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comment on should you buy accounts with no contracts
May 4, 2018
comment on should you buy accounts with no contracts from April 28, 2018 article
    Your response to the person who asked about buying accounts with no contracts is perhaps a little harsh. While I agree that having signed contracts is very important, my experience with the alarm market in both Canada and the US is that there are lots of un-contracted alarm accounts out there in both countries - more than there should be. This has been the case for years and probably continue into the future. The alarm dealers  that own un-contracted accounts that I have talked to don’t appear to be as worried as perhaps they should be and the vast majority have not run into any trouble due to their lack of contracts. In fact some even have their own theories about why they don’t need contracts  which sound plausible although if it were me I would still have the signed cointracts. 
    As for monitoring stations monitoring accounts with no contracts I believe that too goes on much more than we might first think in both countries.
    It is true that there is more importance attached to signed contracts in the US than in Canada. Perhaps this is because the US is characterized as being more litigious. Who knows.
    My advice to the person asking whether to buy those accounts would be to go ahead and buy the accounts but pay a slightly lower price. I personally think the person should be to pay more than 10X if asked- but then go out immediately and get the accounts contracted. In my experience, getting contracts signed is not such a big deal if you keep the contract to a one year contract. A mailing to all the customers with the one year contract to sign and a letter telling the customer why can easily get 80% signed on the first go around. The buyer may have to follow up on the rest.
    There is no question that having signed contracts is also critical to when it comes to selling your company or the accounts.  But let’s not get overly focused on contracts. What is as important is the equipment in place on each account, the way the system is installed, the rate they are being monitored at and how they were looked after by the previous owner.
    Signed contracts are important but because a block does not have contracts is not a reason to not buy them.
Victor Harding
Harding Security
Toronto , ON
    My advice was that if the price was low enough then the purchase could be made but that the buyer should promptly get every subscriber to sign a proper contract. I stand by my advice that you provide no security services without a proper contract in place.
    Any advice that an alarm dealer or central station provide services without a proper contract in place is dangerous and irresponsible.  Of course, you are not a lawyer and your perspective is probably that of an alarm company owner.  I would guess that you use contracts, so not sure why you would suggest it's OK because so many others don't use contracts.  They are idiots, plain and simple.  They are "alive and kicking".  Yes, and that's probably all they are doing. Here's what they are not doing:

  • protecting themselves if there is a loss

  • building a business with value, because their business has little or no value

  • putting off a massive restructuring operation when they have to go out and get contracts signed before any buyer will consider buying them for any price above hardly anything.

    I am well aware of all the alarm companies out there that don't use proper contracts or any contracts.  I speak to them daily.  I handle their defense cases when they get sued.  I represent them when they want to sell  and I represent them when they want to buy.  I can state unequivocally that you need proper contracts in the alarm / fire / security business.  Just because there may be a lot of business owners don't use proper or any contracts is not justification or vindication for that position.  Do you know how many people

  • drive with bald tires

  • don't wear their seat belts

  • smoke cigarettes

  • don't get licensed

  • don't carry E&O insurance

    The list could go on and on.  People do stupid things all the times.  Make mistakes all the time.  Bad decisions all the time.  It might bring some solace that others are in the same boat, but I assure you, the boat is sinking and every one's fate is the same.  
    Alive and kicking.  Is that what someone should aspire to after a lifetime of working?  Pretty sad, and yes, I do see it, in the alarm industry and others too.  How hard is it to do things right?  
    Victor, you also don't give enough importance to using proper contracts.  It is arguably the most important decision you have to make in your business.  You don't think so, well then think about what you will be selling or buying in the alarm industry.  It's your RMR under contract.  That's what is in your briefcase when you go to the closing, not anything else involved in your business.  And when you're the buyer, you leave with the contracts.  If you're the bank, you leave with the contracts.  So, contracts may not be the only factor you need to deal with, but it's right up there in the top 3 [along with insurance, your dealer program, central station, equipment of choice, business model, choice of talented employees, etc].  Lot's to think about.  Why lay awake at night waiting to be sued?  If you don't have contracts and you don't have trouble sleeping, then ....  I had to edit this ending.  I don't want to insult anyone.  Let me leave it this way.  If you don't have up to date proper contracts, from then maybe you can use crayons and coloring book to show the premises and the equipment you'll be installing or monitoring.  


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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
516 747 6700