more advice on selling your accounts / false alarm fines threat to industry May 24, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more advice on selling your accounts / false alarm fines threat to industry
May 24, 2018
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more advice on selling your accounts
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Ken
    Have read with interest the comments in your daily emails. Thanks !  AFS [ The Wooster AFS ]  has been involved with 100s of buy/sells over 30 years. My advise is: 

• have excellent contracts [ Ken can provide ] 

• get A R in order, 

• have accts programed to 800 line you own, 

• use an experienced industry savvy attorney, and 

• get 85 to 90% at close. 

    Integrity of buyer is critical, but has no value if buyer sells their company to some investor group that has no integrity 6 months after you sell. Do not believe your buyer if they say they will never sell . No one can predict the future. Death, illness, divorce, their own financial reversals etc, can alter buyers position. Get the 85-90% at close!! No long term buy outs. 
James T Wooster Sr
888-349-6957
jtwooster@alarmfunding.com
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Response
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    Good advice.  Here's how you deal with the potential that your buyer [with lots of integrity] sells to another buyer [without integrity].  Limit the guarantee to the original buyer only. 
    So you had 5 great points.  Luckily 4 of the 5 are within your control.  You can 

• get proper contracts at www.alarmcontracts.com

• you can program systems to communication lines you control

• you can engage K&K to represent you for your sale or acquisition [we have industry attorneys to meet you needs, and budget]

• you can require at least 85% at closing

    The fifth point, getting your A/R in order may not be within your complete control, but if you start sending K&K your delinquent accounts for collection we can help get the A/R in order.
    BTW, Jim Wooster is listed on The Alarm Exchange in the Financial Services category.  That means you can trust him.
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false alarm fines threat to industry
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Ken
    is this low profile activity another threat to RMR market value?
    A law firm in Little Rock AK filed against multiple cities in Arkansas to recover un-lawful false alarm fines / fees paid by 100s of alarm users. Most of the municipalities quickly settled out of court which will halt the ordinance and rebate 3 years of fines/fees. 
    Why did they settle so quickly? Does it undo the alarm industry “model ordinance” practiced by several thousand municipalities? Does it reinforce the trend to invoice the monitoring firm, not the customer?  Does it change the traditional obligations/liability to the alarm customer?  Lots of questions… Your thoughts.
Lee Jones
Support Services Group
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Response
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    Others involved in the false alarm fine issue could provide a better analysis.  I know the folks at SIA are very active in false alarm issues and ESA is involved in combating false alarm fines levied against the alarm company.
    I have never been a fan of false alarm fines.  It's a revenue raising gimmick, and, other than the revenue, all it does is cause end users to stop using their alarm systems.  Sometimes they keep paying, and other times they don't.  Sure there are plenty of subscribers who require repair service, but continuous false alarms from the same system obviously means that the repairs were not effective enough.
    The model ordinances support fines, but only against the end users, not the alarm companies.  That's the way it should be.  Subscribers will thin out the herd of incompetent alarm companies by requiring service calls that the subscribers won't want to pay for.  These same subscribers won't want to reimburse the alarm company for any false alarm fines and will withhold payment to the alarm company to recoup the fines paid.  
    But, most false alarms are caused by subscribers.  At least that's what "they" say.  "They" being the people in the know, and people who care about the issue.  What do I know, I'm only a lawyer?  So contracts I write require the subscribers to indemnify the alarm company for any fines assessed against the alarm company.  It's in the All in One and other Kirschenbaum TM Standard Form Agreements.  You don't have those contracts?  Too bad for you.  You can fight with the municipality and your subscriber over the fines.
    If municipalities gave back fines then maybe there were defects in the ordinances.  It's possible that some states may consider the fine a form of tax, and that a new tax can only be assessed at the state level, not municipality level unless approved by the state.  Maybe the fines weren't worth fighting over, financially and politically.  It's been well established that municipalities do have the police powers to enact false alarm fines.
    I don't see the false alarm issue having any impact on who will get fined [fining the property owner and getting it assessed as a lien against the property as a property tax lien would be the most effective way for the municipality to get paid], on valuation of alarm companies or on liability of alarm companies.  It's just a pain in the neck, like the red light and speed cameras going up all over the place.  Another way to suck money out of hard working people like you and me who can't wiggle out of the fine.  This may be an issue for Superman, I mean Trump.
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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