Removal Of A Clause
Body language is one of the things that should be observed when negotiating removal of a clause in a leasing agreement. Business owners should know if the lessor’s body language indicates a green light or not.
Potential lessees should avoid using the word “between”. If lessees offer a range using this word, lessors will only hear the minimum. It is always good to prepare before negotiating any items on the lease agreement, failure to which the negotiations might turn out to be an epic fail.
It’s also important that business owners try NOT to establish themselves as the final decision makers in a negotiation. It is much easier to get more wiggle room if they indicate that they have to consult with someone (an accountant or a lawyer) before making the final decision. While at it, business owners should make it a point to only speak to the person who has the authority to sign off on a deal.
LeaseQ Evergreen Clause Management Tips
There are circumstances where businesses are unable to avoid the evergreen clause. The best way to go about it is to evoke the clause in order to protect the best interest of the businesses. There are two methods that the evergreen clause can be evoked.
1. Sometime within. In this case, a lease agreement will automatically renew for another year unless the lessee or the lessor provides notice to terminate the contract within one month of the end of the current lease term.
2. Sometime before. In this case, a lease agreement will automatically renew for another year unless the lessee or the lessor provides notice to terminate the contract within one month before the end of the current lease term.
It is much easier to evoke the second example because it involves sending a notice by either party. The first example is much harder because it includes creating a calendar item and sending a notice within one month.
LeaseQ is based in Boston, MA and provides solid equipment leasing and financing solutions to businesses looking to expand in an uncertain economic environment. They have a free online platform available to everyone on a 24/7 basis. For more information on leasing and evergreen clauses, simply CLICK HERE.