How to Move Monitoring Accounts Following Their Sale Problem-Free

Legal expert Ken Kirschenbaum explains how taking care in negotiating the Dealer Agreement can help avoid problems when moving monitoring accounts.

Dealers selling their monitoring accounts may not understand their obligation to the central station monitoring those accounts.

If the selling dealer and buying dealer are represented by attorneys unfamiliar with the alarm industry they too may not be aware that there could be lingering obligations to the central station.

They would likely not be aware that any money that may be owed the central station, and any obligation to continue to use the central station, may be the least of what they should be concerned with.

The obligation between central station and dealer is expressed in the Dealer Agreement. Can the buying company assume the seller’s contract with the central station and continue the monitoring?

The answer is probably not, unless the Dealer Agreement permits that assignment and assumption. More likely, the buyer will have to establish its own deal with the central station if it wants that central station to continue monitoring.

In such a scenario, however, if the buyer has its own central station it would likely not be looking to have the existing central station monitor the accounts any longer than it would take to move the accounts to the buyer’s central station.

I worked a lawsuit like that latter scenario. The buyer-central station wanted the existing central station to continue monitoring only until the accounts were moved. The central station refused to continue monitoring unless the buyer agreed to pay “above market” for the monitoring, which the buyer refused to do.

The central station then terminated monitoring and notified the subscribers. The buyer was not successful getting an order to restore the monitoring services. The buyer accelerated its projected time to move the accounts to its own central station from several months to several days, so the matter quickly resolved itself.

Quite naturally an existing central station isn’t going to be happy to learn that its dealer has sold accounts and that they will be moving from that central station. That’s when the Dealer Agreement is taken from the dusty drawer and read.

It could be that the dealer committed to a number of years for each account, or a liquidated damage if the accounts are moved too soon; incentives provided by the central station may have to be repaid if the accounts are moved; the central station may not be under any obligation to assist with the move and may not cooperate by continuing monitoring until the buyer can conveniently move the accounts on its schedule.

On the other hand, the central station may very well be cooperative, continue to monitor at the existing rate and assist with the move by turning over communication lines, signing RESBORG (responsible organization) forms, providing activity reports, etc.

A dealer would be wise to negotiate these issues in advance and have them included in the Dealer Agreement. Buyers and sellers should be careful to consider what happens to the monitored accounts after the sale. No assumptions should be made that the central station will permit the buyer to step into the seller’s shoes.

That might happen, but sometimes there are emotional as well as business reasons for not permitting that substitution of dealers. The switching of central stations after a sale is one of the factors that can contribute to higher than historic attrition for the seller.

That could be an important issue on a sale, especially when there is a guaranteed period. Dealers select a central station to “partner” with to provide the monitoring services.

Dealers should consider that when they unilaterally decide to end the “partnership” there may be heightened emotions and sometimes poor business judgment (just like in divorce and business break-up disputes). A little care in negotiating the Dealer Agreement and much of the problem issues can be avoided.

About the Author

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Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.

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