Fairly Balancing The Terms In A Central Station Dealer Agreement - July 28, 2014

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    Central stations and alarm installers (dealers) who utilize these third party wholesale monitoring centers naturally find themselves on opposite sides of the table when negotiating the agreement that the central station presents to the dealer for signature.  This Dealer Agreement or Installer Agreement as it is also called. is an agreement that will define and solidify the terms of the relationship.  Ideally the central station and dealer are on the same team, both providing security to the subscriber.  The dealer has the direct contractual relationship with its subscriber and engages the central station, as subcontractor, to provide the monitoring.  The central station will rely on that contract or will require the dealer to have the subscriber sign the central station’s monitoring contract, often referred to as a Three Party Agreement.  
    The dealer needs the central station to provide the monitoring.  The central station is in the business of monitoring and needs the dealer as a customer.  The dealer is charging the subscriber and wants to pay as little as possible to the central station, and the central station wants to charge as much as the competition will bear.  In the event of a claim by a subscriber the dealer and central station will both want to look to the other for placement of blame and financial responsibility.  
    There are other considerations, and one of them is the lock in length of the relationship.  If you read the fine print you will find that it is not uncommon for a dealer to agree to a three year or longer term.  The agreement might require the dealer to place all accounts with the central during this time, and might impose a minimum number of active monitoring accounts.  This commitment is usually justified by a central station providing some incentive, sometimes in the form of forgivable loan, low interest loan, offer to supply equipment at discount or to provide the monitoring services at a discount.  
    If the central station has provided adequate consideration to justify the long term commitment, and by long term I am referring to any term other than “at will”, terminable at any time without penalty.  Although it’s more likely that a dealer will look to terminate early, a central may have its own reasons for early termination, such as a dealer who is more trouble than its accounts or business is worth.  
    How to strike an even balance, a fair deal for both sides, is the issue.  Though many of these agreements are the product of negotiation, many are not.  A central station presents a contract and the dealer signs it.  (sound familiar?  Just like you expect your subscribers to sign on the dotted line).  Because I am often called upon to prepare the contract station agreement as a form, and then called upon by the dealer to not only explain it but tell them that it’s customary and fair, I have given some thought on the matter.  Here’s what I think is fair.  
    If the central station has not provided any real incentive the dealer should be able to terminate on reasonable notice.  This can be 30 to 90 days notice, during which the central station would be expected to continue providing it’s monitoring services and the dealer expected to pay for the service.  The central station should also be entitled to a fee for early termination that is commensurate with its set up cost, assuming the dealer wasn’t charged for set up.  Say a fair set up charge is $50.  I realize that that will translate into 8 to 25 months monitoring (depending on whether the charge is $2 or $6 a month), but I suspect that the set up cost is probably pretty consistent no matter what the monthly charge is.  
    I intend to make this change a others to the Dealer or Installer Agreement, so be sure to read it carefully before you sign it.

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Alarm Association of Greater St. Louis.   September 16, 2014.  at Tech Electronics HQs office at 6437 Manchester  Ave, St. Louis, MO 63139.  Meeting is from 11:45 – 1:30  Video conference presentation starting at 12:15 CST.  For more information or to register contact Tony Drago adrago@tyco.com  www.alarmstl.org
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