The rental agreement may be the most important tool in operating your self-storage business. That said, it’s vital that you regularly review your lease to confirm it’s up-to-date and effective for its intended purpose.
Some factors to consider are when the agreement was drafted and whether it correctly follows your state’s self-storage laws. Has the lien law been amended? What about recent court decisions that interpret self-storage leases? Depending on the answers to these questions, it may be time for an update. Following are several provisions to check and, if necessary, revise.
Non-Bailment
One of the most crucial ingredients to a strong self-storage rental agreement is an explicit statement that the owner isn’t a bailee of the tenant’s property and there’s no warehouseman relationship between the parties. This is important because a bailee is held to a much higher standard of care than a landlord.
Along the same lines, your lease must state that the self-storage owner doesn’t take care, custody or control of a tenant’s goods. Keep in mind that judges who are deciding cases concerning tenant claims will look primarily to the rental agreement to determine the facility owner’s obligations. Therefore, the lease needs to be clear that the owner isn’t a bailee of the tenant’s property.
Lien-Sale Rights and Procedures
Nearly every state self-storage law requires that language be incorporated into the rental agreement to notify the tenant of the facility owner’s right to lien the tenant’s goods and sell those items once the tenant is in default. Some laws even require that this notice be placed in a specific type size or in bold print. Again, it’s essential to follow whatever is required by the statute. Courts likely won’t uphold an owner’s lien-enforcement rights if he hasn’t properly complied with the statute requisites.
Limitation of Liability
The effort to potentially limit a self-storage owner’s liability in cases of tenant claims is imperative and should be included in the rental agreement under three separate provisions.
First, there should be a value-limit provision stating that the value of the property stored cannot exceed a certain amount (commonly $5,000) unless previously approved in writing by the facility owner. Under this provision, the facility could allow a tenant to store property with a greater value if the tenant could provide proof of insurance for 100 percent of the estimated value of the property. While some states haven’t upheld this provision, many self-storage acts have been amended to allow for it.
Second, there should be a statement whereby the tenant agrees not to store property having special or sentimental value and specifically waives his right to make claims for emotional attachment to the stored property. This lessens the likelihood of tenants claiming emotional distress arising from the loss of or damage to his store goods.
Finally, there should be a jury-trial waiver that attempts to restrict the tenant’s right to bring a claim before a jury. This provision is important because tenant cases heard before a jury have a greater likelihood of returning larger verdicts than similar cases heard only before a judge.
Release of Liability
Your lease should specifically address the tenant’s release of liability against the facility owner, employees and agents. The language should include statements that the property is stored at the “sole risk” of the tenant and the owner isn’t liable for the “loss of or damage to” the tenant’s personal property due to burglary, mysterious disappearance, mold, mildew, fire, water damage, rodents, insects, and acts of God.
It’s also important to include a statement that the self-storage owner won’t be held liable for damage to or loss of property arising from the “active or passive acts or omissions or negligence of the owner, owner’s agents or employees.” This clause is significant because some court decisions have allowed owners to be released from liability even when their own negligence caused the loss or damage to occur. This is especially vital when there’s also language requiring the tenant to obtain insurance for the stored property (see below).
This release section of the agreement can also address liability for any personal injuries that may occur to the tenant while on the self-storage property. Though many states won’t uphold a personal-injury waiver, some mention of it should still be included.
Insurance
One of the most important clauses in a self-storage rental agreement involves the issue of tenant insurance. This provision should state that the tenant is obligated to obtain his own insurance to protect 100 percent of the value of the stored property. It should also provide that the requirement to obtain insurance is a material condition of the lease and that failing to do so would be a breach of the agreement.
Another necessary provision in this section is a waiver of subrogation. This prevents a tenant’s insurance company from pursuing claims against the facility after it has paid the insured. Without it, if a tenant collects from his insurance company on a loss or damage claim, the insurer would have the right to seek recovery against the facility for said payment.
Indemnification
Related to insurance, a good rental agreement should contain an indemnification provision whereby the tenant agrees to indemnify and hold harmless the self-storage facility for property loss or damage as well as personal injury the tenant causes. In other words, if a third party is injured because of the tenant’s actions and seeks to recover against the self-storage facility, the business can look to the tenant to recover any damages it’s required to pay the injured party.
Electronic Communication
In a digital age, people have changed the way they communicate; and the prominence of electronic communication has led many states to amend their self-storage laws and allow lien notices to be sent by e-mail. It’s important to follow these laws to know whether your rental agreement should contain a provision in which the tenant consents to receiving notices by e-mail.
As for text messaging, it’s become more prevalent for self-storage businesses to text account statements and late notices to tenants. However, these messages are governed by federal law (Telephone Consumer Protection Act), which has multiple requirements. These include obtaining written consent from the tenant before sending any texts, notifying the tenant that he can opt out at any time, and a condition that consent to receive texts isn’t required as a condition of purchasing goods or services. If you wish to e-mail and text tenants, ensure your rental agreement contains the correct language to comply with applicable laws.
Other Important Provisions
In addition, your rental agreement should include language addressing the arbitration of claims brought by tenants, restrictions on what can be stored in the unit, the termination rights of the landlord and tenant, and a statement defining a tenant’s abandonment of property. Other provisions should address tenant military status, warranties, partial payments, the landlord’s right to obtain unit access, and the owner’s right to change the terms of the lease agreement upon proper notice to the tenant.
No self-storage rental agreement is perfect, nor does it have to be. However, all good leases contain language that complies with applicable laws and addresses the unique issues that apply in this industry. If you haven’t done so in a while, take some time to read your agreement, and test it to see whether it needs updating.
Ashley Oblinger is an attorney in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber, P.C., where he specializes in business and self-storage law, advising operators nationwide on all legal matters, including lease preparation, lien enforcement, tenant issues, tenant-claims defense, and employment policies. To reach him, call 404.760.7434; e-mail [email protected].
