Legal Watch: Issues for a Rapidly Changing Residential Market

This month’s magazine and column focus on the residential security market, which is undergoing dramatic subterranean shifts. You don’t need a weatherman to know which way the wind blows — it encompasses everything from Google’s acquisition of Nest, to nationally-recognized players moving from selling home security to selling the interconnected home, to increasing consumer expectations surrounding residential video, to the continued push to the cloud and mobile apps.

This ain’t your daddy’s residential market; and if you don’t make the leap forward, you are likely to end up on desolation row. The residential market is changing but there’s still plenty of opportunity for significant, long-term growth, even if the changes can be daunting sometimes. If you play in the residential space, keep your eye on these top three legal issues.

1. Let’s Move the Residential Market to Electronic Contracts. Enough with the paper already! Virtually the entire world has moved to some form of electronic contracting — let’s not be the last to make the leap. Virtually every man, woman and child (especially child) in the United States has at least three electronic devices, and we all regularly click through agreements in the Web. Talk about overcoming objections — when is the last time you read anything you agreed to on the Internet?

Put your residential contract on an electronic device and send it into the home with your salesperson. Get an electronic signature and be done with it. No more “NCR-type paper.”

Just make sure you have complied with the legalities of electronic contracting and that your current or potential future lender and insurer are on board (a deep-dive subject for another column). Electronic contracts are good for the planet, good for you and good for business. Let’s make it happen.

2. Security for Wireless Security Systems. Keep your eyes on a recent class action lawsuit filed against ADT in federal court in Illinois — Baker vs. ADT. In Baker, the plaintiff alleges ADT’s wireless home security equipment transmits unencrypted signals that can be hacked by third parties. As a result, the complaint claims, signals from ADT’s systems can be intercepted and interfered with by those who want to gain access where such systems are installed.

The plaintiff further claims that third parties can disable or suppress ADT’s security systems or cause the system to activate when there actually is no security breach to determine if police are dispatched in response to an alarm; and waiting until they aren’t in order to strike. Plaintiff also alleges that hackers can use a subscriber’s security cameras to spy on subscribers while in the premises.

Don’t gloat — other systems seem to be equally susceptible and you should make sure the systems you install don’t fall into this category. This case is still in its incipient stages; in fact, at press time, ADT had filed a motion to dismiss. Consider a well-crafted arbitration clause that gives you your day in court on catastrophic losses while limiting nuisance type claims to arbitration.

3. Protect Yourself From Claims under the TCPA. A federal consumer protection law — the Telephone Consumer Protection Act — drastically limits your ability to call residential and mobile numbers. The law’s primary purpose is to prohibit companies from telemarketing consumers without prior express consent; however, the law also covers informational and other types of phone calls. Contacting subscribers and others on their cell phones is particularly problematic, as the law requires prior express consent for all calls to mobile numbers — including text messages as well.

The TCPA allows private citizens (and state and federal governments) to sue, and the damages mount quickly — $500 to $1,500 per call — making TCPA claims particularly attractive for plaintiffs and their lawyers.

If you call customers and others to sell your products and services, it is critical to know and understand the TCPA’s stringent requirements. Even if you don’t telemarket, you must still be aware of and comply with the TCPA and its limitations on telephone communications. Make sure you cover these issues in your residential form of agreement.

Eric Pritchard is a Philadelphia lawyer who spends his workday making the world safe for electronic security providers. Reach him at [email protected]. This column does not constitute legal advice; contact an attorney with questions.