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Comment on should we agree to change the price increase provision in our contract
December 9, 2023
Comment on should we agree to change the price increase provision in our contract from article on December 2, 2023
          On December 2, 2023 you gave Debbie spot on advice regarding a customer pushing back on the rate increase provision in your Monitoring Agreements.  You were correct that inflation is significant and being able to increase rates is important.  Your agreements allow the alarm company to raise rates within certain limitations without having to notify the customers.  This is a great tool and, my clients typically find that it is an easy way to increase their RMR.  In our experience, for every five hundred accounts receiving an increase, the dealer may get pushback from two or three.  If the average monitoring rate was $30, a 5% increase raises RMR by $750.  This is the equivalent of adding 25 new customers.  If the three customers make a fuss, the alarm company can just keep them on at the same rate (they can’t cancel anyway, but they typically stay on if they get their old monitoring rate back) and all is good.  Even if they lose these customers (which rarely happens) they are still up $660 of RMR, which is the equivalent of adding 22 customers and their central station bill decreases. 
          In Debbie’s case, the customer wanted a 90 day notice and the ability to cancel.  You advised her on better ways to approach this, and, also warned her of the dangers of negotiating a proven Monitoring Agreement.  One additional piece of advice that I would offer here is to take a page from the real estate industry’s playbook and develop an Abstract of customers with changes to their Monitoring Agreements.  Landlords typically make changes to leases and it is important for them to track those changes for a number of reasons.  We review thousands of Monitoring Agreements each year as a part of due diligence and we often run across a customer with material changes to their agreements that the alarm company has forgotten about and, in many cases, breached the Agreement.  My advice is to resist changes, but, if you do, develop an abstract, or summary, of those changes and make a note in your monitoring software. 
Mitch Reitman 
817 698 9999 x 101 
Reitman Consulting Group
Fort Worth, TX
          Maintaining an abstract is a great idea and will save tons of time when getting ready to sell.  All sellers are required to represent that the contracts they have to sell are transferrable without the customer’s consent.  That would be the case if the contract permits it or the contract is silent on it.  But if the contract prohibits assignment then consent would be needed.  If the buyer of your accounts finds that contract before closing it will be excluded or you’ll have to get consent or you can expect a big discount on the multiple and increase in the guarantee period.  Knowing which contracts you have agreed to restrict assignment is going to be helpful when you’re organizing to sell. 

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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