KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and white list ken@kirschenbaumesq.com ******************************* Collecting 80% / Costs for collection August 26, 2019 *********************** Collecting 80% ********************** Ken, We have been trying to do a much better job on collecting the balance on contracts. My question is, why do you only require 80% of the balance if a customer cancels? Why not require 100%? Thanks, Ron ******************* Response ******************* When a subscriber defaults you have the option of accelerating the balance due under the contract. You also have the option of discontinuing all services. Typically, you do both. Why can’t you collect 100% of the balance of the contract? There is a fine line between liquidated damages and penalty. There are however legal consequences when liquidated damages crosses the line to a penalty. Generally, liquidated damages are enforceable, a penalty is not. In the good old days we sought to enforce a 100% liquidated damage clause. Sometimes we got away with it, but too many times we were challenged. Reducing the damages by 20% makes the demand palatable to judges. There is no magic number in 80%; you can try for 90% or like some clients, go for 70% or less [why I don’t know]. I’ve seen 50%. A liquidated damage clause must be fair when agreed to and make sense when should to be enforced. You know you are dealing with a liquidated damage provision when the provisions starts with “since it is difficult or impractical to calculate actual damages, the parties agree to … liquidated damages”. The actual damages should meet that criteria, difficult to prove. Alarm charges meet the criteria because it would be difficult for an alarm company to calculate its damages in the event of a subscriber default. Arguably a monitoring charge may be easier to calculate damages then a service plan charge, but the 80% comes close enough to make it reasonable. ******************** Costs for collection ********************** Ken, could you send me info on your process and schedule of cost for collections? We have quite a few bad debt that we need to pursue. Thank you George Z *********************** Response *********************** Our commercial litigation department handles alarm collection cases on a one third contingency basis for clients using our Standard Form Agreements; we get 1/3 of what we collect. Client pays expenses. Initially the expense for arbitration is $125 to file. If an answer is received and an arbitration hearing required [the hearing can be by telephone or video] the arbitrator is paid several hundred dollars, shared by the parties. Confirming the award, if necessary, will cost in filing fees and local counsel fees. Both the standard form agreements and the arbitration rules provide for recovery of legal fees, so you may get those back. Most cases either default or settle, so the expenses are less. The process is worth it if you have enough cases to refer or the case is significant enough in dollars. You can reach our collection department by emailing mdiaz@kirschenbaumesq.com or klampert@kirschenbaumesq.com. You can also contact our Contract Administrator Eileen Wagda at 516 747 6700 and she will assist. Concierge Program Clients should contact Stacy Spector,Esq., Program Coordinator, 516 747 6700 x 304 and she will assist. ********************* To order up to date Standard Form Alarm / Security / Fire and related forms, click here:www.alarmcontracts.com ************************* CONCIERGE LAWYER SERVICE FOR THE ALARM INDUSTRY PROGRAM You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** NOTICE: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles *********************** THE ALARM EXCHANGE
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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 www.KirschenbaumEsq.com
