It’s a good idea to review your self-storage rental agreement every once in a while to ensure it includes certain must-have provisions to protect your business. It’s equally important to ensure it excludes language that doesn’t belong in the contract. Let’s start with what shouldn’t be in your rental agreement, and then we’ll look at essentials to include.
Rental Agreement No-Nos
If your rental agreement states that you do or offer things at your self-storage facility that you actually don’t, remove mention of those items. For example, some rental agreements state that if a tenant prepays his rent for several months and the operator raises the rent during that time, the new rate applies in such a way that the prepaid rent will be used up sooner than the length of the prepaid term. Most operators tell me, however, they don’t actually do that; they consider the tenant’s rate locked for the length of the term. Therefore, they should remove that language from their rental agreement.
Second, make sure the provisions in your rental agreement make sense. I recently read an agreement that stated, “This Rental agreement between Owner and Occupant is for the purpose of not renting a Self-Service Storage Unit…” If I were a judge, I’m not sure what I would or could do with the rental agreement after a sentence like that. Make sure you review for those rogue clauses.
Finally, make sure your rental agreement isn’t repetitive, especially if it allows for conflicts. I’ve read contracts that state the late fee is imposed on three different dates. When I ask the owner if he imposes three late fees, he says “no” and wants to know why I asked. The simple solution is to refer to a late fee only once in the rental agreement. The best way to avoid ambiguity is to steer clear of repetitive and potentially contradictory terms.
As a side note: Don’t use your facility rules and regulations for the purpose of repeating that which is in your rental agreement. This sets you up for potentially confusing, conflicting and ambiguous results.
Rental Agreement Must-Haves
Of course, there are many “must haves” for every self-storage rental agreement. Following is a brief summary of the most important provisions.
1. First and foremost, your rental agreement should include all statutory-required provisions or language. This varies by state, but most statutes have some sort of language requirements. For example, Georgia has about two pages of language that must appear in the rental agreement. In California, you must provide space for the tenant to list an alternate contact. The statute actually says the operator’s lien rights don’t apply if he fails to provide this space in the rental agreement. You can’t ignore these conditions. Failure to comply with your state statute is an unnecessary risk.
2. Make sure your rental agreement asks the required question about military service. This is governed by the Service Members’ Civil Relief Act.
3. If you allow people to store vehicles in units, the rental agreement should include triggering language to recognize the possibility of a vehicle being stored. If a vehicle is to be stored, get the additional information you need.
4. Your rental agreement should include a provision that advises the tenant whether the unit is temperature-controlled. I’ve seen some lawsuits from tenants who claim to have been confused by the facility signage, advertising, etc., and “did not realize” their unit was not temperature-controlled.
5. Your rental agreement should properly address the rental term, term length and termination so they’re obvious to the tenant. Specifically, it should identify when the rental agreement starts and when rent is due. It should also clarify if the anniversary date and rental due date are different. If they are, it should explain how you get from the start date to the first full due date.
6. Address how the tenant should pay the rent. Simply saying rent is due by a certain date leaves too much to chance. If you have rules about the acceptance of credit cards, checks, cash, partial payments, etc., commit these rules to writing in the rental agreement.
7. If you accept credit card or ACH payments, the rental agreement should include language that allows you to do so.
8. Clearly disclose all fees you may charge above and beyond rent. While you may not know the exact amount of every fee, the rental agreement should still state the fees for which the tenant is responsible. For example, let’s say the tenant is responsible for any advertising costs resulting from a lien sale of his unit. You advertise several default units at once and spread the total cost of advertising among them. That’s fine. In the agreement, simply state is as the “pro rata” actual share of the advertising costs.
9. Include a comprehensive list of items that are prohibited from being stored in the tenant’s unit. There’s no such thing as an all-inclusive list, but the agreement should state the most obvious items. Most mortgages and insurance policies require that you prohibit the storing of “hazardous materials” as defined by CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act). If that’s the case, consider including the actual CERCLA definition of hazardous materials in your rental agreement.
10. Include a value limit and, if it’s appropriate in your state, a limit on the amount of a lawsuit that can be brought against you for loss or damage arising from your negligence.
11. Include your insurance obligations and those of the tenant. In some states, this is required language.
12. Include a provision that allows you to control facility access. This doesn’t just mean the opportunity to search vehicles on the premises but the ability to close the facility if it’s at all unsafe. For example, in some areas last winter, the ice and snow were so bad that it wasn’t prudent for people to be on the property.
13. If it’s appropriate in your climate, include a clause that eliminates your liability for any damage that happens as a result of mold.
14. A good, solid lock clause is vital. Make sure it address who can pick the lock, how the lock is used, additional hasps, and what happens if the unit ever becomes unsecure.
15. To the extent they’re allowed in your state, include appropriate releases of liability for loss and damage to property as well as personal injury and death of tenants and their guests.
16. Include a modern-day clause that allows for your entry of a unit. I don’t want you to use it, but you should have it in case you need to enter.
17. The rental agreement should include a default clause that covers all instances that would require you to consider the tenant in default and take action. In a lot of states, it’s necessary to include a “no election of remedies” clause, which states that any remedy you might start to pursue doesn’t become your sole and exclusive remedy.
18. Properly address how tenants are going to receive notices from you and how they must deliver notices to you, especially for change-of-address purposes. Even if notices of default aren’t permitted by e-mail in your state, you may want to e-mail other kinds of notices to your tenants. Give yourself those rights in the rental agreement.
19. Finally, include an election-of-law clause and a jury waiver. You don’t want to be fighting cases outside your state or in front of juries.
There are certainly many other provisions that a modern self-storage rental agreement should contain, but these are the basic ones you should include to adequately protect yourself from the most common lawsuits brought forth by tenants.
This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.
Jeffrey J. Greenberger is a partner with the law firm Katz, Greenberger, & Norton LLP in Cincinnati and is licensed to practice in the states of Ohio and Kentucky. Mr. Greenberger’s practice focuses primarily on representing the owners and operators of commercial real estate, including self-storage owners and operators. His website, www.selfstoragelegal.com, contains legal opinions and insights as well as an article archive. You can send your questions, comments or suggestions for future topics to [email protected].
