Potential End of Lease Problems Part Three: Neglected Assets
Remember when you were younger and you really wanted that one thing? You know that toy, or dress, or maybe car, just that one thing that you really needed to get on with your life? So you saved up, worked out some deals, convinced a few people here and there as to why you really needed that shirt, that new gadget, a brand new phone. When you finally get your hands on it, after all those arrangements and promised you made, it only takes a few months or years before you forget all about it…
We’d hoped we would grow out of that eventually or, at the very least, that it wouldn’t extend into our professional, business-minded work lives. That, however, is not always the case. There is a surprisingly large number of businesses, including industry market leaders, who seem to forget what assets are on lease and which ones are nearing their end of lease notice dates.
Surely, being in a lease agreement, the lessor would call you out if you fail to meet your notice deadline?
Surprisingly, failing to return your asset on time may not cause as big an uproar from your lessor as you might expect. In fact, some lessors will be more than happy to see an automatic extension of your primary lease term. Without effective lease portfolio management software, organisations can easily overlook assets whose leases are soon to expire, particularly in larger companies that lease in high volumes.
This can result in further payments on an asset that has lost its economic value – even if you wanted to retain the asset, depreciation should have attract a reduced rental, yet you are still paying the primary rate.
Shocking and costly as it may be, it is understandable that so many businesses neglect their leased assets. Often, the person who initially arranged the lease is not the operational user and the lack of communication between these two parties means that leased assets become part of the office furniture. Items such as desktop monitors, water coolers and even warehouse racking could be financed with a lease, but is everyone aware that this equipment is owed back to the lessor? Old telephones that are now lost in storage or broken shelving that has been thrown away may have actually been acquired via a lease, which you will continue to pay for until the asset is returned or some other action is taken.
The lease will contain a notice period; sometimes as little as a week or as much as 12 months. It will also contain a provision that specifies what will happen if you fail to give notice - typically the agreement will continue and rentals will carry on being charged at the full rate – this is rarely a good option, will soon get very expensive and is difficult to cancel once the extension has begun.
A complex problem, but with a simple solution: plan ahead, pro-actively manage your lease agreement, give notice in plenty of time and communicate with the lessor. Missing your lease notice dates may be understandable, but has expensive consequences and means you miss out on the best lease deals, all of which can be so simply avoided.
Specialised lease management software as a service (SaaS) platforms have numerous features to help lessees regain control of their lease management. Innervision’s very own Lease Optimisation and Information Software, LOIS, includes end of lease notice functions and staggered alerts, ensuring you are alert to and have plenty of time to act on any leases that are soon to expire. Whether you choose to extend the lease or terminate the agreement, LOIS can help make sure you have the necessary tools to make the end of lease process a smooth transition.
For more information on Innervision’s end of lease services and unique lease portfolio management software, LOIS, click here.
Alternatively, you can give us a call to find out how Innervision may be able to help your business leverage the potential within your new and existing lease agreements, on: +44 (0) 20 7283 9422
For more information of end of lease processes and advice throughout the lease lifecycle, you can download our ultimate guide to leasing basics by following this link.
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