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what about the central station when dealer sells the monitoring accounts September 21, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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what about the central station when dealer sells the monitoring accounts
September 21, 2017
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what about the central station when dealer sells the monitoring accounts 
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Ken
    We have a dealer customer that is being acquired.   A question that has been asked is whether, or not, the contract between us ( the central station) are transferable to the acquiring dealer who is also a central station?
    I look forward to hearing from you.
 name withheld
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Response
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     Dealers selling their monitoring accounts may not understand their obligation to the central station monitoring those accounts.  If the selling dealer and buying dealer are represented by attorneys unfamiliar with the alarm industry they too may not be aware that there could be lingering obligations to the central station.  They would likely not be aware that any money that may be owed the central station, and any obligation to continue to use the central station, may be the least of what they should be concerned with.
    The obligation between central station and dealer is expressed in the Dealer Agreement.  I am not sure what the above question asks, but I'll interpret it as asking, can the buying company assume the seller's contract with the central station and continue the monitoring?
    The answer is probably not, unless the Dealer Agreement permits that assignment and assumption.  More likely, the buyer will have to establish its own deal with the central station if it wants that central station to continue monitoring.  In the above scenario, the buyer has its own central station, so it will not be looking to have the existing central station monitor the accounts any longer than it's going to take to move the accounts to the buyer - central station.
    I had a lawsuit just like this.  The buyer-central station wanted the existing central station to continue monitoring only until the accounts were moved.  The central station refused to continue monitoring unless the buyer agreed to pay "above market" for the monitoring, which the buyer refused to do.  The central station then terminated monitoring and notified the subscribers. The buyer was not successful getting an order to restore the monitoring services.  The buyer accelerated its projected time to move the accounts to its own central station from several months to several days, so the matter quickly resolved itself.
    Quite naturally an existing central station isn't going to be happy to learn that its dealer has sold accounts and that they will be moving from that central station.  That's when the Dealer Agreement is taken from the dusty draw and read.  It could be that the dealer committed to a number of years for each account, or a liquidated damage if the accounts are moved to soon; incentives provided by the central station may have to be repaid if the accounts are moved; the central station may not be under any obligation to assist with the move and may not cooperate by continuing monitoring until the buyer can conveniently move the accounts on its schedule.
    On the other hand, the central station may very well be cooperative, continue to monitor at the existing rate and assist with the move by turning over communication lines, signing RESBORG forms, providing activity reports, etc.  A dealer would be wise to negotiate these issues in advance and have them included in the Dealer Agreement. 
    Buyers and sellers should be careful to consider what happens to the monitored accounts after the sale.  No assumptions should be made that the central station will permit the buyer to step into the seller's shoes.  That might happen, but sometimes there are emotional as well as business reasons for not permitting that substitution of dealers.  The switching of central stations after a sale is one of the factors that can contribute to higher than historic attrition for the seller.  That could be an important issue on a sale, especially when there is a guaranteed period.  
    Dealers select a central station to "partner" with to provide the monitoring services.  Dealer should consider that when they unilaterally decide to end the "partnership" there may be heightened emotions and sometimes poor business judgment [just like in divorce and business break up disputes].  A little care in negotiating the Dealer Agreement and much of the problem issues can be avoided.
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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