Monitoring and Service Contracts

Need One for Each
Q:
When purchasing contracts from another dealer, is it normal industry practice that those clients/contracts include service with the monitoring? Has any one in our industry ever purchased just the monitoring contracts?

A: Monitoring and Service are two separate services, requiring two separate contracts. The monitoring contract should provide for the installation, programming, leasing and servicing for the communication device (or software) only. This monitoring contract is used when the subscriber owns the equipment, other than the communication software. Obviously, monitoring is not possible if the alarm system is inoperable, however it is the subscriber’s responsibility to keep the system in working order, not the alarm company who only has a monitoring contract.

That’s where the Service contract comes into play. A good service contract should have the option of “per call” relationship, or fixed periodic payments. It needs to cover normal wear and tear problems with the equipment, and importantly, service on request, not inspection and maintenance.

If you are purchasing subscriber contracts (accounts) from another alarm company, you need to examine the contracts to determine what the Selling Alarm Company has agreed to do, monitor or service or both. A subscriber contract that requires monitoring and service is obviously worth less than a contract that calls for just monitoring, because it’s cheaper to just monitor than to provide service as well.

Valuation of the alarm contracts depends on many factors, but generally a monitoring contract will sell for more than a service contract. Your cost for monitoring can be determined and you would expect to have little service problems with just a monitoring contract. On the other hand, a service contract might require unanticipated work, labor and material, and your costs are less predictable. Keep in mind that this is a very broad and general analysis and that service contracts often command the same valuation as monitoring contracts and, if priced right with the subscriber, could be worth even more than a monitoring contract.

When another alarm company takes over your account, if it’s a monitoring account, the panel code is not often available to the subscriber. The software is your property. Certainly you can sue the subscriber for breach of contract. Action against the other alarm company depends on many factors. Successfully getting the cooperation of law enforcement to be concerned with the “theft” of your property is not likely. It is more a civil matter for private lawsuit.

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