Using the CPI for rate increase April 30, 2024

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Using the CPI for rate increase
April 30, 2024
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Using the CPI for rate increase
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Ken,
          Many years ago, before I started using your contracts, I used a contract that allowed for rate increases based on the Bureau of Labor Statistics' Consumer Price Index (CPI) for my area, indicating “this increase can be measured from the start of the contract to the effective date of the increase.”  Thankfully, your contract does not tie rate increases to the CPI.
          Unfortunately, I still have a number of subscribers under the older CPI contract and, for decades, I've been remiss about raising rates. However, on all new accounts, and when I upgrade a system that changes the method of reporting, such as from telephone dialer to iP/Cellular, I use your contracts. And there is, obviously, a higher rate involved due to the new reporting technology when upgrading or signing new subscribers.
          As everything has increased in cost for my company, such as taxes, insurance, business licenses, state licensing, cost of equipment, utilities, and other related overhead expenses, I have left the monitoring rates as they were from the start. As new subscribers were added throughout the years they were signed to a higher rate, but there are some subscribers paying a lower rate than others.
          I would like to increase the rates, slightly, for subscribers whose rates are far below what I believe are cost effective for my company, particularly the ones not signed under your contracts.  But I am concerned about running afoul of the original contract that holds me to the CPI.  The CPI in my area, as I interpret it, is currently 6.6 percent for goods and services compared to last year at this time.  Since my older contract mentions, “this increase can be measured from the start of the contract to the effective date of the increase,” would this mean the rate increase can exceed the CPI 6.6 percent rate increase for this year?  In some cases, the monthly rate of a basic telephone account is below $20.00 for some subscribers. To bring such an account up to something that is cost effective, where the rate has never increased over 20 years, I would need to increase the rate by 25 percent. In the most severe case that would be a $5.50 monthly fee increase. Other accounts would only need a modest rate increase, which can conform to the CPI 6.6 percent.
Also, checking my state’s regulations on rate increases I can’t find anything that would cap rate increases for this type of service.
          My question is about the percentage of the increase, based on the language in my old contract;
“....this increase can be measured from the start of the contract to the effective date of the increase.”
          Would this mean the rate increase can exceed the CPI 6.6 percent rate increase for this year?
  Thanks.
Anonymous
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Response
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          I bet Mitch Reitman could figure this out.  Or, why not ask the genius lawyer who wrote that idiotic provision.  I won’t even try to figure it out.
          As you point out, your Kirschenbaum Contracts™ provide for up to a 9% per annum price increase on the RMR.  Significantly, you don’t have to ask the subscriber for permission; you don’t even have to give them notice before you start the increase.  You can simply add it to the subscriber’s invoice.  Technically you’re not even required to send an invoice, though almost all of you do.
          The K&K contracts not only allow the increase but the subscriber agrees to the increase.  It’s really that simple.
          Everyone, particularly lawyers, have a “better idea”.  Even worse, most lawyers have “no idea”, they are just spitting out forms that they find on their office computers with the title of the agreement.  Sometimes the terms match the deal.  Here’s how I often guage an agreement:
  *  if you read it and don’t understand any provision, that’s a problem
  *  if you ask your lawyer to explain it and you can’t get an immediate answer, that’s a disaster, and you deserve it because you chose the lawyer.
          You’re right to wonder if you’re interpreting your contract correctly because if you send out an increase that isn’t authorized in the contract you’ve breached the contract; your customer has the right to cancel the contract because of your breach.  Could you claim mistake?  Maybe, but since it’s only your mistake and not a mutual mistake there’s a good chance you cannot undo a breach.  Sure the customer might contact you, point out the mistake and allow you to retract or correct it; or just might terminate on the spot.  Why take the chance.
          I can’t offer you a legal opinion on your provision.  You might rely on it, send out an increase, and lose every customer.  Wouldn’t take long to blame me.  \
          You should be concentrating on getting your “old” customers to sign new updated contracts; the effort will be worthwhile.  Trust me, the CPI provision in your contract is probably the least of your contract problems.
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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