KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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NJ fire alarm customer questions long term contract and wants to switch alarm company
/ Don’t miss contract sale
January 6, 2023
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NJ fire alarm customer questions long term contract and wants to switch alarm company
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Ken,
I have a customer that I have a fire alarm contract (yours of course- the Fire All in One). Can you please help me with the customer’s comments? They are looking to switch to another company because of having all services under one company. The fire contract is for 10 years and they have 6 years left.
Name withheld
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Here are the customer’s new consultant’s comments:
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“We have consulted low voltage for customer. We provide installation, service, monitoring and inspections for security and fire protection at multiple sites.
As we were reviewing their existing services we reviewed the monitoring agreements you hold for them. The one thing that stands out to me is that the agreements are all ten year agreements. Based on the NJ contract law adopted in 2014, data transmission contracts (monitoring) cannot exceed five years. Here is the law: “NJ Contracts Law N.S.A.40A:11-1 et seq. April 2014 (8) The supplying of any product or the rendering of any service by a company providing voice, data, transmission or switching services for a term not exceeding five years. My only two questions regarding these agreements, were they reviewed and approved by a NJ licensed contract lawyer post 2014 and if so could you please provide their information? Monitoring and service contract law changes in NJ every few years including the new service agreement law of 2022."
Customer is willing to negotiate a contract buyout but only if the original contract meets NJ contract law standards. I’m looking forward to our conversation.”
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Response
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K&K looked at this law when it was enacted and determined that it did not apply to alarm monitoring services or contracts. We won't be having any conversation with your competitor but he's certainly able to have his say on behalf of the customer when we sue him on the contract, which will be by way of arbitration.
This customer is under a 10 year contract, the Fire All in One. If the customer stops paying the recommended action is contacting K&K’s collection department [call Kathleen Lampert at 516 747 6700 ext 319 or KLampert@Kirschenbaumesq.com]. The competitor’s offer to discuss settling the contract if he thinks its enforceable is not particularly appealing to me, and I am sure it’s not acceptable to you. The customer owes 80% of the balance of the contract, and legal fees and costs if we have to pursue the customer.
It’s the start of 2023 and I’m not a fortune teller, but I believe we [that’s me, you and especially the customer base of every alarm company] are headed into financially challenging times. I expect interest rates to continue to rise; customers will exhaust their credit lines, and lenders will tighten and eventually significantly limit credit. This is likely to cause an increase in financial failure for individuals and businesses. Don’t shoot the messenger.
The alarm industry weathered the covid shut down but what’s coming is quite different. During covid the government decided to bail out individuals and businesses, throwing massive amounts of money into the economy. That open faucet of funds is pretty much dried up.
Where am I going with this? You need to be more diligent than in recent memory about collecting your receivables. A customer that typically paid within 30 to 60 days, and all of a sudden doesn’t, is likely in trouble. The alarm invoice is usually not a major expense, and if this relatively small expense can’t be paid it signals much greater financial difficulty. You need to contact your customer as soon as the typical payment schedule is not met. That means a customer who pays within 30 days needs to be contacted on day 35. The customer who typically pays within 60 days, needs to be contacted on day 65. The customer who pays after 90 days needs to be brought “into line”. Only the most reliable customers should be permitted to withhold payment beyond 90 days. If no other good reason for that guideline comes to mind then here’s one: When you sell your alarm accounts the over 90 day customers will be excluded; therefore the over 90 day customers aren’t worth anything from an equity valuation. That and the longer this customer stretches you out the more likely it will be cheaper to just switch alarm providers, assuming the customer remains in business or in the premises.
By the way, and for those who don’t use K&K contracts, now is the time to “switch” and get the Standard Form Agreements. You must use K&K contracts to use K&K’s collection department, and that alone is “worth the price of admission”. Contracts are on sale for next few days; don’t miss out.
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CONTRACT SALE NOW THROUGH JANUARY 13, 2023
Join the Concierge Program before you order contracts and get additional 10% discount. Join here: https://www.kirschenbaumesq.com/page/concierge