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more on leasing fire system October 20, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more on leasing fire system
October 20, 2017
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more on leasing fire systems re October 14, 2017 article
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Ken
    The recent response on NYC monitoring systems was based on one company’s specific business operations model [AFA Protective] and contract structure as well as how they handle the tax issue when it comes to labor.   Not all companies operate that way.   Despite what was stated, the client has installed system for insurance not compliance purposes, what was not stated is that all those systems [in NYC] now require a Letter of Approval period.   This applies to all that are currently monitoring regardless of not requiring any approvals in the past.   There is a specific FAIU bulletin that states the procedure to ascertain the approval as well as a limited time period to do so or then be required to meet the present code requirements.   
    The most important thing now is the requirement to file with the Buildings and Fire Departments plans and applications.   All Building Department filings are for permanent attached work and improvements without the intention of removal.    The main item of concern is the determination that these systems are now classified as “Dedicated Fire Alarm Systems” and must be filed regardless of who owns them.   Make note that monitoring systems that you cannot provide a Letter of Approval are violated and the violation states legalize.   
    How do you get around that?   Do you say that they are non-required monitoring systems and therefore not subject to approvals or do they say this approval requirement when they were installed did not apply?   
Yours truly,
Misses Doughtfire
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Ken
    The threshold questions were basically 
1) how can you remove a "leased" fire alarm system when it (supposedly) is considered to be a part of the building? and 
2) how can it be deemed a "lease" when the customer pays something for the installation up front?
    I believe our initial response fully answered those questions.  That said, I take no issue with the factual points brought up by the writer concerning filings and approvals.  I simply believe legally those are immaterial to deciding the threshold questions.  The writer is entitled to his opinion on this, however I will rely on our decades worth of experience in this area including in the courts (which Ken has confirmed first hand) as support of my initial response. 
    One final note: how come it seems that every time we get a dissenter he is always "anonymous"?
Robert Kleinman
AFA Protective Systems, Inc.
Chief Executive Officer
General Counsel
Office: (516) 496-2322 Ext. 1229
155 Michael Drive
Syosset, NY   11791
www.afap.com
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Response
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    There are three [at least] conflicting issues:
  • right to contract and enforcement of the contract
  • Fire Dept and Building Dept regulations
  • tax consequences
    The thing is, these issues are not always in accord and could result in different application of each rule.  Thus, the fact that a capital improvement certificate was accepted in lieu of collecting sales tax would not necessarily preclude a judge from concluding the transaction was a lease and then permit removal of the system.  The contract might way that the alarm company and terminate monitoring and remove the system, and Fire Department rules may preclude that without notice or perhaps permission by way of application and permit.  
    I suppose those, like Misses Doughtfire side with the NYC Fire Department [which far as I can tell imposes its own rules regardless of overriding state law that issues a statewide fire alarm installation license that preempts all local laws, including NYC].  Others, such as AFA, while I am sure respectful of NYC FD rules, have contract provisions in the AFA lease that AFA contends are enforceable, and that includes termination of services and removal of systems, a position I happen to agree with.
    What does this have to do with the rest of the country, where most of you conduct business?  Well, the principles are the same, and so are the economics and business interests.  The original discussion begin with lease or sale.  Whether you lease or sell you encounter much the same issues and you also should have the same economics, the same profit margins.
    The Standard All in One agreements come in both sale and lease format.  There are advantages to both lease and sale transactions, though either is just as profitable if you know how to sell the "contract".  So as soon as you realize you're in the RMR contract business the sooner you will begin increasing your RMR and equity in your business.
    As far as remaining anonymous on this forum, that's everyone's choice, as long as the remarks are not inflammatory, then you have to be ready to take your medicine.
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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