The standard lease and monitoring agreements I offer to the trade
include a provision that gives the alarm company the option to sell the
installed equipment to the subscriber for 80% of the agreed value of the
equipment. We have been having some difficulty enforcing that provision
when the subscriber comes to court and claims that it gave the alarm
company notice to pick up the equipment. I think we can take some easy
steps that will make it more likely that we can prevail on the equipment
part of the claim.
Let's look at the provision. It's in the paragraph dealing with the
subscriber's default of the agreement. Not only will the subscriber be
responsible for the balance of the contract term payments, less 20%, but at
the "option" of the alarm company, 80% of the agreed value. The "agreed
value" is found in the contract and must be filled in when the contract is
prepared. Obviously not every contract has the same "agreed value" [though
in monitoring agreements the value may be consistent, such as $400]. If
you don't fill in the agreed value, then it's not likely that the provision
will be enforced. So that's easy, fill it in. The subscriber will not be
concerned with this valuation because you are not asking the subscriber to
pay for the equipment, unless there is a default and most subscribers will
not be thinking that far ahead. In fact, most subscribers may be pleased
that you are installing such expensive equipment, since the subscriber
isn't paying for it.
The next weak link in enforcement is in exercising the option. Upon
the subscriber's default the alarm company needs to decide if it wants the
equipment, or the sale. That choice is going to be easy most of the time;
you'll want the sale. If you do want to sell the equipment then you should
exercise the option by writing to the subscriber. That letter should
advise that the balance of the monthly payments are now due and that you
are exercising your option to sell the equipment for the agreed value in
the contract. Do not demand the equipment back and do not give any other
options to the subscriber. Your letter should be a final letter advising
the subscriber that it owes for the balance of the contract [do not
discount it at all -- that will be done when the lawsuit is brought] and
that the equipment is now sold for its agreed value.