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comment on unlicensed alarm contractors enforcing contracts  December 19, 2018
comment on unlicensed alarm contractors enforcing contracts
            Thank you for your forum. 
            Regarding the issue of unlicensed alarm contractors seeking to enforce their contract,  there are provisions in most licensing schemes that state that an unlicensed contractor (usually it is a contractor) cannot enforce or collect on a contract if he contracted to perform work for which he did not have a license. In Utah, for example, Utah Code Ann. § 58–55–604, provides that an unlicensed contractor (which includes an alarm company) cannot bring an action to enforce a contract if the contractor is not licensed. 
            UCA § 58-55-604.  Proof of licensure to maintain or commence action. 
     A contractor or alarm business or company may not act as agent or commence or maintain any action in any court of the state for collection of compensation for performing any act for which a license is required by this chapter without alleging and proving that the licensed contractor or alarm business or company was appropriately licensed when the contract sued upon was entered into, and when the alleged cause of action arose. 
            It is also unlawful (illegal) conduct in Utah and I presume most other states with similar licensing schemes.
            UCA § 58-55-501.  Unlawful conduct. 
     Unlawful conduct includes:
engaging in a construction trade, acting as a contractor, an alarm business or company, or an alarm company agent, or representing oneself to be engaged in a construction trade or to be acting as a contractor in a construction trade requiring licensure, unless the person doing any of these is appropriately licensed or exempted from licensure under this chapter;
            Again, thank you for your forum.
            There are some jurisdictions that have specific laws against unlicensed contractors enforcing the contract against consumers, home owners.  Other jurisdictions apply the law to consumers and in commercial settings.
            A more important issue deserves discussion. It's one thing if an unlicensed contractor can't seek to commence an action to recovery under the contract, it's another matter if the law declares the contract entirely unenforceable.  In that situation the unlicensed contractor would not be able to depend on the contract to defend a claim by a subscriber for a loss.  I am not aware of any case where the unlicensed contractor could not use the contract to defend a claim.  Anyone know of one?
            An unlicensed alarm contractor should also be concerned with what value the contract brings to the table.  Adding RMR creates equity in your alarm company. Your company will be valued based on a multiple times your RMR.  You know the RMR; it's the multiple that you don't know and that comes from the potential buyer.  You can anticipate that a contract signed by an unlicensed alarm company is going to be offered a multiple of zero.  That contract will be excluded from a purchase in almost all cases.  This alone should convince alarm companies to maintain proper licenses.
            I want to take a moment to thank all those who contribute to this forum. Without your questions and comments it would be difficult to produce this forum, so thanks so much.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC

Attorneys at Law
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