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 ****************************** Automatic renewal: myths and pitfalls / financial webinars start today - see below September 15, 2020 *********************** Webinar today: How to Use Lending to Grow Your Business Register: https://attendee.gotowebinar.com/register/5986254083373814030 ************************ Automatic renewal: myths and pitfalls ************************ The provision, found in the Kirschenbaum Contracts ™ and most alarm contracts, providing for the automatic continuation of the agreement continues to raise questions and at times confusion. Let’s see if we can get to the bottom of these issues and if possible reach consensus. The automatic renewal provision is typically found in the same provision that establishes the length of the contract, the term of the contract. The Standard Form Agreements provide for a 5 year term for the residential contracts and a 10 year term for the commercial contracts. There is no compulsory period and the term is often driven by competition in the area, custom and practice, though more often than not the duration of the term is an arbitrary preference by the alarm owner. Yes, the term is sometimes challenged by subscribers, and when it is a change can be made. The automatic renewal provision usually extends the term of the contract for “like term”, or specific period. To be truly automatic renewal there would be no requirement that the extension be affirmatively approved; rather, there is usually a provision that wither party can, by notice to the other, terminate the contract before another renewal. Consumer contracts, and in some states commercially contracts too, sometimes require specific notice provisions in the contract or other notice that must be provided in a particular way, for the automatic renewal clause to be effective. Effective means enforced. You can check your state requirements for automatic renewal here: https://www.kirschenbaumesq.com/page/alarm-law-issues The automatic renewal provision is really essential in an alarm contract; without it the contract would abruptly come to an end. What’s wrong with that? Think of a fire alarm where the monitoring service simply stops at a particular time; no notice. Well, why not give notice? OK, who is going to give it? Why should you assume another obligation, giving notice, when it’s the subscriber who refuses an automatic renewal provision. If you do agree to no automatic renewal be certain to terminate your service at the time the contract expires. Continuing service after that date will not have the protection of the contract. Myths: 1. You need an automatic renewal provision in the contract. This is actually correct for the reasons expressed above. 2. The longer the renewal the better. This is false. From a valuation perspective there isn’t much, if any, difference between automatic renewal periods. What’s important is that the contract does renew. 3. Contracts in renewal are worth less than contracts in original term. There is some validity to this. But contracts are rarely evaluated on an individual basis, so that the entire portfolio of contracts will be considered and evaluated together. If most contracts are in automatic renewal they could drive down the multiple. Pitfalls: 1. If you don’t comply with automatic renewal laws you risk having your contract voided or deemed voidable. 2. If you haven’t complied with automatic renewal laws you can expect any potential buyer of your accounts to reject those accounts in renewal. Unfortunately my experience is that no alarm company complies with an automatic renewal law that requires a separate notice of renewal. If you do, congrats. 3. Even if your state does not have any automatic renewal law presently, it could enact such law in the future, and that will affect your existing contracts. 4. Agreeing to provide notice of the renewal is an additional burden you don’t need. If you subscriber refuses, for any reason, to agree to automatic renewal then be certain to terminate service at the prescribed time, no exceptions. 5. Relying on automatic renewal may cause you not to try and get new contracts signed. New contracts give you the opportunity to introduce new services and technology, update your subscriber’s systems and increase your equity in the contracts. Conclusion: I remain most comfortable with the month to month automatic renewal. Every state that has an automatic renewal law exempts month to month renewal. I expect future laws in your jurisdiction to follow these statutes. While essential that the contract have an automatic renewal provision, the length of the renewal isn’t worth extending if it requires you to do something or anything to effectuate the renewal. I think it’s better to get new contracts signed rather than allow the majority of your contracts to fall into renewal. ********************** WEBINAR SCHEDULE AND REGISTRATION ********************* Webinar Series: Financing for the alarm industry When: September 15, 2020 12 PM ET half hour presentation and then Q&A Topic Details: How to Use Lending to Grow Your Business - A general overview of how an alarm dealer can use lending to grow, such as making a acquisitions, buying out a partner, fueling organic growth, consolidating debt, etc. Presented by: Jim Wooster and Jim Wooster Jr. Alarm Financial Services, Inc 866-204-9350 ext 1200 www.alarmfunding.com Hosted by: Ken Kirschenbaum Who should attend: company owners and CFOs Register: https://attendee.gotowebinar.com/register/5986254083373814030 This webinar will be recorded and available at https://www.kirschenbaumesq.com/page/alarm-webinars ****************** Webinar Series: Financing for the alarm industry When: September 17, 2020 12 PM ET half hour presentation and then Q&A Topic Details: How to Finance an Acquisition - A more specific drill-down on this method of growing by purchasing the accounts of another alarm company Presented by: Jim Wooster and Jim Wooster Jr. Alarm Financial Services, Inc 866-204-9350 ext 1200 www.alarmfunding.com Hosted by: Ken Kirschenbaum Who should attend: company owners and CFOs Register: https://attendee.gotowebinar.com/register/4228983813536754190 This webinar will be recorded and available at https://www.kirschenbaumesq.com/page/alarm-webinars ********************** Webinar Series: Financing for the alarm industry When: September 22, 2020 12 PM ET half hour presentation and then Q&A Topic Details: How to Finance Organic Growth - A more specific drill-down on the many ways loan financing can help an alarm dealer grown organically through covering creation costs, enabling leasing, expansion, etc. Presented by: Jim Wooster and Jim Wooster Jr. Alarm Financial Services, Inc 866-204-9350 ext 1200 www.alarmfunding.com Hosted by: Ken Kirschenbaum Who should attend: company owners and CFOs Register: https://attendee.gotowebinar.com/register/3255545487536556558 This webinar will be recorded and available at https://www.kirschenbaumesq.com/page/alarm-webinars ********************* To order up to dateStandard 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
