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Trouble getting 5 year contract term and automatic renewal in CA
May 7,  2022
Trouble getting 5 year contract term and automatic renewal in CA
          I have a couple questions for you:

1.    We have a commercial customer that would like us to monitor their fire alarm system (we currently monitor their security system).  We always tell them to check with their current alarm company to make sure they are not under any contractual obligations before we take over. 
2.         The current company sent the customer the contract they signed five years ago with an auto-renewal of two years, which just kicked in.  They do not have the separate disclosure for the auto renewal required for auto-renewal of terms more than month to month. 
     How should my customer handle this with their current alarm company?  Can they cancel without being held to the two years? 
     This auto-renewal requirement notification applies to fire alarms too right?
3.    While looking into this, I found references to a new round of hell regarding auto-renewal contracts.  I know, I should just do month to month after the initial term.  Which would be ok if we could get five or 10 year contracts like you suggest.  We are doing great if we can get people to sign three year contracts.  Longer terms are becoming a bigger and bigger issue.
          You can use these questions in your newsletter if you think it will help
          Looks like the auto-new statute in CA applies to residential contracts:
          “(9) For residential agreements entered into on or after January 1, 2017, that include an automatic renewal provision renewing the agreement for a period of more than one month, a clear and distinct disclosure shall be included separate from the terms and conditions of the agreement advising the consumer that the agreement they are entering into contains an automatic renewal provision. The disclosure shall include the length of time of the renewal term and specify that failure to provide notification of nonrenewal to the licensee, as required in the agreement, will result in the automatic renewal of the agreement. The consumer shall acknowledge being advised of the automatic renewal provision by signing or initialing the disclosure. The disclosure may be included on the same document as the right to cancel form required by Section 1689.7 of the Civil Code. The automatic renewal provision shall be void and invalid without a separate acknowledgment of the disclosure by the consumer.”
          There is a law that went into effect January 2022 but interestingly enough it is repealed as of July 1, 2022, dealing with charging consumer credit cards.
          The auto-renewal laws are posted on the K&K website under Alarm Law Issues
          Regarding your take-over, I don’t like to counsel subscribers, even when asked by an alarm company, how they can cancel their alarm contract.  I never know when it’s a contract I wrote that they are canceling. 
          As a take-over alarm company you aren’t under any obligation to warn your customer that it or they may be under contract, nor is it your obligation to help them figure out how to get out of their contract. You are free to contract with the customer, though if it turns out to be leased system expect to hear from the original alarm company demanding return or payment for its equipment.  A customer contracting with two or more alarm companies for the same service could obviously have a problem, a problem you don’t want to be in the middle of by having advised the customer whether it owes any obligation to the other alarm company or whether it can get out of the other contract.  Keep in mind, even if you’re right, the other alarm company could start collection proceedings which will cost the customer money and time to defend.
          So in California the automatic renewal law applies to residential, not commercial.  The commercial fire alarm contract would not be affected.
          It’s a terrible idea for you to counsel your prospective customer, or current customer, on the enforceability of a contract with another alarm company.  It’s a worse idea for you to ask me to comment, especially when you don’t provide the contract in question.  What if it’s a Kirschenbaum Contract™ and I am opining on how the subscriber can get out of it? 
          Alarm customers are free to contract with as many alarm companies for the same service they want; it’s their problem if they get stuck with multiple contracts for the same services.  Think a gardener who shows up to cut the grass at 2PM cares if he gets there and the grass looks like it was cut at 10 am that morning?  If that’s what the customer ordered who is he to complain?  Of course the proposition is preposterous, but it’s really not your position to point that out.
          What I really want to comment on is your difficulty getting 5 or 10 year contracts signed.  The reason, primary reason, is not your customers, the economy, the culture, the competition or any other reason other than lack of training or commitment from your sales force, and that might be your fault since you steer the ship.  Your sales force needs to train to make the deal, sell the contracts.

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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