increasing your monthly charge during contract term April 27, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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increasing your monthly charge during contract term
April 27, 2018
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increasing your monthly charge during contract term
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Ken,
    I have used your contracts for over 20 years and I have a quick question.  I have always kept my monitoring rates low;  in fact my last price increase was in 1997.  According to your contract I can increase the monitoring up to 9% per year.  So, can I take a customer that is currently paying $18.95 per month and increase them to $21.00 per month?  That is an 11% increase (more than the contract states), however these customers have not had an increase in 20 years.
Thank you,
Greg 
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Response
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    I really should charge extra for giving an answer that my client already knows the answer to.  Answering the question with another question, whose fault is it that you haven't increased your rates for 20 years?  Did you expect your subscriber to call and demand an increase?  [that's two questions, sorry]
    First let's establish a ground rule.  You can't increase your monthly charge unless your contract permits it or your subscriber agrees to it, specifically and knowingly.
    The Standard Form Agreements permit an increase of up to 9% each year, and the subscriber agrees to pay that increase.  Contractually you can do it, and you can hold the subscriber to the increase and the contract.
    Other attorneys [and alarm guys writing their own contracts] are a lot smarter than me.  They have come up with all kinds of ways and terms to increase the monthly charge.  

• some are just silent on the issue and figure they can increase whenever they want; sneak it in, who's the wiser

• some permit increase without a specific amount

• some permit the subscriber to cancel if they don't like the increase

• some permit the alarm company to cancel if the subscriber won't pay the increase

    All ingenious ideas.  One dumber than the next in my humble opinion.  
    If you are under contract to provide your service and there is no right to increase then you can't.  Simple as that.  Also, to answer the above question directly, if your contract permits up to 9% a year you can't increase 11%.  That puts you in breach of contract.  If you do it without getting the subscribers WRITTEN consent, you are in breach.  
    What do you risk?  Good question. Here's what:

• breach of contract claim by that subscriber, permitting the subscriber to cancel, and get the increase back

• charge of deceptive business practice if your Attorney General gets wind that this is your common practice

• problem selling your alarm contracts eventually, because a buyer is going to want a representation that your subscribers are being charged and they are paying what the contract calls for, a representation you won't be able to make [honestly].  

    Think increases don't work?  Here's a story.  I get a collection case [41 years ago] in Manhattan.  I sue a very prominent person in the legal profession [I'm out of law school maybe a year].  He is paying $900 a month.  He calls me when he gets served with the summons and complaint and tells me he has never been sued in his life [he's an old guy by now - probably my age now].  We talk and I finally ask him, what kind of building is being monitored for $900 a month, is it the building that houses your well known big business [he was the publisher of the NY Law Journal - obviously knew enough people to crush my just started career in law].  He tells me no, it's his apartment, an apartment he has lived in for over 40 years.  Told me he started with this alarm company [that company, Holmes Electric, is no longer around, having sole long time ago], and that with all the annual increases this is now what he was paying.  Well I was as surprised as you must be, and with my profound sense of fairness, promptly settled for a one year subscription to the National Law Journal [he wouldn't settle for a subscription to the NY Law Journal].  
    I am not a fan of late charges or penalties, but annual increases are fine.  Never a deal breaker though when I am negotiating subscriber contracts for alarm companies - which I do on almost a daily basis.
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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