What You Can and Can’t Do When Raising Alarm Monitoring Rates
Legal expert Ken Kirschenbaum explains how to raise monitored account rates the right way.
I recently had an alarm client ask me about increasing a customer’s monthly monitoring charge during the contract term. But there was even more to it as the owner was looking to make up for lost time.
“I have always kept my monitoring rates low; in fact my last price increase was in 1997. According to the standard form agreement alarm contract (alarmcontracts.com), I can increase the monitoring up to 9% per year. So then, can I take a customer that is currently paying $18.95 per month and increase them to $21 per month? I realize that is an 11% increase and exceeds what the contract states; however, this customer has not had an increase in 20 years. What do you think?” the colleague asked me.
I really should charge extra for having to give an answer when the person already knows what that response will be — in other words, seemingly obvious.
So I answered the question with another question, “Whose fault is it that you haven’t increased your rates for 20 years? Did you expect your subscriber to call and demand an increase?” OK, that was two questions, but you catch the drift. Let’s dig a little deeper.
First let’s establish a ground rule. You can’t increase your monthly charge unless your contract permits it or your subscriber agrees to it, specifically and knowingly.
As this company owner mentioned, the standard form agreements permit an increase of up to 9% each year, and the subscriber agrees to pay that increase. Contractually you can do it, and you can hold the subscriber to the increase and the contract.
Other attorneys (and alarm guys writing their own contracts) perhaps are a lot smarter than me. They have come up with all kinds of ways and terms to increase the monthly charge. Some are just silent on the issue and figure they can increase whenever they want; “Sneak it in, who’s the wiser?” they reason.
Some permit increases without a specific amount. Others permit the subscriber to cancel if they don’t like the increase. Still others permit the alarm company to cancel if the subscriber won’t pay the increase.
Those are all ingenious ideas — one dumber than the next in my humble opinion. If you are under contract to provide your service and there is no right to increase, then you can’t; simple as that.
Also, to answer the above question directly, if your contract permits up to 9% a year you can’t increase 11%. That puts you in breach of contract. If you do it without getting the subscriber’s WRITTEN consent, you are in breach.
What do you risk? Good question. Here’s what:
- breach of contract claim by that subscriber, permitting the subscriber to cancel, and get the increase back
- charge of deceptive business practice if your attorney general gets wind that this is your common practice
- problems selling your alarm contracts eventually, because a buyer is going to want a representation that your subscribers are being charged and they are paying what the contract calls for — a representation you won’t be able to (honestly) make.
Think increases don’t work? Here’s a story . . . One year out of law school 41 years ago, I got a collection case in Manhattan. I sued a very prominent person in the legal profession who was paying $900 a month for monitoring.
He called me when he got served with the summons and complaint, telling me he had never been sued in his life. We talked and I finally asked him, “What kind of building is being monitored for $900 a month? Is it the building that houses your well-known big business?” (He was the publisher of the NY Law Journal; I obviously knew the right people to crush my just-started career in law.)
He told me no, it was his apartment, an apartment he has lived in for more than 40 years. He told me he started with the alarm company (Holmes Electric) and that with all the annual increases that was what he was paying.
Well, I was as surprised as you must be, and with my profound sense of fairness, promptly settled for a one-year subscription to the National Law Journal. I am not a fan of late charges or penalties, but annual increases are fine so long as spelled out in the customer agreement.
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