Automatic Renewals in Equipment Leases

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The good news is that courts interpret a contract as a matter of law based in large part on reading the document creating the renewal right. You indicate that your lease provides automatic renewals unless terminated by the tenant, but that is not usually enough to create a forever renewing lease. If the lease does not have language that clearly and explicitly provides for renewals and perpetuity, Florida courts will interpret the renewal provision to provide for only one automatic renewal.

In the recent case of Chessmasters, Inc.

Automatic Renewal Clauses in Business Contracts May Require Mandatory Notices

For each extended five-year period, lessor is entitled to an increase in rental price of not more than 10 percent current rental price. Another appellate court found the following language was also inadequate to create a perpetually renewing lease: This lease shall automatically renew under the same terms and conditions as listed above, unless either party, by written notice within 60 days of the expiration date, declines to renew said lease.

According to one Florida appellate court in the case of Sheradsky v. Basadre, what happens to the lease after the first renewal period is that it becomes a tenancy at will, which means it continues for as long as both parties agree it may continue. That decision involved a washing machine equipment lease. Generally, the tenant under such circumstances continues in possession with the permission of the landlord and that transforms the lease into a lease for the time for which periodic rental payments are made i.

Automatic Renewal Clauses in Your Contract

That arrangement can be terminated by giving notice to the tenant depending upon time period for which periodic rental payments are made. The law generally implicates contracts relating to the lease of business equipment or for the provision of business services, but contains numerous exceptions. For instance, business contracts do not include contracts for the lease or purchase of real property, contracts for the lease of medical equipment, or contracts relating to equipment or services for personal, family, or household purposes.

The initial disclosure provision requires the seller of the services to inform the customer about the renewal or extension either on a separate form when the customer enters into the business contract, or in a conspicuous manner in the contract. Under either method, the disclosure must contain certain elements. For instance, the initial disclosure must contain a statement that the business contract will be renewed or extended unless the customer declines, and the duration of the automatic renewal or extension period.

A disclosure must also inform customers about any increase in charges that will apply under an automatic renewal or extension, what the customer must do to decline renewal or extension, and the date by which the customer must decline renewal or extension.

Automatic Renewal Clauses

For business contracts that have an automatic renewal or extension term of more than one year, sellers of services must provide a reminder notice about the automatic renewal provision. The reminder notice must contain similar elements as the initial disclosure. The statute provides certain additional rules about when and how the seller must provide the reminder notice.

Seller Must Provide Information To Make the Provisions Enforceable

For instance, sellers have various options to give customers written notice, including personally or through certified, registered, or U. The statute has a specific remedies section, allowing customers to bring an action or counterclaim for damages against a seller for violations under section Damages can include twice the amount of the damages incurred by the customer, including reasonable attorney fees.

However, the seller can protect him or herself from liability by taking the steps necessary to ensure compliance with the law.

Balboa Capital Review - Pharmacy Equipment Leasing

She practices business and intellectual property litigation and has almost 20 years of experience in the health care field. Law School.

There is change afoot in the equipment leasing marketplace, and it portends a potentially seismic shift in the perception, usefulness and utility of the well-tested HOHW clause. Corporations with private fleets in the U.

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As the economy continues to strengthen, this trend will continue to grow and so will the need to replace aging equipment. Recognizing the Signs of Financial Distress. Diagnosing financial distress, and the ability to address the relevant issues, is a necessary role of board members and senior executives.

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