Renting copier equipment is not a new thing for any business. If you are reading this article, some of you might be stuck with a copier that is no longer helpful for your business.
Now the million-dollar question is – how to get out of a copier lease that is not suitable for your company?
This article discusses how to break free from a copier lease with as minimal financial loss as possible.
Table of Contents
What Is A Copier Lease Agreement?
A copier lease or copier machine rental agreement is a contractual agreement between the renting company and a business. This agreement is enforceable by law.
The rental company allows the business to use the copier for monthly rent. The period of the agreement will usually be from one to three years.
Several providers give businesses an option to purchase the machine at the end of the lease period.
Printing technology is advancing every day, and the market is constantly replaced with printers having newer features.
Let’s suppose you have invested in a high-tech printer for your office. With the current technological advancement rate, the chances are high that your printer will be obsolete in a few years. Thus renting a copier makes more business sense.
How Do Copier Leases Work?
Various leasing companies provide printers after signing a contract. The contract is usually for a period of 12 months to 60+ months, depending on the prior agreement with the provider.
Ensure that you read all the clauses before signing. You could often find provisions that state that the lessee is responsible for selecting a vendor and are accountable for the quality of service they receive. However, once you have signed a contract, it is equally binding for both parties.
Copier Lease Agreement vs. Service Agreement
While copier lease only concerns the copier being leased, service agreement covers a lot more such as supply orders, remote support, machine maintenance, downtime servicing, etc.
In short, a service agreement is a contract that you have made with the dealer concerning all the services that they will provide you and at what cost.
What types of copier service agreements exist?
There are two types of copier service agreements.
One is a Smart Copy Agreements, and the other is a Fair Market Value (FMV) Lease.
The former one combines your services and leases into one single agreement. This is helpful if you have multiple locations and wish to receive a single bill every month.
This is beneficial for businesses as they will be receiving a consolidated bill every month instead of paying each time separately.
In the Fair Market Value (FMV) Lease, the lease agreement will be independent of the service agreement, making it easier to cancel the contract.
If you need to pay multiple bills, FMV may seem a bit of a hassle, but it is worthwhile if you are a single-site business.
You will still have to finish your copier’s payments, but it gives you the flexibility to switch your service provider.
Smart copy agreements present some roadblocks for businesses if you try to get out a copier service agreement. But if you are happy with your current service provider, it is always wise to choose smart copy agreements as you will get a consolidated bill at the month-end.
What should you look for in your copier service agreement?
While going through the contract, carefully check if there are clauses for:
- Automatic Renewals
- Breach of Contract
- Early Termination Fee
Why Do Your Copier Service Costs Go Up?
When you sign up for a copier service contract, the provider will give you a brand new copier. For the first one or two years, there won’t be any problem with the functionality.
But as time goes by, wear and tear happen, and the parts need to be repaired or replaced. The service technician will use Preventative Maintenance (PM) Kits to retain the machine’s working quality.
So if you are wondering why your copier service costs are shooting year after year, it may mean that your machine is getting old and the technician is replacing old parts with newer ones.
What Should You Check Before Breaking Your Copier Lease?
f you are planning to lease a copier, there are several aspects that you should carefully look at in a contract. Most contracts are designed to protect the parties issuing the contract from as many scenarios as possible.
Following are some of the things that you should check in a copier lease:
Breach of contract
Malaysian laws are strict when it comes to enforcing a service contract, so it is pretty challenging to break a copier lease contract.
The only way to get out is gross negligence on the part of the provider. If you think that their service is slow or the machine breaks down, you could add in gross negligence.
Unfortunately, though, there are no legal provisions for that.
To add to gross negligence, it would have to be extreme, like never coming to fix your machine after repeated complaints or never maintaining the device, etc.
A quality service provider will make sure that they build brand trust by any means, even if they have to admit their faults and allow the company to move out of the agreement.
This is a clause in the agreement that allows the service provider to renew someone’s business. If such a clause is included in the contract, you will have to serve a letter of notice at least 30-60 days before the contract’s termination.
Failing to do so will cause the contract to renew itself for an additional 12 months (depending on the agreement). Make sure that you are fully aware of the cancellation procedure of the contract with the company.
Early termination fee
Before getting into a contract, make sure that you are aware of any early termination fees.
Copier dealers often penalize businesses for early termination of the contract as per the Malaysian Contract Act.
Some providers will penalize you if you breach their Intent policy letter, while others will hold you to fulfil the entire agreement.
Six Ways To Get Out Of A Copier Lease
With a lease agreement in place, you have entered into a binding contract for a predetermined amount of time and money.
That said, there are specific ways in which you could get out a copier lease if you are sure that the copier in no way is meeting your requirement.
Let’s discuss how.
1. Review the condition for cancellation
Once you have decided to cancel your contract, carefully look into the contractual agreement to check whether the condition for cancellation is spelt out, along with any fine for early termination.
If you can handle the additional costs that incur early termination, it is better to go forward.
2. Look at the contact for any clauses that might be helpful
Take a look at the contractual agreement carefully to check if all performance guarantees are met and whether a breach of a guarantee allows you to terminate the contract.
If you find a clause that is not met, the copier leasing company may be questioned for a contract breach.
3. Pay off the lease amount
This is a better option if you don’t want to be meddling with penalties. However, having done that, you will be stuck with the copier that you do not wish to proceed with.
You can try to recover some of the cost by selling the equipment, but the prices of used printers are relatively low.
4. Check the agreement for an assumption clause
Sub-leasing the equipment is another effective way to relieve yourself from the lease agreement. Check the contractual agreement for any assumption clause that allows another company to assume your lease’s remaining terms.
5. Through lease transfer (copier lease buyout)
Dealers are willing to take business away from their competitors.
In a new lease, copier lease buyout can be included as one of the terms. This allows the new dealer to earn your business on new equipment. Once a lease transfer is made, the new dealer will take care of the pending balance that you have with your old company.
6. Negotiate with the provider for early lease termination
This can be used as a last resort if all the above steps fail. You could negotiate with the leasing companies for early termination of the lease
When Is A Good Time To Break Your Copier Lease?
Businesses decide to break copier leases due to several reasons. The whole idea of leasing out a copier is that you don’t have to pool in extra funds to pay for a brand new copying machine.
Another reason is the requirement of a high volume of printing for a short-term project. However, irrespective of the reason, it is sensible to cut loose from a lease contract when it is no longer fulfilling your requirement.
Here are some of the reasons for you to do so:
Your maintenance pricing is climbing, and you want a machine that has a lower cost per page
If you find that your maintenance pricing is too high, it is a wise option to break free from your copier lease.
Your business is upgrading and needs a larger high-volume copier or more
Business situations can change at any point in time. You must have leased a copier while you had lesser copying requirements. However, if your business expanded over time, increasing your demand for copies, it might not be worthwhile/cost-efficient to hang on to the old and outdated copying machine.
You found out that competitors are paying less in their copier leases through other vendors
It is possible to avoid unnecessary financial loss if businesses are smart enough to choose the right provider which offers the best service at a reasonable cost. If you find better quality service at a lower price from a different provider, it is advisable not to continue with the current one.
You didn’t read the lease terms and conditions carefully and have signed an unfair agreement
Singing a deal with the rental company should be in the best interest of both. If you have later realized that you have signed an unfair agreement or the rental company has tricked you into the contractual agreement
Your lease has been automatically renewed before you had time to cancel
Sometimes the rental company would automatically renew your agreement before you get time to cancel the deal. If that is the case, it will be an excellent opportunity to cut free from the rental agreement.
What To Do If You Decide To Break Your Copier Lease?
Once you have decided to break away from your existing copier lease, you could follow the below-mentioned tips.
1. Inform the copier leasing company
As per Malaysian law, the first and foremost thing to legally break the lease is to inform the leasing company regarding your intent with the supporting documents.
It is also advisable to retain all legal documents pertaining to the lease agreement, such as communication records, details of any change in the agreement, or any other official actions. This will come in handy if your case gets complicated.
2. Cancel automatic renewal on the lease
Rental companies often add a clause for automatic renewal of the agreement. Often termed as the “evergreen clause,” this requires businesses to give advance notice between 30 to 180 days to the rental company if they don’t wish to renew a lease.
Failing to do so will result in automatic renewal, making it more trouble for some to get out of a contract. While signing the contractual agreement, due care must be taken to prevent the contract’s automatic renewal.
3. Be prepared for early termination fees
Successful lease cancellation is often associated with termination fees. If you are planning to terminate your lease agreement, be prepared to pay the price.
You will also be required to pay the packing fees and ship the equipment at your own expense. Evaluate the total cost in advance and keep the necessary funds ready to avoid any last-minute surprise.
4. Consult a lawyer
If you are uncertain of specific clauses in the contract, it is advisable to consult a lawyer. This might sound quite expensive, but in the long run, this can save you from a lot of legal hassles.
5. Document everything
In case of any legal actions, documentary evidence is required to support a reasonable cause. Thus make sure that you document everything to support your reason.
Copier Machine Lease Termination Letter Sample
Download this sample copier machine lease termination letter to express your intention for an early lease termination.
Usually, copier lease agreements will have an auto-renewal clause for renewing the contracts automatically when the lease period ends.
Make sure that you are fully aware of the terms and conditions to cancel the auto-renewal.
Rental agreements usually require the lessee to send a letter of intent during the leasing company’s specified period. The period will usually be from 30 to 180 days before the termination of the contract.
Thus, if you intend to cancel your copier lease agreement, ensure that you send your letter of intent within the stipulated time frame as required.
Even when you are caught up in a bad lease agreement, do not think you are stuck. There is always a way to get out an unwanted copier lease agreement.
This article has mentioned some essential factors to keep in mind while cutting loose from an agreement with your copier service provider.
You can carefully evaluate your present condition and choose the option suitable for you.
Our quick advice would be, if you are signing a contract for the first time, it is better to:
- Read the contract terms carefully (take a few days to go through each clause and what it means for you).
- Check for alternate options.
- Consult a lawyer that the contract is in your favour.
- Ensure that there are no clauses mentioned for additional service charges, renewal clauses, fines, etc.
- Go for a reputed provider with good customer reviews.