What to Know About Taking Back Equipment in Account Takeovers
How to handle trying to regain equipment when you’ve lost an account.
A recent inquiry touched on how to handle certain installed equipment when an account is taken over by another provider. The dealer asked: “If we go out and pull our radio after a fire system is online and notify the AHJ the system is offline, what exposure does that create for us? We have since notified this competitor that we never sell our radios. If this were to happen again, is there any recourse for this competitor if they use one of our radios again for interfering with our ownership and recovery of our equipment?”
Because my alarm law practice started representing alarm companies in New York City this issue came up often. It wasn’t radios then, it was the entire leased system. The preferred business model then for commercial accounts was to lease the alarm system. Our Standard Form Agreements still offer “leased” versions for security and fire installations. Instead of discussing the pros and cons of selling vs. leasing business models, I’ll address the specific questions and perhaps a perspective of the leasing business model will become apparent.
An alarm company does need to identify its equipment as its property. You can do it a number of ways, from stickers on the panel, notice on your decals, signs near the panel, etc. Another way is to file a UCC-1 Financing Statement stating that the equipment is owned by you. This is not the purpose of the UCC-1 (which is used to perfect a security interest in collateral rather than declare ownership) but it may be effective to put a new owner of the premises on notice. It’s not likely to be given any effect for a competitor taking over the system since that competitor would have no reason to do a UCC search.
“Pulling” your radio or other equipment could prove challenging. You have no right to access the premises and you would be trespassing if you don’t have permission to enter and remain on the property. Unless you own the entire system you would be interfering and potentially dismantling a system you don’t own. The subscriber may dispute your ownership. While leaving your equipment onsite hoping that a new owner will engage you or that your old subscriber will continue paying you and restore the relationship, it may be construed as an abandonment of the equipment.
The subscriber is not obligated to store it for you and certainly if you’re offered the opportunity to remove the equipment, and don’t for whatever reason, the subscriber or new owner may be justified in treating the equipment as abandoned. Engaging in this “self-help” could get you arrested for trespass or theft. If you really want the equipment back then you should avail yourself of the offer, or demand, by the subscriber to remove the equipment, or you should make the demand promptly for removal and then follow through if permitted.
The Standard Form Lease offers another alternative: your option to deem the equipment sold for the “agreed upon price,” which is stated in the lease. The sale price is usually sufficient incentive for the subscriber to permit removal, or sufficient for you to allow the subscriber to pay for it and retain it.
If your equipment is properly labeled, or you have effectively put the other alarm company on notice that the system or equipment is leased and your property, you could argue that the competitor has converted your property. Conversion is a tort action (also criminal, but not likely going to be prosecuted) and you can sue the competitor and the subscriber for conversion. Your damages are likely to be the value of the equipment at time of conversion.
We have argued in these cases that the value should be the fair market value of the installed and working system, which would be considerably higher than used equipment sitting in a box or available for purchase. Sometimes the lawsuits get settled and everyone is more or less content with the outcome. Going all the way through trial is likely to be a costly endeavor and not worth the effort or expense unless it’s very extensive system.
Another way the Standard Form Agreements deal with this issue is providing that all programming remains the property of the alarm company. Reprogramming a fire alarm system in a large building may be costly enough to encourage the subscriber or new owner to stick with you.
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