I agreed to this ?
Every so often a customer wants to upgrade their equipment but can’t because of a clause in their lease or financing documents or other contracts. Some common clauses that catch people by surprise are automatic renewals in multi-housing contracts, renewal options on real estate leases, or blanket liens on new equipment by lending institutions.
Automatic renewals AKA evergreen clauses call for a contract to automatically renew unless the facility notifies the equipment owner that it does wish to renew. The common notification period is between 90 days and one year! If notice is not received in time the facilty is commited for another term which is usually the original term of the contract.
Lease options must be exercised in similar fashion. As the original term of a lease is nearing its end the leasee has a specified period to notify their landlord of their desire to renew for another term. If you miss that window you may lose your lease.
Blanket UCC’s are liens placed not only on the equipment you just purchased but on all other equipment ” hereinafter acquired”. It provides the lender with additional protection against the risk of a loan. With this protection if you paid cash for equipment after you financed some equipment and then defaulted on the loan you may find that the lender claims the additional equipment as collateral as well.
Customers usually find these out at the worst time and when presented with these items often reply “I agreed to this ?” at which time they see their signature on the agreement in question. Avoid these unpleasant surprises. Have your attorney and your accountant review any financing document and lease. They read these all the time and know what to look for. Our attorney always told us ” Your personal signature is your most valuable asset. Do not spend it foolishly.” Good advice.