November 24, 2010
*************
**********
Question:
*********
Ken,
What recourse does a company have in the following scenario:
A fire or security system was sold as rental, the client moves or goes out of business, and the security company chooses to leave system behind in an attempt to sign up the next tenant/owner. The new tenant or owner then allows another security company to reprogram and service the system, and the tenant/owner states they own everything in the building including the security or fire system. Does the security company with contract from previous tenant or building owner hold any merit or would they need to pick up equipment before their client vacated premises?
Jason Martin
Sonitrol Orange County
**********
Answer:
**********
First let's clarify one point, you don't have equipment that is "sold as rental". Your transaction is a lease of equipment, or you can call it rental, but that's not the customary term in the alarm industry. So here we have a leased system. The subscriber defaults, or the term of the lease expires, the tenant moves or the owner of the building sells - in any event, your subscriber is no longer at the premises.
You either knew the subscriber was gone or you didn't know. Perhaps the subscriber left the premises, didn't let you know, and continues paying you. But your scenario provides that the alarm company knew the subscriber left and chose to leave the system in the premises hoping that the new tenant or owner would enter into a new contract for alarm service. It's a gamble, particularly if you don't take some measures to protect your title to the equipment.
When you chose to leave the equipment in the premises you run the risk of the new occupant claiming that you abandoned the equipment. Often it's a reasonable argument because the equipment is not worth removing and only the continued service and monitoring of that system has real on going value. Yes, the cost of reinstalling a system, wiring and all, would be costly to the subscriber, but the intrinsic value to you after removal is far less.
If you decide to leave your equipment in place you should take a few steps, none guaranteed, to protect your title. Some companies like to file a UCC-1, but that is not really the proper vehicle to protect title because a UCC-1 is a financing statement used to perfect a security interest in property that you don't own but claim a lien on. That's not the case with leased equipment. The UCC-1 will however show up and perhaps put the new occupant on notice that you are around and claim an interest in the equipment.
You could place stickers on your equipment, something to the effect that the equipment is owned by you. Of course that notice can be removed.
You should as soon as possible notify the new owner or occupant that you own the equipment and that unless a new contract is signed you intend to remove the system, wiring and all. You should give a relatively short time for the new owner to decide, setting a specific date and time that you wish to remove the system. You then need to show up and remove the system at that time. If access is denied you have a good case for conversion of the equipment. You have done what you should have done to protect your title and demand its return.
If you don't want to take some steps to protect your title then you can expect the new occupant to claim that it purchased the alarm system along with any other improvements left behind. Unless your system is extensive and expensive it won't be worth fighting over. You can only recover the value of the equipment, not the remaining term of the contract.