When does Evergreen Lease Clause apply in a property deal?

An Evergreen Lease Clause is a provision in a lease agreement that automatically renews the lease for an additional period at the expiry of the current term unless either party provides formal written notice of termination within a specified timeframe. It is designed to ensure lease continuity without requiring active renegotiation at each expiry.

When the Evergreen Clause Is Triggered

• The lease term expires without either party serving a termination notice within the required notice period
• The tenant continues in occupation beyond the lease expiry without a new lease being executed
• Neither party actively initiates lease renegotiation before the notice deadline passes
• The automatic renewal period commences immediately following the expired term

Key Features of an Evergreen Lease Clause

• Specifies the notice period required to prevent automatic renewal, typically 30 to 90 days before expiry
• Defines the duration of each automatic renewal period, commonly one year at a time
• May include rent escalation provisions that apply automatically upon each renewal
• Continues indefinitely until one party formally terminates with the required notice

Implications for Landlords and Tenants

• Landlords benefit from uninterrupted rental income without vacancy risk between lease terms
• Tenants benefit from continued occupancy security without the need for lease renegotiation
• Both parties must actively monitor lease expiry dates to avoid unintended automatic renewals
• Tenants seeking to vacate must serve notice well in advance to avoid being locked into another term

An Evergreen Lease Clause is a useful mechanism for ensuring lease continuity, but it requires careful management by both landlords and tenants. Missing the notice window can result in unintended lease renewals with significant financial and operational consequences for either party.