KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Comment on central station agreement issues
October 12, 2020
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Comment on central station agreement issues from article on October 6, 2020
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Ken,
As I was reading Bart Didden’s comments on central station agreements in your October 6, 2020 article an issue came to mind. I have been involved in a few hundred transactions and it amazes me how many Sellers don’t have a copy of their central station agreement. This amazes me.
The central station agreement may be the most important agreement that you have entered into, yet many owners not only don’t know what is in it, they can’t even locate a copy of it. Bart pointed out the two provisions (security interest and right of first refusal) that are potential land mines, but there are others. Many do not know the terms of their agreements and find that they are in the middle of a three year commitment and will owe their station a significant balance if they sell.
Ken correctly points out that there may be a valid reason for a security interest or right of first refusal, but what if the casual event, like an incentive, or special attention from the station, happened years ago and now it is just a standard service provider relationship? It is not uncommon to run across an agreement signed in the ‘90’s (when right of first refusals were commonplace) and the central station has sold to another party. If the Agreement is assignable (most are) the provisions most probably transferred to the new owner. While you may be able to go to court and set aside some of these provisions, renewals and term may be enforced, and, why do you want to have an unnecessary hurdle to your sale.
My advice, have Ken help you to negotiate (or renegotiate) your central station agreement. They are selling a service to you, not the other way around. If the agreement is incredibly one sided and the station seems to be uncompromising this may be a hint of what the relationship will be like. After Ken finishes the review and the Agreement is executed, keep a copy, you need to know the terms. You may also want to have Ken prepare an Abstract of the agreement (term, renewal date, conditions, etc…) so that you know the contents of what may be the most important agreement that you have signed.
Mitch Reitman
Reitman Consulting Group
817-698-9999
http://www.reitman.us
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Response
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When you think about the contracts an alarm dealer is likely to sign you quickly realize that the central station dealer agreement is among the most important. Other agreements, such as a lease for premises, purchase of real property, maybe a distributorship or dealer agreement, financing agreements including a note and security interest, shareholder or member agreements; the list goes on, are all important agreements. Any business owner would be foolish to think these agreements should be signed without first seeking legal counsel.
I don’t mean to imply that the agreement with the central station is or should be contentious. While some may view the relationship as inherently conflicted, I think the relationship should be viewed as a collaborative and mutually beneficial relationship. Certainly the dealer needs to have its subscribers monitored; central stations need dealers as customers. There needs to synergy and cooperation as well as mutual respect as each party, dealer and central station, do their part to provide the monitoring service to the dealer’s subscribers.
OK, I know that sounds nice but obviously there are different interests at play. Also, not all central stations view the relationship as described ideally above. Some Dealer Agreements are lop-sided, not just unevenly balanced. There are several essential issues important to dealers and these are the issues addressed in the Rider to the Central Station Dealer Agreement. Get this form and you will immediately realize how important they are and you can then find out if you have them in your current agreement or the one you are about to sign.
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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
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