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master contract and who signs it / Month to month model / more comment on the ESA vote [ballots need to be in by tomorrow] June 8, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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master contract and who signs it / Month to month model / more comment on the ESA vote [ballots need to be in by tomorrow]
June 8, 2017
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master contract and who signs it
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Ken
    I am inquiring about a contract to use for monitoring a customer's sites. The current customer I am working with is a hotel chain with 50 sites.  How much would this contract cost?  Can we sign one contract with the property owner or will we need to have one for each site?  
    The only issue is if the General Manager who would sign leaves would the contract still be valid?
Thanks
MH
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Response
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    I suggest you use the Commercial All in One, and not just a Monitoring Contract.  You are going to be doing more than monitoring and the All in One agreement covers the design, installation, repair service, inspection, monitoring and more.  You don't have to provide for all the services covered, but they are there for you and your subscriber should your transaction include all the facets of alarm services.  
    You can use one contract to cover multiple locations.  If systems and pricing is going to be different for each location then you will have to cover those distinctions in a Schedule of Equipment and Services [a form that comes with the All in One form].  I am available to assist you structuring the All in One to serve as a "master agreement'.  
    A General Manager is likely authorized to bind the subscriber.  If authorized when committing the subscriber to the contract, the contract will remain viable and enforceable even when the General Manager leaves.  
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Month to month model
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Ken,
    I presently use your All in One contracts, purchased in 2013, and just changed the language in my contracts for new subscribers, effective 1/1/17, to reflect month to month renewal terms.  I checked your link to the California B&P Sections 7599.54 and 17602 and decided month to month is much easier to manage for my business.  I have a good number of subscribers on automatic renewal terms, 2 years maximum,  from contracts signed many years ago, but never sent notices restating their renewal terms.  Some of these contracts were signed over 30 years ago.
    So, my question is, are these older contracts, with 2 year automatic renewal terms, impacted by this new California legislation?  Is there a requirement to send some type of a notice to subscribers under contract prior to 1/1/17 about automatic renewal?
    I'm not a stickler for holding my subscribers accountable to an automatic renewal and would like to put all of them on month to month.  When someone wanted to cancel, prior to the end of the contract term, I never held them accountable for early cancellation and never pushed the issue. I didn't think it was worth my time to pursue it and wanted to end our business relationship on friendly terms.  So, I think a month to month term would fit my business style much better.
    Is this something I can do by a simple letter to my subscribers under older auto renewal terms?   Maybe a letter asking for agreement or acknowledgment by signature that their automatic renewal terms are changing to month to month?   As far as devaluing my business, by converting everyone to a month to month, should I want to sell my accounts in the future, I'm not worried about this as it makes up a smaller portion of my overall revenue.
    On some of these older contracts I'll need to do the math, while on others the renewal date is quite clear.  I'm looking at retiring in the next few years and am not sure I want to subject myself, or my customers, to contract disputes should I sell to another company and I think it would limit my responsibility to a month rather than a lengthy remainder of a renewed contract. 
     I guess, with a month to month arrangement, I wouldn't be selling accounts, but providing a recommendation to my subscribers to sign with another company that  I would identify in a letter, and in exchange I would receive a fee for those customers who sign up with the new alarm service.  I suppose a simple contract between me and the new alarm company would spell out the fee due upon a customer signing up with their service.  Am I very far off on how this might work? 
    I've talked with other small dealers who experienced various problems when trying to sell their business, and would like to minimize these if possible.  I don't rely on the monitoring revenue anyway so I'm not concerned about what it might bring.  I'm not understanding the benefit of getting new contracts signed when I'm converting all previous contracts to month to month.  Is it for the protective clauses?  My older contracts were quite extensive too, with liquidated damages, limits of liability clauses, etc.  I'm looking for a value in having new contracts signed rather than sending a letter noticing the subscriber about the month to month conversion.
    If you use this in your Alarm Articles, please keep me,
anonymous
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Response
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    Even if your contract is signed before the effective date of the California automatic renewal law I believe you will be required to comply with the law as renewals come up.  
    I think you are better off with a contract with a term [could be 24, 36, 60 or more months] with an automatic renewal term of month to month.  That is my advice for California and everywhere else.  All auto renewal statutes exempt month to month, and any new statutes are likely to continue to exempt month to month.  
    But relying on month to month or any other renewal term for any long period of time is a mistake, for two reasons, at least.  
You should be interacting with your subscribers offering new equipment and services.  Contracts and systems that are 30, 20, 10, even 5 years old, can and should be updated.  It's not only equipment that has changed; contract terms have changed.  
    I think you are wrong about recurring revenue.  It's the overwhelming successful model for doing business in the alarm / security / fire / integration industry.  It's great that you have other successful revenue operations in your business, but that's no reason not to maximize the RMR with your alarm customers.  I can't think of any good reason why you would conduct an alarm business without intending to one day sell the RMR accounts.  Even month to month accounts have value and can be sold.  Your idea is to not sell them but to recommend they go elsewhere?  I am sure plenty of people reading this forum will be happy to take them over.
    The All in One Agreements, along with the advice you get on this forum, from me but others as well, are all you need to operate a successful alarm business.  Get with the program.  Get the updated contracts here, update your subscribers' systems and services, and get your subscribers to sign new contracts.  If you're concerned you'll make too much money when you sell I'll happily help you out with a hefty bill for legal fees on the sale.
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more comment on the ESA vote [ballots need to be in by tomorrow]
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Ken
    This responds to Bart's comments in the June 5, 2017 newsletter. 
    Perhaps the wording was not correct, but the intent was more than valid.  Assuring that if someone who is entitled to vote, does not have their ballot (for whatever reason), is able to vote (as they are entitled) to was the point. 
    I don’t think anyone thought it was for the purpose of stuffing the ballot box as you implied.  You certainly know the process and procedure that was outlined and sending in a thousand votes would not get the box stuffed. 
    Angela’s comment calling the communication among members “emotional rhetoric” was uncalled for.  Distributing a letter drafted on behalf of four past presidents rather than each drafting a letter with their own personal statements I would call emotional rhetoric.
    Your attack of Larry Huff sounds like emotional rhetoric trying to put words in his mouth that were not said.
Jason Etter
AVX Integrated Technologies
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Ken,
    I’d like to follow up on the post about ESA governance changes. Our ballots are due back in the mail or hand delivered to the ESA office by this Friday, June 9th no later than 2pm central. I appreciate your coverage of this very important matter for ESA!
    Here is my response:
    In response to the posts surrounding ESA starting with the post titled ESA seeks to change board – NYESA objects dated June 1, 2017, I would like to provide your readers with a different perspective. I am a partner of a security integration company in Brookfield, WI that employs eight people and serve as President and Chairman of the Board for ESA. I am not a national company, I don’t play golf, nor am I a “good ol boy.”
    Our current Board is comprised of 45 voting members, which has no criteria for qualifications, term limits or accountability; whether individuals chosen to serve are elected or appointed, there remains no consistency in attendance, or engagement level.
    Prior to becoming President of ESA, I served on the Governance Task Force and spent many hours educating myself about how other associations similar to ESA are structured and governed. I learned from multiple association experts and listened to their advice on how we can improve ESA for our members. This information and knowledge was then passed on by the Governance Task Force to the current 45 person board. That board then spent countless hours discussing and debating various proposals prior to approving by a majority vote the model currently out for vote. If anyone is interested in learning more about the process I would encourage them to visit: www.ESAweb.org/bylawsamendments.  
    As President and Chairman of the Board, I have a responsibility to support the decision that the current board has made. Regardless of that responsibility, as a company owner in this industry I fully support the work that our volunteers have put into this process and the proposed changes that are a result of their dedication to improving ESA. Most would agree that a board of 45 people cannot be strategic, nimble or even proactive to ensure ESA is at the forefront of serving our members and the fact that this process has taken almost 4 years proves it.
    The problem with the points those in opposition are trying to make is that they are based on the wrong premise. They are not taking into account the responsibility and accountability that ESA board members should have, and that is the duty to serve ESA.
    Earlier this year I posted a document about the duties of board members. Here is an excerpt:

    Many organizations have board members that work for other companies; however, when they sit on the board of another organization they are there to work in the best interest of the organization they serve. The goal of any effective Board is to have the ability to serve all of the members of the association, not just a particular geographic or demographic population.  This industry is at a critical turning point and ESA has an opportunity to continue making a difference for our members. The new model provides a means by which the representatives are elected and therefore can be held accountable for their participation, or lack thereof.  In addition, the representatives can each be subject matter experts to ensure that the governing board has a wide spectrum of knowledge and expertise to serve the members. 
    The proposed amendments to the bylaws are needed and I fully support the recommended changes approved by the current board of directors.  
Angela White
ESA President & Chairman of the Board

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Ken,
    I would like to respond to the traffic concerning the upcoming ESA Election.  A few years back, I was asked to serve as an Ex Officio Member of the ESA (then NBFAA) Board and Executive Committee and to provide some financial control and reporting advice.  My firm was able to assist them and I left the Board around ten years ago.  I am currently an Associate Member and I provide advice and volunteer my time on occasion. 
    One service that my firm provides is to observe the vote counts for the elections.  We have done this for 10 – 12 years.  We observe the controls over the ballots and the actual counting process.  In this period of time we have never observed any breach of controls or procedures.  I can confidently say that the process is fair and well controlled.
    I realize that there is a great deal of contention over the current election regarding the by-laws.  As an Associate Member I do not get involved in the politics, nor do I believe that it is proper for me to take a position or vote.  In my opinion the Association is for the benefit of the Alarm and Systems Integrator members and not me. 
    I am sending a Senior Manager from my firm to observe this year’s count.  She is a Certified Public Accountant with over 35 years of experience.  She is well qualified to observe the vote count and ensure that controls are in place and observed.  Not only is she qualified, she has no idea of the issues at hand in the election and to her the votes are simply yes’s and no’s.  We have in the past observed situations in which two people from the same member firm mistakenly attempted to cast a vote.  The ESA’s controls detected this and ensured that only the designated representative’s vote was counted.
    All ESA members can rest assured that the vote count will be fair and accurate. 
Mitch Reitman
Reitman Consulting Group
Fort Worth, TX
817-698-9999
http://www.reitman.us
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
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