Configuring Default End-of-Term - Product Advisory
Introduction
When configuring the Asset Types settings in the LeaseAccelerator application, the Default EOT Treatment field is REQUIRED and should be populated with either evergreen (month-to-month) or terminate without fee. Do not leave this field blank when configuring the economic life and depreciation methods for a product category.
Default EOT treatment is the end-of-term option to be used to record a lease in the absence of a defined EOT recordation. This means if no EOT option is configured for a schedule as being automatic, AND no other action is taken at end of term, this is the default action that will be taken, either evergreen (month-to-month) or terminate without fee.
Please note that when you configure the default EOT treatment, it will apply to all future leases booked and will not apply retroactively to existing leases.
Additional Information on EOT Options
When populating the EOT Options tab for leases in a Portfolio Intake Workbook (PIW), consider the following:
If a deal is loaded with EOT options, and one of those EOT options is marked as not requiring Lessor notification (which is different from zero-day Lessor notification), then that option is what will be exercised at end of term in the absence of any other decision or activity.
If a deal is loaded with no EOT options, or all EOT options require notice (even if 0 days notice), then by default, the system will evergreen the assets at end of term in the absence of any other decision or activity.
If a deal is loaded with no EOT options, or all EOT options require notice (even if 0 days notice), and the default EOT treatment is set to terminate without fee, then by default, the system will “other” the assets at end of term in the absence of any other decision or activity.
Placing 0 in the Min Days Notice column of the PIW means that the option requires explicit election but can be exercised as late as the last day of the lease with no advance notice. It does NOT mean that the option will be automatically exercised. Conversely, leaving the Min Days Notice column of the PIW blank means that the EOT option will be automatically exercised if no other action is taken.
Evergreening (which could be month-to-month renewal or terminate without fee) will take place on the first day after all advance notices have been missed, but not less than 27 days before end of term. So if all EOT options require 90 days advance notice, the deal will be evergreened 89 days before end of term. If all EOT options do not require advance notice, so Min Days Notice is 0, the deal will be evergreened 27 days before end of term.
Evergreen renewal is for one payment period; for a lease with annual payments, default renewal is for one year. You can circumvent this behavior by explicitly configuring a month-to-month renewal option with monthly payments with 0 min days notice. You should specify a payment amount in that scenario.
Declaration of intentions resets the clock on evergreening; evergreening will not take place until end of term has been crossed but will be recorded with a backdated date of one day. Intentions are only applicable in the month in which they are declared.