"Overhold, Evergreen and Option date" - What do these terms mean?

Here's a question posed to me by one of my clients;

I have been leasing for years and although I have heard the term "Overhold", I have never really considered my company to have been affected by the circumstance.
As it turns out, after a careful review and audit, we have indeed discovered that we have paid more than we had to on a few leases. This mainly was a result of simply not paying attention to our lease portfolio.
Is "Overhold" a common occurrence in this industry and isn't what they do unjust? Further, what can a company do to remedy this problem?

Jerry R. Thorold CFO

My Reply:
I have been evaluating equipment leases for organizations for a number of years and have found 'Overhold' to be a recurring oversight.
Before addressing the term 'Overhold' you need to understand a few other terms.

'Evergreen' clause - a clause in the leasing contract which allows a lease to continue past its end-of-term with or without your knowledge. This clause sets up the lease contract to self-renew each year or from month to month until the lessee gives formal notice of its termination.

'Option date' is the date by which the lessee must inform the leasing company of their end-of-lease intentions. Typically it is 1 to 6 months prior to the end-of-term of the lease.

'OverHold' is the term used to describe a lease in which no notification was given to the leasing company prior to the option date and because there is a 'Evergreen' clause, the lease self-renews and you continue to make unnecessary lease payments and often incur penalties.

The lease agreement you negotiated three or four years ago may not look so good if you miss your option date. In a situation where an 'Overhold' exists, and you are paying additional payments as it is not unlawful for the leasing company to debit your account for as long as you have use of the asset or until you have given proper and formal notification.

How do you know when to give the option date notification to the lessor if you don't have a good handle on when your lease is coming due?

An easy solution exists.

The software, TrackMyLease^TM, is an inexpensive "set and forget" sort of application. All you do is fill in a few fields and the software does the rest, giving you plenty of notice, well in advance of your IT and equipment lease option dates. Now you can decide what you want to do with the equipment, and not go into costly "Overhold".

For more information, please visit www.TrackMyLease.com