Home security companies are known for long-term monitoring contracts that are easy to enter and expensive to exit. The business model involves heavily subsidised equipment installation in exchange for a multi-year monitoring agreement. The combination of equipment 'free installation' offers and multi-year contracts means many homeowners don't realise the true cost until they need to cancel — due to a move, financial difficulty, or dissatisfaction with service.
What is a Monitoring Agreement?
A home security contract typically has two components: an equipment agreement (covering the installation and ownership of sensors, cameras, and control panels) and a monitoring service agreement (a recurring monthly fee for professional monitoring). These may be in a single contract or separate documents. The monitoring agreement is typically 24–36 months with significant early termination fees. Equipment may be owned by you, leased from the company, or 'included' but tied to the service contract.
Red flags to watch for
A 3-year monitoring contract with no exit right means you're committed to monthly fees regardless of whether you move, the service deteriorates, or you simply no longer need it. Calculate the total cost commitment before signing: $50/month for 36 months is $1,800.
Industry standard is 75–80% of remaining payments as an ETF. On a $50/month plan with 24 months remaining, that's $900–$960 to exit. Some contracts charge 100% of remaining fees. This should be clearly disclosed before signing.
If the equipment is leased (not sold to you), the company can require its return on cancellation, may charge for unreturned equipment, and may retain the right to disable the system if you don't return it. Clarify who owns the equipment.
Some contracts require you to either transfer the remaining contract term to the home buyer or pay the full ETF on moving. If a buyer refuses to assume the contract, you're paying the ETF even though you're leaving the property.
Many monitoring contracts include annual price increase clauses (3–5% per year). Over a 3-year term, your monthly fee may be significantly higher than the signed price. These clauses should be clearly disclosed.
Your legal rights
Home security contracts are governed by state contract law and, for door-to-door sales, the FTC's 3-day Cooling-Off Rule. Many states have specific home security regulations. California law requires a 3-day right to cancel residential alarm contracts and limits ETFs to 50% of the remaining balance for residential customers. Some states require that the ETF reduce over time (not remain flat). The FTC's Negative Option Rule (2023) applies to recurring billing elements. If a monitoring company fails to provide the agreed service (e.g., repeated false alarms with no response), you may have a claim for breach of contract.
Questions to ask before you sign
- 1What is the minimum contract term, and what is the early termination fee if I cancel before the end?
- 2Who owns the equipment — is it mine after installation, or does it remain your property?
- 3What happens to the contract if I sell my home — am I released, or must I pay the ETF or transfer the contract?
- 4Are there annual price increases, and if so, by how much and do increases trigger a right to cancel?
- 5What is included in the monitoring service — what response protocols apply when an alarm is triggered?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.