October 29th, 2019 by Function4
“How do I get out of a copier lease?”
As a copier dealer, this is a question we commonly hear from businesses unhappy with a lease they signed with a competitor’s leasing company.
The business may want to break their copier lease contract for several reasons, including changing needs, financial hardship, outdated technology, poor performance, or misrepresentation by the leasing company.
In this blog, we’ll help you examine the options available for legally terminating a copier leasing relationship early without a penalty or with minimal losses.
What Is a Copier / Multifunction Printer Lease?
A copier lease is a legally binding contract between a leasing company and a business. The leasing company allows the business the use of a copier for an extended period, usually one to three years. In return, the business makes regular payments to the leasing company. The business has the option to purchase at the end of the lease period.
The business is legally bound to pay installments to the leasing company for the entire duration of the copier lease, and conditions required to terminate the contract are strictly defined. As such, this means that copier leases are not especially easy to get out of.
Copier / Multifunction Printer lease vs. Service Agreement
Before we continue, let’s discuss the difference between a copier lease and a service agreement. The service agreement is a separate contract with a qualified copier dealer or service provider (not the leasing company) to provide regular maintenance and repairs for an agreed-upon monthly fee.
This article is primarily concerned with how to cancel the copier lease with the leasing company, not the copier service contract agreement with the dealer.
Six Ways to Break a Copier / Multifunction Printer Lease
A broken lease occurs when one party terminates the agreement before all of the preset terms are met. Once you have determined that your copier lease is no longer meeting your business needs, there are six methods you can use to legally get out of your lease:
Review conditions for cancellation in the contract.
Your first action should always be to review the lease terms and conditions. Conditions for cancellation by either party should be clearly spelled out, along with any penalties for early termination. See if you qualify to cancel the contract and what associated costs you may incur.
Look for what constitutes a breach of contract.
The copier you leased may fail to fulfill its advertised capabilities. Check to see if the lease contract includes certain performance guarantees that are not met. If it does, then the copier leasing company may be in breach of contract. Performance clauses are more typically included under the copier service agreement, however.
Check for an assumption clause in the lease.
An assumption clause allows another company to assume the remaining terms of your copier lease. Sub-leasing this way effectively relieves you of the financial burden of monthly installments. Still as the original lessee, you would retain responsibility for the leased equipment if anything should happen to it.
Transfer the lease to a new copier dealer through a buyout.
A copier lease buyout (not to be confused with a $1 buyout lease) can be included in a new lease. Copier dealers commonly buy out leases to take business away from a competitor. This allows the dealer to earn your business on newer equipment. The copier dealer will cut a check to you to pay off the remaining balance you have with your old leasing company. The catch here is that you are adding the remaining balance of the old lease to the cost of the new lease.
Ask the leasing to renegotiate or terminate the lease early.
Although copier leasing companies are rarely willing to renegotiate or terminate early, you never know until you ask.
Pay off the lease early.
This option usually does not incur any penalties and may even save you some money. However, you will be stuck with owning equipment you may no longer want. You can try to recoup some of your costs by reselling the copier, but the returns on used copiers and printers are typically low.
Advice to Follow When Breaking a Lease
Consult with a lawyer.
If you are uncertain about the terms of a lease, you can ask a lawyer to review your lease and inform you of your legal options. Legal fees don’t make this the most economical course of action, but it can potentially save you a lot of trouble.
Gather evidence to support your reasons for opting out of the lease early. You are literally making a legal case, and you will be required to show evidence to obtain a ruling in your favor.
Inform the copier leasing company.
To break the lease legally, you must inform the leasing company of your intent and show your supporting documentation. It is also wise to keep records of any communications from the leasing company, changes made to the agreement, or other official actions taken. This will help support your case if further complications arise.
Cancel automatic renewal on the lease.
Some leases contain clauses that require you to give advance notice in writing if you do not want to renew a lease. This is also called an “evergreen clause,” and you may be required to give anywhere between 30 to 180 days’ notice. Failure to meet these deadlines can trigger an automatic renewal of the lease, making it that much more difficult to get out of. Read the automatic renewal terms of your copier lease and meet any requirements necessary to prevent them.
Be prepared for early termination fees.
Most successful lease cancellations will result in some sort of early termination fee. Also, you will need to pay costs to pack and ship the equipment back to the leasing company and purchase insurance for the equipment’s return trip. Determine what these fees will total in advance and keep the funds available to avoid any unpleasant surprises.
Keep in Mind
Getting out of your copier lease can feel like an impossible task. Know that it is possible by understanding your options and carefully examining your situation. You’ll need to determine which will be most effective for you.
To help avoid this problem on future copier leases, be sure to:
- Shop around for copier leasing companies.
- Read and compare lease terms closely.
- Research and ask questions about anything you don’t understand.
- Be alert for red flags such as payment adjustments, renewal clauses, and surcharges.
Function4 would be happy to be a resource for any additional questions you may have.
Disclaimer: This blog is NOT legal advice. A copier lease agreement is a legally binding document. We recommend speaking to your attorney before making the decision to break a copier lease.
Posted in: Business Technology