October 9, 2010
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Question:
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Hi Ken,
Question: When purchasing contacts from another dealer, is it normal
industry practice that those clients/contracts include service with the monitoring?
Has any one in our industry ever purchased just the monitoring contracts?
You raised the question in that e-mail that stated that "our contracts" which
we utilize (purchased from you!!!) state that the software for monitoring
belongs to us (the Dealer) so if another alarm installer is servicing it, that
alarm dealer could be sued??? fined???
Thank you for your assistance. I love you e-mails. They are very
informative. And yes, we do utilize your contracts, and you were more then
right when you said they need little or no changing!
Thanks again...
LJH
Danbury, CT
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Answer:
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Monitoring and Service are two separate services, requiring two separate
contracts (or one that deals with both services - although I recommend separate
contracts). My monitoring contract provides for the installation, programming,
leasing and servicing for the communication device (or software) only. This
monitoring contract is used when the subscriber owns the equipment, other than
the communication software. Obviously monitoring is not possible if the alarm
system is inoperable, however, it is the subscriber's responsibility to keep
the system in working order, not the alarm company who only has a monitoring
contract.
That's where the Service contract comes into play. My service contract
has the option of "per call" relationship, or fixed periodic payments, and
covers normal wear and tear problems with the equipment, and importantly,
service on request, not inspection and maintenance.
If you are purchasing subscriber contracts (accounts) from another alarm
company you need to examine the contracts to determine what the Selling Alarm
Company has agreed to do, monitor or service or both. A subscriber contract
that requires monitoring and service too is obviously worth less than a
contract that calls for just monitoring, because it's cheaper to just monitor
than to provide service as well. I recommend retaining counsel for this to oversee the transfer and build in an appropriate guarantee and restrictions, where applicable, which my firm handles.
Valuation of the alarm contracts depends on many factors, but generally a
monitoring contract will sell for more than a service contract. Your cost for
monitoring can be determined and you would expect to have little service
problems with just a monitoring contract. On the other hand, a service
contract might require unanticipated work, labor and material, and your costs
are less predictable. Keep in mind that this is a very broad and general
analysis and that service contracts often command the same valuation as
monitoring contracts and if priced right with the subscriber could be worth
even more than a monitoring contract.
When another alarm company takes over your account, if it's a monitoring
account, use of the panel should be a problem since the code is not often
available to the subscriber. The software is your property. Certainly you can
sue the subscriber for breach of contract. Action against the other alarm
company depends on many factors. For you to be successful getting law
enforcement involved with "theft" of your property I would imagine that you
would have to be in an area with nothing else going on. In other words, I
doubt you could get cooperation and I have never heard of (or thought of to be
honest) seeking police assistance. Most likely a civil matter for private
lawsuit would be the only avenue of potential relief.
Thanks for the compliment on my standard contracts. They are the product
of many years of input from many alarm companies all over the country.
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