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Accidental Auto-Renewal is a Costly Mistake

Unless you're Regus, in which case it’s a windfall.

· Contract Management,Office Lease,Regus,Auto-Renewal

We receive thousands of Regus complaints every month.

Here are two stats that might surprise you.

  1. Inadvertent auto-renewal accounts for 11% of all Regus complaints we get.
     
  2. But since most cases that feature an auto-renewal complaint also feature several additional complaints--which are often the reasons the person has decided to leave Regus in the first place--I estimate that somewhere between 25% and 35% of all customers who leave Regus are surprised with an accidental auto-renewal at the end of their lease.

That's a lot of unhappy people and perhaps a big part of why Regus keeps trying make its problems someone else's by trying to sell its company.

Have an auto-renewal complaint yourself? Welcome to the club. No one’s happy to be here :(

regus complaints

In plain English: Regus profits massively on its customers’ mistakes.

That means that surprise auto-renewals are a massive revenue source for Regus--since, as Regus must see it...

If we can turn every churning customer into 12-24 more months of contract revenue, we can continue to afford our dreadful brand reputation and maintain revenue growth YoY.

I estimate the average number of months a customer stays at Regus is just under 18. So, by maintaining this auto-renewal racket, Regus is unilaterally increasing its customer lifetime value by somewhere around 33%--importantly, not by being better, such that customers want to stay longer, but by being sneaky, such that customers are duped into paying for an extra 6-12 months of service they did not want.
 

Let’s have an adult conversation about responsibility.

In my experience, most professionals believe that fulfilling one’s obligations is part of being a professional. If you say that you will do something, then you should do it. And this is probably the ethic Regus would cite to justify why its enforcement of auto-renewal is perfectly justified: if you did not intend to auto-renew, then why did you not give us notice that you wanted to terminate your agreement?

There is gaping problem with that position, though. The professional ethic that one should fulfill the obligations it freely accepts is premised on mutual consent and understanding, both of which appear to be missing in probably 90% of cases I see of Regus auto-renewing someone unbeknownst to that customer. Let me explain what I mean.

can i get out of my regus lease

First, take consent.

If I promise to give you the moon in exchange for a one-time $10 payment, and you decide to take that deal; and then I slap a pre-written contract on the table and say “sign here,” whose fault would it be if the terms of the contract turned out to not match the promise that I made you? Regus might say that it would be your fault for not reading the contract and noticing these difference, but is it really? Again, speaking purely in terms of ethics, if Regus leads you to believe that the terms of the deal include A, B, and C, but then Regus slips in an additional term D in hopes that you do not notice it in the contract, doesn’t that attempted (and often successful) misrepresentation rob you of you opportunity to fully consent?

A good test of what I mean here is this: can a person actually consent to something he/she was not aware of? Probably not, with maybe one exception. If I sign a blank check and consent to letting you fill in any amount you like “because I trust you,” then you might be able to find a few scenarios in which the consent to trust someone was valid even if the entrusted party later abuses that trust.

But that is not what happens with Regus auto-renewal complaints. Instead, the pattern appears to be that the Regus salesperson will tell you just about anything you want to hear to try to induce you to sign the agreement. And in many of those cases, not only do you not have the legitimate makings of consent--whereby the salesperson walks you through the agreement line-by-line before you sign, making sure that you are aware of each obligation and that you freely consent to them--but many of those promises that Regus salespeople make turn out to be lies. Here is a sample of some that I have seen:

  • “No, this isn’t a lease. It’s a month-to-month contract that you can cancel at anytime.” It turned out to be a 24-month lease.
     
  • “Yes, we can provide you with a VLAN that you need as part of the deal, at no extra cost.” Customer signs the contract, Regus IT people setup the VLAN a few weeks later, Regus bills customer $6,000 for VLAN setup.
     
  • [Regus sales manager]: “Yes, if you sign today, I can give you a 20% on both of your offices over the next 24 months.” Customer signs, gets first bill and notices no 20% discount, Regus says sales manager was not authorized to offer discount (even though his offer was in writing), and claims it will not honor the discount.
     
  • This one is my personal favorite. Regus area manager negotiates the rate for a customer who would be paying Regus $80,000/year. Everything was in writing, and the customer signed the agreement. And in fact, Regus honored the negotiated rate at first. Then, 3 months later, the area manager left the company, and Regus said that it would not honor the rate that its former employee offered. The difference in price was something like $20,000/year.

What these examples demonstrate is that Regus has both a pattern of over-promising and under-delivering (as the last two examples show) and a pattern of failing to obtain legitimate consent when executing agreements (as the first two examples show). Sure, the fact that it was a 24-month agreement, or that there would be an extra $6,000 charge, might have been buried somewhere in the agreements that these customers signed. But that does resolve the more fundamental issues of the contract not matching the sales promises and the salesperson probably crossing his/her fingers in her pocket, hoping the customers just signs without digging too deep.

Takeaway: If a Regus customer is not fully aware of the terms of auto-renewal in the Regus contract, then I contend that Regus has failed to obtain mutual consent.

evergreen clause

Now, take understanding.

Let’s pretend that Regus salespeople are mostly walking people through these contracts before they are signed. Is that good enough? Again, I would argue no, and here is why.

[Sales person says to potential Regus customer]: “Just so you know, this agreement will auto-renew unless you terminate it.” [Potential customer]: “Got it.” Does that fully inform the potential customer of all of the obligations that auto-renewal clause entails? No. And this is something I see all of the time. The potential customer logs that pointer somewhere in his mind and is aware that he must tell Regus if he wants to terminate the contract at the end of the term. Then, 10 months into the 12-month contract, he remembers this and tells Regus that he is terminating at the end of the 12 months. Regus says no so fast, the deadline for giving notice of termination was “three months” prior to the contract end date. So, as Regus is happy to inform this person, you are stuck with Regus for another year: “will you be paying with check or credit card?”

The fact is that Regus operates as though the terms of its auto-renewal clause are precise. There is a contract start date, a contract end date, and a deadline for giving notice. All of these dates are fed into Regus’s billing system to automate auto-renewal. Why, then, does Regus not simply expose those same dates to the customer so that he may setup similarly precise reminders/automations? I think you know the answer.

Here is an example a reminder Regus sends when your notice of termination deadline is approaching:
 

evergreen clause example

This email was sent at 1:02 AM, and it was just 7 days before the deadline. Both of these are calculated decisions. Many of these email reminders might go to your spam or promotions folder, and how often do people check those? Yea, probably not more frequently than once every month. So a 7-day advance notice is not much a reminder. But even if this reminder email was seen on the day it was sent, how much time do you suppose it takes the average business to plan and execute major business decisions like which office to work from? Yea, a week is probably inadequate for most businesses--all calculated decisions by Regus.

The point is that, for many Regus customer, these reminder emails, which are only sent once and just a week before the deadline, might be the one and only time that a customer has a full understanding of the auto-renewal terms. And that raises questions about the legitimacy of the agreement given the apparent lack of full understanding at the time it was signed.

Here is how Regus can fix this and stop being shady.

Whatever dates affect auto-renewal, write those exact dates on the contract itself. Don’t continue to let your automated billing system be more informed than your customers. Then, send not one reminder, but three: 90 days in advance of the deadline, 45 days in advance, and 14 days in advance. And while you are at it, include a “how are we doing? question to solicit customer feedback, because I suspect there will be a tight correlation between how customers think you are doing and whether customers opt to churn. As it is today, you must have a warped sense of self, since many of the customer who do not churn--due to contractual gamesmanship on your part--might actually despise you.

are automatic renewal contracts enforceable

Note: this survey does not include state laws relating to auto-renewals of real estate
property. But interestingly, there is debate whether a Regus contract is a lease agreement or a service agreement, or whether it is even a contract for real estate property. According to the Regus Services Agreement: “This clause reflects the fact that the Customer is taking a serviced office agreement and not a lease and that Regus retains overall control of the Business Centre. The Customer has no real-property or commercial property interest of any kind in the building where the Business Centre is located.” This clause allows Regus to hide somewhere between laws pertaining to consumer contracts and laws pertaining to real estate contracts, a place which Regus sometimes calls “hospitality contracts,” which, conveniently. lack most of the legal protections against things like surprise automatic renewal.

Is this asking too much of Regus?

No. As the above index shows, many US states actually have laws dictating what providers must do for an auto-renewal to be enforceable. Surprise: all of the things I suggested above come from many of those laws. So I am not wishfully thinking here. It is an ethical problem Regus must fix. But very soon, it will be a legal problem.

Dear Regus, getting out ahead of this today will save you from the tough wake-up call that will occur when your customer churn rate tracks tightly with how your customers rate you. Hint: the chart will look like an X.

Here is an excerpt from a Veeto demand letter to Regus about an auto-renewal complaint.

If an auto-renewal term is something you would like your customers to mutually agree to, then why would you not provide an unambiguous interpretation of the clause you drafted? Easier to be sneaky, perhaps? Why would you not make notice deadlines clear? Why would you not send reminders that provide clear instructions on how and where to give notice? I wonder if the answer lies in the total number of Regus customers who inadvertently auto-renew every month, due to what appears to be your strategic failure to conduct business in good faith. Just how lucrative is this sneaky auto-renewal racket anyway? Millions of dollars every month? Maybe more? A sum more valuable than your brand reputation? We cannot speak for all Regus customers, of course. But we can tell you what we think: Regus cares more about contracts than customers, because customers can choose to churn when mistreated, but a contract...ah, that you can just unilaterally auto-renew. Who needs customers when you have contracts?

👆 As you can see, we are tight penpals with Regus ;)

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