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How does your contract deal with increases to the RMR

April 6, 2023
How does your contract deal with increases to the RMR
          Long term contracts with recurring monthly revenue end up being a commitment on your end also; you need to provide the service.  Many factors contribute to a need for an increase, some direct and some indirect and harder to explain.  Your customer may not really care why your expenses went up or why they went up; that’s your problem if you agreed to a monthly charge for the term of the agreement and there is no provision that permits a change to that charge.  How many times can you get away with a “fuel” charge increase?
          I just reviewed a contract that has a provision from the early 1980s which reminded me of this topic.  Here is the evolution of the right to increase the RMR:
1.  Alarm company can increase RMR and if subscriber doesn’t agree subscriber can cancel the contract.  Problem with this is that once the increase is sent out and the subscriber cancels the contract is over.
2.  Alarm company can increase RMR and if the subscriber doesn’t agree to increase the alarm company can rescind the increase; contract RMR doesn’t increase but at least it’s not canceled.  Of course the alarm company can refuse to rescind the increase in which event the subscriber can cancel the contract.
3.  Alarm company can increase RMR and subscriber is obligated to pay the increase.  This is option you have if you use the Kirschenbaum Contracts™
          The right to increase is often challenged by potential subscribers, though surprisingly enough it’s the amount of the increase that’s questioned and not the right to increase itself.  The Standard Form Agreements have a 9% per year right to increase.  Sometimes we delete it and sometimes we reduce that number to something less.
          One issue that comes up from time to time is what happens when the subscriber is in default, hasn’t paid, and the contract year is up; can you impose the increase and calculate the subscriber’s default based on the increased RMR? 
          Answer is K&K won’t do that; we will calculate on the last RMR payment made by the subscriber, not an increased amount.

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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