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 ******************************* what is an alarm account / how loyal are customers / dragged into customer disputes June 20, 2019 ************************** what is an alarm account ************************** Ken, I think its time you explain to all your readers just what a customer is, from both the legal side and the business side of things. I often hear from other alarm companies who are trying to sell their accounts that they have great customers. If you do some looking they have a list of customer that don't pay their bills and they think those are good customers. I have seen lists from sellers where a major portion of their list is over 90 days past due and the response is "well they may be slow payers but eventually they pay". Can you please shine a bright light on this dark corner of our industry. Wayne ************************** Response ************************** What is an alarm account depends on who is asking. Alarm companies, like many businesses, carry customers that don't pay their bills timely with the expectation and hope that the customer will eventually honor its obligations. But if the question of what is an alarm account is being asked at the time of a sale then the customer list is going to be under attack from the buyer. Every alarm purchase deal includes some criteria for which accounts will be paid for and which will not be paid for. If not being paid for these accounts are either excluded from the sale or expected to be transferred to the buyer even though the buyer is not paying for these accounts. When thinking about, or asked, what is your RMR, you should consider some criteria. Past 90 days is often considered non-qualified and excluded from the monetary calculation. *************************** how loyal are customers *************************** Ken, I would like to know if you can recommend some experts in the industry who can testify, as an expert, as to how cut throat our industry is and how customer jump ship from one alarm company to another all the time and how common it is. The best example I can see is a homeowner who has oil heat with one company and sees an add or hear of another oil company and moves providers.Is it acceptable theory that a customer, with or without a contract, is a customer for what could be LIFE. Do courts understand that alarm accounts without valid contracts, or if the customer are unhappy with their current company, can change? I understand that sometimes the customer may need to pay off the balance of its contract but he is free to move and the new company. Name and company withheld *************************** Response *************************** While there is an expectation that an alarm account will remain an account, not all do and moving to another alarm company is certainly easy enough, in most cases. Buyers don't really believe that an alarm account will last forever. What is the expectation? Well, one measurement, at least a starting point, is what did the buyer pay for the account. Say a buyer pays 35 times RMR. It stands to reason that the buyer hopes the account will remain active for at least 35 months. Some accounts will not make it for 35 months, but many will. The break even on the 35 times RMR purchase may take 40 months. So if some accounts drop off but most remain you can calculate the expected profit. There are a number of real experts and plenty of others who think they are experts. A real expert will have been involved in many buy sell deals and company valuations. Use the Acquisition Team of lawyers are K&K and avoid post-closing disputes that require expert testimony. If you end up in a dispute the Litigation Team at K&K may be able to help. **************************** dragged into customer disputes **************************** Ken How about a clause to discourage customers releasing video to 3rd parties who request it, such as police....or put a price on it. Maybe something that says if we get pulled into court as a result of them releasing a video to a 3rd party, we bill them a ridiculous price. I've been having customers request video for incidents not directly related to them, such as police wanting video of 15 minutes to see if a robbery suspect drove by the dealership... or a robbery off property. Its just getting to be an atrocious pain in the ass, and I don't want to be pulled into court because of my customer thinking they're "helping". Mike *************************** Response *************************** The provision you're asking about was added to the Standard Form Agreements, I think in 2017. The provisions is in the updated contracts. Either you don't have updated contracts or you haven't bothered to read them. That's one or two mistakes on your part, and you can do something about that today. Get updated contracts and use them. ************************** To order up to date Standard Form Alarm / Security / Fire and related forms, click here:www.alarmcontracts.com ************************* CONCIERGE LAWYER SERVICE FOR THE ALARM INDUSTRY PROGRAM 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
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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
