Automatic Renewals and Evergreen Clauses
The furor over these provisions continue. On the one hand, lessors who do not include some form of holdover protection or notice of return in their leases sometimes find themselves unable to collect full rentals if the lessee fails or refuses to return the equipment. Perhaps worse, what if the lessee returns equipment abruptly after orally promising to purchase it. Some lessors, including banks, find themselves ill-equipped to depose of equipment without a significant lead time .
On the other hand, we continue to hear about lessors who include provisions allowing them to continue to collect "rent" after the end of a $1 purchase option lease. We have also been presented with lease forms in which the end of term responsibilities of the parties seem to be deliberately misleading.
As we have reported in our newsletter, several states have enacted laws addressing these issues. Unfortunately, these laws will affect honest leasing companies trying to protect themselves as well as those who, at least arguably, need to be regulated.
We continue to maintain that ethical behavior is the best way to minimize government regulation and that unscrupulous lessors should be isolated and identified to the public.