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Collection issue, / what are DIY accounts worth June 23, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Collection issue, / what are DIY accounts worth
June 23,  2017
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Collection issue
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Ken,
    Collection issue, need to know where we stand and what can be done, this is a bit involved, do we stand a chance taking legal action or should I bite the bullet?
    History
    We signed a monitoring contract in 2013 with a subscriber and due to installation issues the system was not on line until 2014, which is when we started billing for monitoring. It's a public school with existing fire alarm; we added central monitoring (approved by FDNY).  The monitoring contract was a K&K Rev 1/10.  The contract states $200 per month billed quarterly.
    We use Quick Books and were sending invoices via QuickBooks, and did not realize invoices were not being received.  I had been sending them to the school principal, as I did with other issues pertaining to the fire alarm, no one had said we needed to send to anyone else.  When we realized the problem (beginning of 2016) I started contacting the school custodian who I deal with, he said that the principal had left and to send them to himself and someone else.  
    During this time we transitioned out of our corporation into another new corporation, and we started billing under the new corporation [similar names].
    We met with the subscriber and tried getting it to sign a new All in One that covered more than monitoring.    
    Since I'd be sending this to you for collection, should we start an arbitration or sue or let it go?
 anon
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Response
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    You have a 10 year monitoring contract for $200 a month.  Sub's been on-line since 2014 and hasn't paid.  You didn't give all the details that we'd need before commencing an action, but looks like it could be 120 months or something like that.  The Standard Fire All in One, and the Fire Monitoring Agreement, which you used,  calls for full acceleration of the term and recovery of 80%.  That could be $19,200.00.  Also, a 200 a month monitoring contract could be worth around $8000.00.  Why let it go?
    Billing to wrong email address?  No problem.  The contract does not even require you to send a bill.  It's the subscriber's responsibilty to make payment.
    Late or delayed start?  No problem.  The delay wasn't your fault and even if it was, the subscriber stayed with you and accepted the monitoring services in 2014.
    The corporation that signed the contract is gone; your new corporation took over.  No problem.  The old corporation assigned all its contracts to the new corporation.
    What about license issues?  No problem.  Your services for this contract are for monitoring and New York does not require a license to monitor alarm accounts.  Also, you subcontract out the monitoring to a NYC FD approved central station.
    Your 2010 contract form may include an arbitration clause which will make pursuing the subscriber a bit easier and less expensive, but even without that provision we should pursue.  
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what are DIY accounts worth
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Ken
    The DIY webinar was very well done, especially the enrollment process.  I have been a broker in the industry for about 30 years and I am curious as to what the perceived value of a DIY account with professional-full time monitoring is expected to be.  I can make a case for reduced value and increased value, but I would like to hear what you and others think
    Thanks and keep up the good work.
Tony
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Response
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    Jury may still be out on the value of DIY accounts.  I admit that I have not had any deals with DIY yet.  If I had to guess I'd say the multiple is going to be around 18.  Anyone have better idea? 
    I agree that there are lots of variables.  Some DIY contracts are for a term, 3 or more years, and others month to month. DIY systems may require pass-through the manufacturer's portal or receivers, and will not work without that, so the system becomes essentially worthless if the RMR is canceled.  Other systems are self monitored through the internet and therefore no RMR for that feature.  
    And keep in mind that not all DIY accounts with similar systems are going to have the same value.  The contract form is going to influence the value of the accounts.  Use our DIY Nationwide Forms to maximize the value on sale.  I've had a number of "large nationwide operations" get our Nationwide DIY form and then change the terms, usually making those terms look a lot like the terms and conditions the company uses for non-alarm system sales and services.  Well, I can only lead the horse to the water, can't make it drink.  Make all the changes you like to the standard forms. When you get the subscriber claims the defense attorneys will have a field day billing their hearts out scrambling around trying to get your provisions enforced.  
    One thing is for sure.  There are going to be loads of DIY systems and the alarm industry is going to start trading and selling them soon enough.  My transactional attorneys can hardly wait.
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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
516 747 6700
www.KirschenbaumEsq.com
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