July 27, 2011

 

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Question

 

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Ken

    Instead of re-sign renewals agreement every five years why not have a eleven year agreement with a five and a half option to cancel?   Why?   As you have said many times before you can have a ten year or longer agreement but people would be reluctant to sign it.   But if you explain that you can cancel after five and a half years so therefore it is like a five year agreement the reluctance to sign may disappear.  

    This way you don't have to deal with the five year re-sign because it is longer.   As to why five and a half years?   This is to offset a straight five year and thus set the customer off balance to remember the exact time to cancel if they intend to do so (Pitney Bowes is famous for billing unusual amount of days to make it difficult to see what you are actually paying). 

    Now you may say that conditions and terms change and the five year so renewal and re-sign allow for this.   I say why not address this like insurance and credit card companies as well as banks do.   Send out an addendum with the bill stating that the following document is now part on the accepted agreement and on that document you can state what has been added and deleted, change or updated as well the option to cancel or revert to the original terms at the discrepancy of the Company.   When the next change happens simply state the this addendum replaces the one dated, remove that document and replace it with the current terms and conditions and attach accordingly to the original agreement.   Most property leases amend the original lease as opposed to issuing a new lease and this is something to consider in this industry.

    You may say that this is confusing and difficult to keep track of and I say that this is easier in most cases than getting a new agreement signed and attracting attention to the terms of the agreement and present amounts being paid (especially if this have grown over the years) and thus soliciting new bids form the work before considering re-signing a new agreement.   What do you think?   Is this a possibility of feasible?

SG

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Answer:

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    You actually raise an interesting idea, which, like your others ideas [see July 9, 2011 email] isn't really much help.  Credit card companies do send out frequent rule changes, but that only binds future use of the card.  Landlord's leases frequently give the landlord the right to implement and impose rules and regulations for use of the premises that take effect after the lease is signed, but none of these rules can change the essential terms of the lease.  Likewise, the alarm contract cannot be changed or modified by the unilateral decision of the alarm company - at least not without permitting the subscriber the right to terminate the contract.  We had that issue with RMR increases. 

    Older contracts had language permitting the alarm company to increase the monthly payment, and if the subscriber didn't like the increase it could terminate the contract.  After a few cases where the increase was rejected and the contract terminated, we changed the contract language to permit the alarm company to retract the increase and compel the subscriber to continue with the contract.  More recently we employ contract language that permits an increase and the subscriber is required to pay it; no option to cancel.  This however is not concealed or designed to deceive the subscriber.

    The change of rules you might be able to impose will more than likely not be anything that makes you more money, and also will involve your procedures that are not specified in the contract, such as how you will deliver your invoices, or procedures adopted in responding to alarm signals.  You can't change terms in the contract without creating the opportunity for the subscriber to cancel.

    As I said in response to your other ideas, any form of deception is intolerable because in the end you want to be able to enforce your contract.  Deception in your contract will cause judges to refuse to enforce the contract and may attract the attention of the attorney general or consumer affairs in your jurisdiction who may decide to prosecute for deceptive business practices.

    Long term contracts need to be reasonable and economically justifiable.  You can't install a basic system and expect to be able to justify a 10 or more year contract, especially with residential subscribers.  The Standard Form Contracts are 5 years residential and 10 years commercial.  I think that's reasonable and enforceable.

    Regarding renewal contracts or automatic renewal provisions, I believe that you can rely on automatic renewal provisions unless your state prohibits it, but you are still subject to reasonableness.  Ten and 10 is probably a stretch, even for commercial.  With more states looking at prohibiting automatic renewal without some notice requirement I am comfortable recommending that the contracts auto renew month to month.  I think you're better off staying in touch with your subscriber and getting a new contract signed before the old one expires.