Why Security Dealers Shouldn’t ‘Hide’ Commercial Accounts in Residential Contracts

An alarm inspector with the Phoenix Police department warns security dealers of dangers and potential illegalities of ‘hiding’ business accounts in residential alarm monitoring agreements.

Detective H.W.”Robbie” Robinson of the Phoenix Police Code Enforcement Unit/Alarm Inspections, submitted this notice in an email newsletter distributed by security-industry attorney Kenneth Kirschenbaum, legal contributor to Security Sales & Integration. Robinson warns against the practice of intermingling commercial alarm accounts with residential contracts. It’s dangerous for the customer and potentially illegal for the dealer (edited for grammar).

I am the Alarm Inspector/Detective for the Phoenix Police Department and have had issues with alarm dealers or their sales team hiding their commercial accounts under the name of the business owner as a residential contract.

I have found that the alarm dealers do this because they can get the “person” (business owner) through the credit check as a residential contract easier than they can get a qualifying credit score for the small business “entity” under a monitoring contract for a commercial account.

I have been told that some dealers do it because they have a residential contract only or no commercial contract restriction on their dealer agreement. Basically, the dealer runs the “residential” contract through his dealer program and sells the contract to the national alarm company who does not verify the information on the contract.

This creates a situation where PD is dispatched to an address looking for a residence and the officer arrives to find that the location is actually a strip mall or business location. The officer cannot locate the “residential” premises and attempts to get further direction from the central monitoring station operators that rely on the data entered from the contract.

If the central monitoring station operator cannot reach an RP on the call list to get the correct info and the officer cannot find the correct location then they eventually leave the area without ever checking on the alarm.

The most common and most dangerous are the strip mall business locations where the residential address looks like an apartment number. This is a serious risk for the responding officer who may not be paying attention because they are looking for a residence and talking on the radio or typing on the computer trying to verify the dispatch information when the bad guy sees the cops and runs out of the business.

This creates a potentially deadly situation and I would like to hear what you have to say on this if you think that there is a liability component related to the alarm dealer or the alarm company running the dealer program.

I have brought this problem to the attention of several major alarm companies that operate national dealer programs and yet it still happens.

I just had one last month where even the national dealer program messed up when they relocated the alarm system from the owners residence to his business because he still had time left on his residential contract. The national dealer program left the contract under the name of the residence even though it was now at a commercial business in a strip mall.

The alarm tech installing the alarm system (reprogrammed the existing commercial alarm system) at the new location obviously knew that this location was a commercial business, but in typical fashion, the tech installed the alarm system exactly as stated on his work order, signed off and got paid.

The officers were dispatched three times in less than a month and could not find the location of the alarm before it came to my attention. When I talked to the national company about it they found it in their notes that the customer negotiated to have the alarm moved to his business because he could not get out of his residential contract. They left it as a residential contract after changing the address used for dispatch, but ignored the fact about alarm being installed at a “business” location and they continued dispatching PD to a residence.

Phoenix has had lawsuits where a business tried to sue the City of Phoenix because the officers did not find the “residential” premises and they got cleaned out. We defeated their claim by obtaining a copy of the original monitoring contract showing that the dealer falsified the contract and the 911 recordings showed that central monitoring station operating the dealer program gave us the bogus “residential” info during the alarm activation dispatch.

In 2014 I got a conviction on a fraud schemes case that landed the sales person for a local alarm dealer in prison for 3.5 years. The investigation started because the officers could not find the correct location for the alarm system that ended up being a business (hair salon) hidden as a residential contract under the name of the “owner” of the salon.

Can you please comment on this problem and help me to get the word out for the national dealer programs to verify the contract info when they are putting the account online. Something as simple as searching the address on the internet to get the street view in order to look at the property to see if it is obviously a residence, apartments or a commercial strip mall can stop this problem most of the time.

Kirschenbaum responds:

Alarm dealers should not be using a residential agreement for a commercial account, and should not be listing a commercial account as residential. I was not aware that this was an issue or problem. If dealer programs are allowing their dealers to push through contracts for commercial accounts under individual names in order to meet credit score criteria then it’s a practice that should be stopped.

Obviously it’s essential for police and fire personnel to be able to identify and locate addresses when responding to alarms. Besides possible criminal repercussions, as mentioned above, there can be civil liability exposure for intentionally causing confusion leading to delayed or no police or fire response. It’s unlikely that this is a problem limited to Phoenix.

Alarm dealers need to understand that they are selling life safety equipment and services. The potential exposure for liability cannot be ignored and sooner than later your luck is going to run out if you disregard best practice and procedures. That means using the proper contract for the services you are offering, whether you’re offering:

  • PERS
  • ePERS
  • residential
  • commercial
  • fire
  • environmental
  • sales and installation
  • DIY with monitoring
  • You need to be using the proper contracts and you need to be properly identifying the subscriber to the AHJ so that proper response is not jeopardized.

    For more legal information on security and home automation, visit www.alarmcontracts.com.

    This article originally ran on SSI‘s sister site cepro.com.


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