Renewal (SAP Library - Flexible Real Estate Management (RE-FX))

Renewal

Definition

There are two types of rules that you use to renew a contract with a fixed term at the end of its term:

Renewal:

Defines how the contract term is renewed at the end of the contract. The contract is automatically renewed. If the renewal is not to be implemented, it has to be refused (by the contractee or contractor).

Option:

Multiple single and recurring options can be defined in the contract. The contractee thereby has the option of renewing the contract while keeping the existing conditions. An option is not automatically implemented. The contractee must declare his agreement for the option to come into force.

You create notice rules in Customizing. However you can define individual renewal rules in the contract dialog in the Term tab (see Procedure).

Prerequisites

Create your renewal rules in Customizing. To do so, choose the following path in the task level menu:

Customizing ® Flexible Real Estate Management ® Contract ® Renewal ® Renewal Rules

Procedure

Determine renewals for fixed-term contracts in the Term tab. You have the following options:

Contracts with fixed end-date

It is possible to renew a contract with an end-date (such as a term of 01/01/2001 – 04/01/2002). In the Term table, you choose Create Term to call up and simulate renewal rules (see below).

Contracts with options without renewals

There are one-time options as well as recurring ones. If an option is not declared in writing, all the subsequent options are null and void. If the option is declared in writing, the contract renewal takes effect. Notice can only be given on a contract if the period of notice is observed.

If no notice is given and no option declared in writing, the contract automatically changes to one without a fixed term where statutory periods of notice apply.

Contracts with renewals without options

One-time renewals (for instance renewal of two years with a period of six months for submitting rejection). When all renewals are exhausted, the contract automatically changes to one without a fixed term where statutory periods of notice apply.

Recurring renewals (contract is renewed each year for a subsequent year with a period of six months for submitting rejection).

Unlimited renewals (for instance, the contract turns to an unlimited one at the end of its term and can be terminated at the end of the year with a period of three months notice).

Note You can determine the following combinations:

One-time or multiple one-time renewals

One-time or multiple one-time renewals followed by a recurring renewal

One-time or multiple one-time renewals followed by an unlimited renewal

Contracts with options and renewals

If a contract term has both options and renewal rules, the options have priority over the renewals. When all options are exhausted or have not been taken advantage of, the renewal rule automatically comes into force.

In the Term table, choose the term Renewal. In the lower part of the screen, tabs for Renewal and Memo are displayed. Choose a renewal type.

Standard renewal rules are set in Customizing (see Prerequisites). In the contract dialog, you can choose a standard renewal procedure and simulate the function by pressing Simulate Renewal. If you have defined a text in Customizing for the renewal rule, you can display it here by choosing Display Text.

If you wish to define one or more individual renewal rule for a contract as the renewal type, choose Individual Renewal Rule.

In the detail area, a table appears where you can create new rules by choosing Append Row. If you choose Create with Template, you can import rules already defined in Customizing and change these, if required, in the detail view of the contract using Detail View for Renewal.

Example

Fixed-term contract with options and renewals

Period of notice (6 months before contract end)

Option rule (2 options every 5 years)

Renewal rule (one-time renewal for two years with a period for submitting rejection of 6 months; then 1 year recurrently with a period of 6 months for submitting rejection).

	Term	Notice	Declaration of option/ renewal refusal (=notice)
Term of fixed-term contract	01/01/1995 12/31/1999	06/30/1999
1. option	01/01/2000 12/31/2004	06/30/2004	06/30/1999
2.option	01/01/2005 12/31/2009	06/30/2009	06/30/2004
1. renewal	01/01/2010 12/31/2011	06/30/2011	06/30/2009
2. renewal	from 01/01/2012 by one year	each year on 06/30	each year on 06/30

Executing Notice

Navigation area ® Processes ® Renew

Option rules

For an option to become effective, the contractee must give a written statement to this effect. The contractor then has to activate the option in the system.

Go to the navigation area. In the hierarchy of contract data, expand the Processes node. You activate the options by choosing Renew.

Renewals

If the renewal is automatic, there is no need to enter approval or to activate the renewal. You refuse an automatic renewal rule by giving notice.

Renewal refusals that result in a contract termination are handled under Processes Give Notice (see Notice).