By far, the rental agreement is one of the most important tools you have for protecting your self-storage business; so, it’s critical to ensure the document you’re using is up-to-date and effective. That can sometimes be tricky, as the industry and state laws are constantly evolving. Over the past year, for example, facility operators have faced significant challenges due to the coronavirus pandemic, and those obstacles have made it even more crucial to pay attention to the accuracy of your lease. Make sure it addresses the following.
Termination
A hot-button legal topic that comes up frequently in self-storage is the whether a facility operator can terminate a rental agreement based on tenant conduct. Many leases state that either the operator or renter may end the lease with notice to the other party of at least 10 or even 14 days before the end of the monthly term. Based on what I’ve heard recently, however, I recommend altering your agreement to shorten that time. In the case of an unruly tenant, you want the ability to terminate the lease quickly.
It’s also wise to add language that allows for immediate termination of the tenant’s occupancy due to certain behavior, such as criminal or illegal acts or improper use of the space. You can also include a provision allowing you to deny gate access to the tenant once his occupancy has been terminated, thus forcing him into the office and allowing you to escort or monitor him during his move-out. This can help prevent an unhappy customer from damaging the facility in retaliation.
Your rental agreement should also include a provision that specifically addresses the conduct of the tenant and his guests while on site, particularly how they treat employees and other customers. Failure to comply should result in immediate termination.
Emergencies
During the onset of the health crisis, there were a lot questions about whether self-storage facilities could stay open during shelter-in-place orders. This reinforced the need for your rental agreement to address situations in which tenants can be denied facility access. Accordingly, your lease should contain a provision that tenants can be refused entry if there’s a local, state or national emergency, or severe weather. It should also state that the facility operator isn’t liable for denial of access in these situations.
Electronic Communications
Many states now allow self-storage lien notices to be sent by email. It’s important to follow state laws and ensure your rental agreement contains a provision in which the tenant consents to receiving notices via email.
Additionally, more operators want to text their customers. While texting lien notices is only allowed in West Virginia, you may be able to text account statements and facility information. Just bear in mind that text messages to tenants are governed by federal law through the Telephone Consumer Protection Act, which has multiple requirements. You must get written consent from tenants before sending any texts. You must also notify them that they can opt out at any time, and that consent to receive texts isn’t required as a condition of rental.
The past year has shown us that the ability to communicate with tenants electronically is especially important when emergencies occur and you need to get information to them quickly. But if you wish to email and text tenants, make sure your rental agreement contains the correct language to comply with applicable laws.
Security
Another issue popping up more frequently relates to the security of the self-storage tenant and his stored property. Your rental agreement should clearly state that neither the owner nor any employees have made any representations as to the safety of property or persons at the facility, and you aren’t required to provide any security to the tenant or the stored belongings.
The provision should also state that any security you maintain at your facility is for your use and convenience only, that it may be discontinued at any time without liability or notice to the tenant, and any video-recording devices aren’t monitored. This can easily be tied into the provision in which the tenant agrees there are no express or implied warranties regarding the storage space or the facility.
Arbitration
At the start of the pandemic, we saw shutdowns of state and federal court systems. Most cases that were in progress came to a grinding halt, and new claims could barely get off the ground. In the end, few cases were adjudicated, and there a backlog was created. Many cases may still be pending, and may not be heard for months or even years. Some involve disputes between self-storage tenants, employees and owners.
However, some self-storage legal cases have been able to proceed due to a mandatory-arbitration provision in the rental agreement, which can also be used as a defense tool for companies facing class-action lawsuits brought by tenants or employees. By adding this language to your lease, you can move disputes out of the public arena and into a private process, bypassing long court dockets and seeking private administration and resolution.
Additional Provisions
In addition to the above legal provisions that have become more critical in response to the pandemic, following are a few cornerstone items that must appear in every self-storage rental agreement. Of course, you should include any provision required by your state law, as courts likely won’t uphold your lien-enforcement rights if you haven’t complied with statute requirements.
- No bailment: Your lease should include an explicit statement that the self-storage operator isn’t a bailee of the tenant’s property and there’s no warehouseman relationship between the parties. This is important, as a bailee is held to a much higher standard of care than a landlord.
- Lien-sale rights: This provision notifies the tenant of the operator’s right to lien and sell his goods should he fall into default.
- Limitation of liability: This is one of the most important provisions in a self-storage rental agreement. It should state that the value of the property to be stored can’t exceed a certain amount, commonly $5,000, unless previously approved in writing by the facility operator.
- Release of liability: This releases the operator’s liability for damage to stored property and personal injuries at the facility.
- Insurance: Tenants are required to obtain their own insurance to protect 100 percent of the value of the stored property. Failure to obtain such insurance is a breach of the agreement.
- Indemnification: Tenants agree to indemnify and hold the self-storage facility harmless for property loss, damage or personal injury caused from their use of the facility.
No lease is perfect, nor does it have to be. What a good agreement must do, however, is certain language that complies with applicable laws and addresses unique industry issues. If you haven’t done so in a while, take some time to read your self-storage rental 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; email [email protected].
