KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and white list ken@kirschenbaumesq.com ************************************ Subcontractor clause in All in One / Comment on Ron Davis’ webinar April 7, 2020 ******************** Subcontractor clause in All in One ******************** Ken I have a potential client who is questioning the paragraph in the Commercial All in One regarding subcontracting special services. Here is what he said: “There's a part in there that I don't recall from the other contracts about you having sole right to assign work to third parties but you not having any responsibility for the errors, negligence, etc. of said third parties. I don't like that, as I have no control over whom you bring in and no recourse if they do a poor job, as I have no agreement with them, only you, and you refuse to be responsible for their work. So, as I see it, either you have to give us control to approve/deny and negotiate with any third parties you bring in or you need to take responsibility for their work as the main contract holder.” We don’t use any subcontractors onsite; it would be only alarm.com and our central station. How would you advise I respond to this? Would it be OK to remove/modify this? anon ********************* Response ********************* You should not remove or change this provision. You are subcontracting the monitoring services, and perhaps other services. Your central station relies on this provision, and will any other subcontractors you engage. While I have no problem with you disclosing to your subscriber who subcontractors are, I am certain that you don’t want your subscriber dealing with them directly to negotiate contract terms. How to respond to this challenge: The paragraph actually recites what the law is anyway, at least in most jurisdictions, if not all. As the contractor you are contractually responsible for performance of the contract, whether by you or others you engage – the subcontractors. You are also responsible for your own negligence. However, you are not responsible for the negligence of your subcontractors, and your subcontractors are not responsible to your subscriber for breach of contract because the subcontractor doesn’t have a direct contract with the subcontractor. The subscriber does have recourse against the subcontractor for the subcontractor’s negligence. So your subscriber is wrong when he writes that he would have no recourse for a poor job or damage caused by a subcontractor. The subscriber can hold you liable for your breach of contract, which will include the subcontractor’s work, and can hold your subscriber liable for its negligence in performance. You can supplement the contract terms with this explanation because it’s the law anyway. ********************* Comment on Ron Davis’ webinar on March 24, 2020 on selling accounts ********************* Ken For what it is worth here are my thoughts regarding several of the issues that rose in today’s webinar: 1. Multiples of net RMR- In Canada almost all knowledgeable buyers buy accounts net of the cell and alarm.com charges paid to the provider on the accounts. This deduction from gross RMR is usually much greater today than it was 5 years ago simply because but a much higher % of accounts use cell or alarm.com today. But the details are important. When working for a Seller I try to negotiate that these monthly costs be deducted at the Buyers rate not the Sellers and there can be a difference of several dollars per account per month. The Seller is often smaller than the buyer and accordingly often has higher rates. Secondly watch out for alarm.com rates. Today they can be higher than $10/acc/mth for some accounts. Because of these extra charges the overall margin on monitored accounts is often lower than it used to be. 2. Valuing fire inspection accounts- Again I thought your approach to valuing these accounts was more common than Ron’s. The facts are that the margins on items like fire inspection, service and guard revenues are all lower (25- 40%) than for most monitored accounts (50-80%). Lower gross margins usually means lower values. In Canada the way we value a fire inspection account is a lower multiple (15-25) is applied to the gross revenue on inspection account. We would not deduct the cost of inspection and use the original multiple times the net revenue. 3. For everyone’s information multiples of EBITDA as a method of valuation can and should be used to value both fire service and integration businesses- not just fire companies. And oddly enough these integration businesses can have monitored accounts in them but they are not valued separately. 4. Valuing monthly pre-authorized payment (PAP) alarm accounts- In Canada account bases with a large % of PAP accounts would attract higher values. Why because it is so much easier and less expensive to bill and PAP accounts usually have lower attrition. The other wrinkle is up here PAP out of a bank account is even better than PAP on a credit card because credit cards have to have their expiry dates updated every 2-3 years- a pain. The other benefit to using PAP for the Seller is that it eliminates any deferred or unearned revenue deduction. 5. Lifetime warranty- Ken I think you are wrong on your views re lifetime warranty. Lots of dealers over the years have used use lifetime warranty and for very good reasons. ADT in Canada used to use it all the time. Firstly lifetime warranty helps to sell the system. Secondly it is usually sold at an extra $5-10/mth/acc so it increases the RMR on the account. Thirdly it avoids having to argue with the customer on service bills which is a big deal particularly in the residential market. There is a place for life time warranty but it can reduce the value of the accounts being sold for obvious reasons. Hope this all helps. Regards, Victor Harding Harding Security Services Inc. Toronto , ON M4T 1A3 www.hardingsecurity.ca *********************** Reaching K&K during the lockdown ********************** During this crisis the most efficient way to reach our attorneys is via email. You can also call and if not picked up, leave a message and your call will be returned promptly. Here are a few departments to contact directly: alarm / security / pers / fire department: Ken - Ken@Kirschenbaumesq.com or call and leave a message with return number at 516 747 6700 x 301 health care professionals: Jennifer Kirschenbaum,Esq 516 747 6700 x 302; jennifer@kirschenbaumesq.com alarm licensing: Alison Gallub,Esq 516 747 6700 x 317 AGallup@Kirschenbaumesq.com; or Eileen Wagda, Licensing Administrator, 516 747 6700 x 312 EWagda@Kirschenbaumesq.com Employment issues: Kieran Bastible 516 747 6700 x 315 kbastible@kirschenbaumesq.com; or Jennifer Kirschenbaum,Esq Concierge Alarm Clients have full access through our Concierge Program Coordinator, Stacy Spector, Esq 516 747 6700 x 304 or SSpector@Kirschenbaumesq.com Collections: [courts are shut down at this time, so don't expect much progress. We will however continue to prepare papers on our end so that we will be ready when the courts normalize] Kathleen Lampert 516 747 6700 x 319 KLampert@Kirschenbaumesq.com Pending litigation: Caroline Wallet,Esq CWallett@Kirschenbaumesq.com 516 747 6700 x 305 and Maureen Biel,Esq 516 747 6700 x 303 MBeil@Kirschenbaumesq,com Bankruptcy and debt collection issues: Steve Sheinwald,Esq 516 747 6700 x 309 SSheinwald@Kirschenbaumesq.com or Scott Dillon,Esq 516 747 6700 x 318 ********************** Webinars Series 2020 - Register now ********************** We are pleased to offer the below FREE Webinars. Originally scheduled as Roundtable discussions at the ISC we are now opening up attendance in webinar format. Please sign up for one or more webinars and we hope you’ll participate in the discussion. Other webinars TBA For those of you who had a Free private meetings scheduled with Ken Kirschenbaum at the ISC show, please call Stacy Spector,Esq at 516 747 6700 x 304 to re-schedule the meeting via Skype ************************* When: April 7, 2020 at 12 PM ET Topic: discussion on the current state of the Financial/Capital Market Stability in the Security Industry and necessary agreements needed for security companies Presented by: Troy Iverson, VP of Sales, Brian Davis, CFO of AvantGuard Monitoring Centers Hosted by: Ken Kirschenbaum, Esq Who should attend: owners, CFO, managers, Register here: https://attendee.gotowebinar.com/register/7558739325686839811 **************** To order up to date Standard Form Alarm / Security / Fire and related Agreements, click here:www.alarmcontracts.com ************************* CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** NOTICE: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles *********************** THE ALARM EXCHANGE
This area is reserved for alarm classifieds, alarm company announcements, solicitations, offers, etc. There is no charge to post a listing here.Include your contact information, phone, email and web site. If you would like to submit a post, please send an email to ken@kirschenbaumesq.com. To create a reciprocal link to our website, click here. ************************************************ Getting on our Email List / Email Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. You can read articles and order alarm contracts on our web site www.alarmcontracts.com ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
