Complying the AB 2073 –

Changing your Residential Agreements
By Alan Pepper
When the California Legislature and Governor first approved sweeping changes to the law governing home improvements performed by contractors, the alarm industry was able to obtain some concessions regarding duplicative requirements for providing the 3-day right of rescission notices, however the new law has imposed significant added requirements that would have made typical residential alarm agreements quite cumbersome and probably confusing for customers. The California Alarm Association was able to cause the passage of AB 2073 which provides some relief from the new compliance requirements of the Home Improvement Act (the “HIA”). These new provisions go into effect on January 1, 2007. Following is a brief description of the state of the law and the obligations of an alarm dealer. Bear in mind that this only applies to residential systems and has no relevance for commercial or institutional systems.

The HIA applies only to systems that are not covered exclusively by the California Alarm Act. Typically, alarm dealers sell or lease, install, monitor and service dual systems that have both a security (burglar/hold-up) system and a fire/smoke system.

The fire/smoke portion of the system is not covered by the Alarm Act and is covered by the HIA. Therefore, if you are only selling and installing a security system, you do not have to comply with HIA for that system. However, if you are selling or leasing and installing a fire/smoke system in conjunction with a security system, or selling or leasing and installing a stand-alone fire/smoke system, then compliance with the HIA may be required.

The economic threshold for compliance is $500.00, and the various possibilities are:

1. If you sell a combination security alarm and fire/smoke alarm system and your selling and installation costs (not price to the customer) to you for the fire/smoke system is under $500.00, then you don’t have to comply with the full contract requirements of the HIA, and instead you can comply by adding a statement in your contract that states:
“If a fire alarm system has been installed, we certify that all costs attributable to making the fire alarm system operable for the residence identified by this document, including sale and installation costs do not exceed five hundred dollars ($500.00).”

It is important to note that the cost of monitoring service is NOT included in the $500.00. This can also be done in a separate certificate/document which must be signed by your selling agent and delivered to the customer with the contract. The text is slightly different, and incorporating the text into your base agreement may be the better alternative.

Also, if your standard alarm panel includes both security and fire capabilities, and you use this panel whether or not you use the fire portion, then the entire cost of the panel could be allocated to the security system.

However, if you use a different, more expensive panel, for dual systems than you use for a security-only system, then the cost differential should be included in the determining if you are under the $500.00 cost threshold.

2. If you sell a stand-alone fire/smoke alarm and the total price (not cost) to your customer, including monitoring is less than $500.00, then you do not have to comply with HIA.

3. If you sell a stand-alone fire/smoke alarm and the total price (not cost), including monitoring is $500.00 or more then you must comply with all of the contract requirements of the HIA which should be done with an agreement that is designed for that purpose. You will need to use a similar agreement for other non-security systems priced at over $500.00, such as home theater, central vacuum, intercom and similar systems that are governed by the Contractor’s law.

4. If you sell or lease and install a combination security alarm and fire/smoke alarm system and the cost to you of the fire/smoke portion of the alarm system is $500.00 or more, then you must comply with the full requirements of the HIA, which can be done by using either a complete contract form or an addendum to your standard contract that meet the requirements.

The new law imposes other requirements. If you use the certification process described in paragraph #1 above, you must retain copies of the agreements for five years and make them available to the CSLB within 30 days of their request. The provisions should not be taken lightly – if you rely on the certification be sure you can demonstrate that your costs for the fire/smoke alarm system are under $500.00.

This new change and relaxation of the contract requirements, does NOT, in anyway, change the requirement to have a Contractor’s license for installing fire/smoke systems. You should contact your attorney or other contract advisor regarding the full details of the new HIA requirements and the exceptions permitted under AB2073.