Specific language for most clauses is not included here because any changes to your agreement, no matter how small, should be made with the guidance of your attorney. Even minor modifications can create ambiguity or a violation of state law. If your lease is at all unclear or unlawful, the courts will generally find in favor of the tenant. So while these suggestions are useful, proceed with changes only after discussing them with legal counsel.
Basic Clauses
First, there are basic provisions that identify the names of the parties involved, the length of the lease and the space rented. The following should be included in your agreement:
Size.
Modern leases are careful to state that the size of the space quoted is approximate, and there is no abatement or adjustment in rent if the space is smaller or larger than declared. They also typically confirm that the space has been inspected by the tenant and is deemed to be suitable for the tenant’s purposes.
Terms.
This clause should clarify the term of the lease and how it renews. For example, is it a month-to-month lease with month-to-month renewal? If you give an abatement of rent for signing a six-month lease, state this clearly in the agreement so you can recover the discount if the tenant does not fulfill his obligation. This clause should also discuss termination. How much notice are you or the tenant required to give if one of you wishes to end the lease?
Locks.
Consider including a requirement that the tenant keep the space locked. You can even specify the type of lock the tenant can use. Finally, you want to give yourself the right to lock the unit should you find it left open.
Insurance.
The most common provision in a basic lease states that the tenant must have insurance for his stored property. This clause disclaims your responsibility to carry insurance for stored goods and warns the tenant about any limit on value.
Liability.
Most leases include an owner’s release from liability for property loss and personal injury. (In some states, these must be covered in separate provisions.) To the extent of the law, you want to disclaim—or have the tenant waive—your liability for anything that might happen to him (injury or accident) or his property (damage or theft). You might also include a waiver of subrogation, which attempts to prohibit the tenant’s insurer from coming at you if the tenant cannot sue you for a loss. Usually, this clause must usually be conspicuous in the lease, so check with your attorney.
Access.
Ensure your lease provides you with the right to enter a unit under certain circumstances, particularly during an emergency. Some self-storage statutes define the term “emergency.” If your state law doesn’t, you’ll need to define the situations in which you can enter a unit to safeguard tenants, employees and others, such as necessary repairs.
Default and remedy.
One of the basics missing from most leases is a default-and-remedies clause. While your state statute will almost certainly define default as failure to pay rent and provide you with specifics for remedy (a lien sale), there are other instances in which you may need to take action.
For example, you might have a tenant who regularly leaves trash on the premises or damages your property. You may think you can simply terminate the lease at the end of the next rental period, but what if the tenant doesn’t comply? Do you have the right to deactivate his gate access and overlock the space? Can you remove his property from the unit? Do you have to perform an eviction?
These types of questions should be answered in your default-and-remedies clause. Many owners include a lot of do’s and don’ts in their lease but fail to draw the final conclusion: If a tenant does/doesn’t do something you do/don’t desire, it’s a breach of the lease, and you have the right to take certain courses of action.
Correspondence.
Define when and how you expect to exchange notices with tenants. Some correspondence is statutorily prescribed, such as a certified-mail notification before a lien sale. Other notices are simply administrative, but you still want them to be binding. For important items, have a clear method of delivery and confirmation. Do not assume conveyance is assured once you drop an item in the mail. Similarly, state how you want tenants to notify you of changes to their accounts, e.g., address, payment method, lease term, etc.
Assignment.
Prohibit unit assignment and subletting in your lease. Especially in this day and age, make sure the tenant you approve for the space is the one who actually uses it. Give yourself a method of remedy if this isn’t the case.
Mandatory Requirements
Don’t ignore state-mandated lease language. Many statutes have requirements for certain language or rights that must appear in bold print or be otherwise conspicuous. For example, the state of New York has a litany of statements that must appear and requires that the lease be printed in a minimum type size. These demands are simple, but they can present big problems if you don’t comply.
Most states require that you reprint verbatim or re-state the self-storage lien section of their statute in your lease. Check the statute for definitions of important items such as “lien remedy” or “default.” Remedies vary by state, so your lease should match accordingly. Finally, make sure your lease uses the same terms to identify the facility, unit, landlord and tenant as your state statute. For example, do not create ambiguity by referring to the person renting the space as a “tenant” if the statute refers to him as “lessee.”
Advanced Lease Considerations
If you have covered all of the above in your lease, you have a relatively basic agreement that sets forth the minimum statutory requirements and outlines some of the responsibilities between owner and tenant. Now there are other clauses you might consider for additional protection.
Use of space.
What is an acceptable storage use? Do you allow the storage of art, antiques, artifacts, irreplaceable items or items of sentimental value? If not, state that in your lease. You might also want to prohibit people from living in the space, engaging in illegal activity, or storing liquid waste, trash, flammables, animals, illegal or stolen property, explosives or any caustic chemicals. You might think these things are obvious, but if you don’t state them in your lease, you could have a tough argument on your hands down the road.
Hazardous substances.
The provision regarding use of space should identify items prohibited from storage. But when it comes to hazardous substances, your lease should include language verbatim from the Comprehensive Environmental Response Compensation & Liability Act, such as:
Tenant shall not store in the premises any hazardous substance. The term “hazardous substance” means:
- Any substance defined as a “hazardous substance” under CERCLA
- Petroleum, petroleum products, natural gas, natural-gas liquids, liquefied natural gas and synthetic gas
- Any other substance or material deemed to be hazardous, dangerous, toxic, or a pollutant under any federal, state or local law, code, ordinance or regulation.
Value Limitation.
The storage lease should always include a dollar-value limitation on stored property. Some operators are resistant to this concept at first; but do you really want to accept potential liability for $100,000 worth of property in exchange for $75 to $150 in rental fees? You want to cap your liability so you can’t be sued by tenants who claim the contents of their unit are priceless and irreplaceable. While some states will award judgments for items of sentimental value, generally, a value limitation can save the day.
Security.
It’s important to clarify the role of security systems and related features in your lease, because they may not operate at all times, or as advertised, or as the tenant assumes they will. A clause advising tenants of actual safeguards and possible failures is advisable.
Control of Access.
Ensure your lease gives you the right to change operating hours and gate procedures or deny a tenant access under various circumstances, including the event of emergency, disaster or non-payment of rent.
Governing law.
It’s important to establish governing law and severability in your lease, particularly if your facility is near a state line or you get a lot of business from out of town. In the event a claim is brought against you, this will ensure the claim is filed in the county or state in which your facility is located, not where the tenant resides.
Mediation.
A mediation or arbitration clause is highly recommended. These methods of dispute resolution are generally more affordable than litigation. They also allow you to work through issues with tenants privately, without going on public record.
Oral representation.
This clause states there were no oral representations in the business transaction, and identifies the lease as the full and complete understanding between the two parties.
Service members.
With so many people in the military, language regarding the Service Members’ Civil Relief Act is imperative. At least signing, your tenant must declare if he—or any family member storing items in the unit—is active military or on reserve status. The clause should also state that you will be notified of any change in this regard immediately.
Warranty of information.
It’s not uncommon for a storage owner to be duped into renting a unit by someone with a stolen identity or false contact information. Even though it seems obvious, you have to give yourself the right to end this type of tenancy, especially if you need judicial assistance. A warranty-of-information clause declares that any information provided by the tenant is warranted as accurate. Proof to the contrary creates a default on the lease and entitles you to relief in a court of law.
Additional Clauses
There are some other clauses or addenda you might want to include in your lease. For example, consider issues such as the use of electricity and dumpsters. Some tenants may attempt to plug into your power. You may wish to charge for this or prohibit it altogether. The same holds true for dumpsters. Clearly state how and when they are to be used.
With some RVs exceeding $500,000 in value, scant mention of vehicles in a lease is no longer an option. Even if you don’t offer formal vehicle storage, you’ll likely have tenants who store vehicles in their units. For this reason, your lease needs a solid clause regarding storage, default and disposal. It should also include a well-planned set of rules and regulations for vehicles.
If you automatically charge rent to credit cards or withdraw it from customers’ bank accounts, you need a provision that permits this activity on a first-time and ongoing basis. You also need permission to continue charging until any debt to the facility is paid in full. Be very careful with electronic-check transactions—the lease language must be specific, so seek guidance from your bank.
Finally, allow yourself the opportunity to screen tenants for criminal and credit purposes. You might not conduct background checks now, but you may want to in the future, so include this provision in your lease. There’s specific language required to allow you to run these types of reports; the credit-reporting agencies will provide it to you. Here’s an example of how it might read:
I hereby authorize XYZ Storage to obtain consumer reports, and any other information it deems necessary, for the purpose of evaluating my application. I understand that such information may include, but is not limited to, credit history, civil and criminal information, records of arrest, rental history, employment/salary details, vehicle records, licensing records, and/or any other necessary information. I understand that subsequent consumer reports may be obtained and used under this authorization in connection with an update, renewal, extension or collection with respect to or in connection with the rental or lease for which this application was made.
The best way to approach your lease is to anticipate situations in which you might be sued by a tenant. Hopefully, you will never have the experience. A well-written lease can set reasonable expectations for you and your customers. It can also help avoid unnecessary, frivolous litigation and any potential for class-action exposure.
Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. This column provides general legal insight into the self-storage field and should not be substituted for the advice of your own attorney. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151; e-mail [email protected].