Security Sales & Integration April 2021 - 57

EXECUTIVE DECISIONS

Legal Briefing by Ken Kirschenbaum

Coming to Terms
With Monthly
Renewals
A proper alarm
contract has
an automatic
renewal clause.
Subscribers
who insist on
deleting that
provision don't
realize the
consequences.

Ken Kirschenbaum, an
SSI Industry Hall of Famer,
has been a recognized
counsel to the alarm industry for 45 years and is
principal of Kirschenbaum
& Kirschenbaum, P.C.
(kirschenbaumesq.com).
The opinions expressed in
this column are not necessarily those of SSI, and not
intended as legal advice.

securitysales.com

SS2104 pp56-57 Biz Fit-Legal.indd 57

▶ MOST ALARM CONTRACTS have a " term "
specifying a number of years the agreement is to
run and an automatic renewal provision. Generally the renewal term is month to month and can
be canceled on 30 days' notice prior to a renewal.
Some renewal notices have longer terms, at times
equal to the original term. Statutes that prohibit
or condition automatic renewals generally exclude a month-to-month renewal, which is why
the Standard Form Agreements (alarmcontracts.
com) includes it.
The term provision raises a few issues ...
Can you change the term?
Yes, the length of the contract is a business decision. If you're making an investment in the
subscriber you may need a longer term to recoup
your investment. Consider also the service plan
term. A new or takeover account may have more
repair service at the beginning of the relationship
and you'll need a longer term to recoup all the
service calls at the beginning of the relationship.
Also be careful because there will come a tipping
point where the older system requires more repair
service. It's your job to figure out the right term.
How can you change the term?
You cross out the printed term, say five or 10 years,
and handwrite the new agreed upon term. If you
have electronic contracts your form will have to
accommodate that change if you permit it.
Do you even need a contract or one with a
" term, " and if you cross out the entire term
paragraph will the contract simply renew
month to month?
A proper contract with your subscriber is essential. It's your contract that defines your duty
owed to your subscriber; the contract eliminates,
reduces or shifts exposure and liability. The contract enables you to find a central station willing to monitor your accounts and an insurance

ken@kirschenbaumesq.com

company willing to offer you E&O coverage. It's
the contract that creates value and equity in your
business. Remember this question as you're going
to hear it when you want to sell your company,
your alarm contracts and accounts, and finance
your operation: " What's your RMR under contract, and what contract do you have and has every customer signed it? "
A proper alarm contract has an automatic renewal clause. Subscribers who insist on deleting
that provision don't realize the consequences.
Alarm companies that permit deleting the automatic renewal are looking for trouble. There are
only a few options once the automatic renewal
provision is deleted:
▶ Alarm company assumes burden of notifying subscriber the contract will be coming
to an end, along with all services.
▶ Subscriber assumes duty of letting alarm
company know the contract and services
are coming to an end.
▶ No one has any obligation to notify the
other that the contract is coming to an end
or has terminated, along with all services.
Then there are only two options: alarm
company continues to provide service after
termination of contract or alarm company
terminates all services.
In most cases, when the subscriber insists on
deleting the automatic renewal clause there is no
mention of any notice requirement. Upon expiration of the contract the alarm company is faced
with the two options, continue service without
contract or terminate (obviously a new contract
can be entered into). If the alarm company continues service it could reasonably argue that the expired contract continues, by implication or some
other theory. Do you really want to gamble your
business on that argument? I can't recommend it.
If the contract expires then so does your protection; so does the value in the account. You
will be gambling your company for the monthly
charge, and believe me if there is a claim it won't
be worth it.
You should explain to your subscriber they
must agree to a month-to-month renewal. If
they won't, be sure to include in the Disclaimer
Notice and Schedule of Equipment and Services
that all services will end upon expiration, without notice, and in the case of fire alarm service,
you will be notifying the AHJ of termination of
service. No exceptions.
APRIL 2021 Security Sales & Integration

3/22/21 10:43 AM

http://www.kirschenbaumesq.com http://www.securitysales.com

Security Sales & Integration April 2021

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