No matter how good your self-storage business may be, there are still many laws and regulations that expose it to liability. The best way to reduce that liability is to understand your risks and adjust your operational practices accordingly. The top legal threats for facility operators in 2017 fall into three categories: technology, ADA (Americans With Disabilities Act) accessibility and court intervention.

Technology

As the self-storage industry moves further into the world of technology and explores ways it can be applied to facility operation, there’s increased risk of liability. Technology isn’t fool-proof. There’s always the risk that a system will malfunction or be hacked. Even though there are operational benefits to technology use, there can be legal drawbacks.

First, as more operators rely on online rentals and Web-based financial transactions, the risk of data breaches increases. Most of you work hard to secure your customer information, using firewalls and other Internet-security protections, such as encryption. When it comes to credit or debit card payments, you work with your merchant-services providers to ensure your systems comply with the Payment Card Industry standards and other regulations. However, there are no guarantees against a data breach.

If you’re using a website to transact business, it should meet certain requirements relating to consumer protections. For example, it must be easy to use, readily understandable for a typical consumer, and accessible to those with disabilities. As such, it should use legible fonts, clear buttons for acceptance of terms and, if possible, visual and audio methods for describing facility services.

Further, the website must contain information regarding the privacy rights of the user, specifically how customer information is gathered and used. Depending on the state where your company’s principal place of business is located, the website privacy policy will need to include certain warnings and a clear point of contact for consumer complaints. You should rely on your Web developer to verify accessibility compliance, and then ask your lawyer to confirm your privacy policy is up-to-date under the current applicable laws.

This technology concern can also expand to systems that are subject to occasional failure, including management software, payment processing, kiosks, gate systems and security cameras. If you’re using technology to manage your facility, you must make the effort to maintain the systems and be prepared to update them as necessary to avoid operational disruptions.

ADA Accessibility

Beyond liability arising from technology, there are other legal threats to storage operations. I expect to see an increase in litigation around the Americans With Disabilities Act (ADA). Title III of the ADA prohibits private entities from discriminating against individuals with disabilities by maintaining places of business that aren’t physically accessible. The act requires that places of “public accommodation”—private businesses that offer goods and services to the public, including self-storage facilities—remove architectural barriers that limit access to or use of the location.

The ADA requires that small businesses remove architectural barriers in existing facilities when it’s "readily achievable" to do so. This means "easily accomplishable without much difficulty or expense." This requirement is based on the business’ size and resources. Companies with more resources are expected to remove more barriers than those with fewer resources. Barrier removal may include:

• Providing an accessible route from a parking lot to the business entrance
• Installing an entrance ramp
• Widening a doorway
• Installing accessible door hardware
• Repositioning shelves
• Moving tables, chairs, display racks, vending machines or other furniture

Although self-storage operators are subject to all the ADA building-access regulations applicable to structures generally, the act also includes space accessibility "scoping requirements" that apply specifically to self-storage buildings and doors. These require that if the property has fewer than 200 units, then 5 percent of a facility’s units must be accessible. If it has more than 200, then 10 units plus 2 percent of the remaining units must be accessible.

In addition, the ADA-compliant units must be dispersed among the different "classes” of spaces provided. Since the term “classes” is undefined in the ADA, it could mean either the size or type of unit (i.e., climate-controlled).

That said, if you have more unit classes than the number of accessible units required, you don’t need additional accessible units just to have one in each class. There also appears to be no need to disperse the accessible units among buildings in a multistructure facility. As with hotels, there appears to be no requirement to hold the unit back from rental solely for a disabled customer if other spaces are otherwise rented and the space is needed.

There’s been an uptick of lawsuits filed by disabled consumers who file claims for themselves and on behalf of others. Sometimes these individual plaintiffs and their lawyers file dozens if not hundreds of lawsuits against all types of properties including restaurants, office buildings, movie theaters and self-storage properties. Although there may be merit to these actions relating to technical violations of the ADA, most are filed solely because of the financial incentives granted to lawyers under the ADA. The statutory recovery of fees make these cases attractive.

Court Intervention

Finally, there are two court-related challenges that may impact self-storage operators this year:

1. The effort to weaken the enforceability of exculpatory provisions found in self-storage rental agreements

2. The effort to reverse the enforceability of class-actions waivers found in standard arbitration provisions to manage tenant disputes

Over the years, the courts have struggled with the enforceability of the “release of liability” provisions found in all contracts, not just those included in self-storage agreements. These provisions seek to release landlords and other contracting parties from responsibility for all types of risks that may arise from the contract at issue. When it comes to self-storage, these provisions are based on the non-bailment relationship of the parties and the fact that the storage operator takes neither care, custody nor control of the stored goods. A typical provision might read:

“Release of Landlord’s liability for property damage: All personal property stored within or upon the space by Tenant shall be at Tenant's sole risk. Landlord, Landlord's agents and/or employees shall not be liable for any loss or damage to Tenant's personal property stored at the self-storage facility arising from any cause whatsoever including, but not limited to, burglary, mysterious disappearance, fire, water damage, mold, mildew, rodents, insects, Acts of God, the active or passive acts or omissions or negligence of the Landlord, Landlord's agents, and/or employees.”

However, there have been cases—usually state-law dependent—that have held this type of release as too broad, and no release should exclude liability for a landlord’s negligence. Other courts have held that while ordinary negligence may be released, a landlord shouldn’t be free from liability arising from gross negligence. As these types of provisions grow weaker, it becomes more important for storage operators to require:

1. That their tenants have insurance for their stored goods

2. That their tenants have sufficient insurance to cover their own risk of claims that may otherwise survive this type of release provision

The other court-intervention concern involves arbitration provisions in contracts and, specifically, the ability to enforce class-action waivers contained therein. It isn’t surprising that class-action lawsuits are starting to surface against self-storage operators, since the industry is a perfect breeding ground for this type of litigation. Each facility has a large number of tenants who all sign the same lease, pay the same fees and charges, and are processed under the same state lien procedure. If a claim can be developed against a self-storage operator, the class can easily be determined based on the tenants who occupied the facility during the period under which the alleged wrong occurred.

One method to control such claims is to use a rental agreement that contains arbitration provisions to handle disputes as well as a class-action waiver. The waiver would allow that although individual tenants may retain their right to assert claims against the storage operator, they’re not entitled to create a class to pursue those claims.

There’s recently been an effort by the plaintiffs’ bar—a group that benefits from class-action litigation—to restrict the ability of businesses to avoid class actions, either by their employees or customers, via these waivers. In other words, the effort has been to contend that it’s unfair to restrict parties from filing class actions if that’s the most appropriate way to “right a wrong.” Although the courts have so far continued to support these waivers, the effort to fight this type of dispute-resolution provision continues to grow.

These are but three of the significant threats self-storage operators face this year. The best way to combat business liabilities is to be prepared. Be informed of legal dangers by speaking with your attorney, participating with your state self-storage association, and reading online resources. Once you understand the risks, you’ll be ready to face any issues that come your way.

Scott Zucker a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta, which specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. Zucker is a frequent speaker at self-storage industry events, author of “Legal Topics in Self-storage: A Sourcebook for Owners and Managers,” and a partner in the Self-storage Legal Network, a subscription-based legal service for storage owners and managers. For more information, call 404.364.4626; e-mail [email protected]; visit www.wzlegal.com.

By Dean Mandichevski

Until 1991, the Republic of Macedonia was part of Yugoslavia, which had a centrally planned economy. Back in those days, all companies were state-owned and there was no place for entrepreneurship. With the break-up of Yugoslavia and the transition to a market economy, a need for self-storage emerged.

Until 2010, all the storage space available for rent in Skopje, the capital, was bigger than 50 square meters. However, there was a growing demand for space smaller than 10 square meters from individual users and micro-businesses. Since our company was already in the warehouse-renting business, we decided to repurpose an existing warehouse and divide it into smaller units.

The Design

Before designing the space, we conducted online research and visited facilities in the United Kingdom and United Arab Emirates (UAE). We noticed the U.K. units were much like their U.S. counterparts—equipped with roll-up doors and available in different sizes. The facilities also offered extra services, such as a retail section with packing supplies. Some featured art and wine storage.

Facilities in the UAE, however, were much simpler. They typically offered just one size, and the units didn’t have roll-up doors but rather steel mesh for separation. Ultimately, we opted for the second design, as it was more cost-effective and got the job done.

Security is a huge selling point for us. As such, we offer a high level. The building and hallways are equipped with video cameras. Customers are required to bring their own lock.

The Market

About 70 percent of Macedonia’s population lives in individual houses, while the rest live in collective buildings. Many of these dwellings offer a small amount of basement storage. With this in mind, we knew it wasn’t going to be easy to introduce the self-storage concept to the general public. However, we also recognized there were many people who were either moving to another country, in between apartments or building a house, and they needed a place to store their belongings for a short period. We believed we had a target market.

Our customer base consists mainly of two types: individuals who store their extra items, be it for lack of space or because they’re in between moves, and micro-businesses that store documents, extra furniture and stock. We’ve also spotted a tendency among our business tenants to rent a second unit or to move to a bigger warehouse altogether. Fortunately, since our primary business is renting warehouse space, we’re still able to offer them what they need.

We started marketing our units, and the public responded well. Of course, some customers were wary at first. After an extensive explanation of our new offering, they were convinced the units and general service were of high quality, so there was no room for any doubt or distrust.

Growth

A year after we introduced the self-storage concept to our market, our occupancy reached 100 percent. We doubled the capacity of our property and are looking at the addition of even more units to fulfill the growing demand. We’ve been pleasantly surprised by the market’s response to this new idea. Occupancy continues to increase, so we can happily conclude that introducing self-storage to Macedonia was a wise move.

Adding self-storage and diversifying our business has allowed us to gain a new customer base as well as increase our income and gain more awareness. We’re also looking at ways to bring in new revenue, such as selling packing supplies or offering truck rental. Unfortunately, Macedonians’ purchasing power is rather low, so anything we might introduce has little chance of becoming a profit stream.

We also thought about offering moving services to our tenants. However, since most Macedonians are of the do-it-yourself kind, we decided not to pursue it. The only amenities we currently offer in our self-storage business are the free use of trolleys and forklifts. Parking in our yard is also free to customers.

Value Add

We do follow self-storage trends, but because the Macedonian market is still in its infancy, we don’t think it’s the right time to introduce some of them. This includes things like art, mobile and wine storage; document digitalization and storage; and parcel acceptance or delivery. Should the market gain traction—and if customers demand value-added services—we’ll be more than happy to provide them.

Overall, we can safely say that entering the self-storage business was a fun ride. Even though we had previous experience with renting real estate office space or warehouses, this industry is a different beast altogether. Unlike dealing with corporate customers, storage tenants have different concerns we need to address to gain their trust. This will turn these relationships into a lasting partnership that’s beneficial to all parties.

Dean Mandichevski is the marketing manager for Svoj Sklad in Macedonia, which opened in 2011. The property is owned by GAL Dooel. Founded in 1993, the company owns and leases office, residential and warehouse space as well as brokers leases for third parties. For more information, visit www.svojsklad.mk.

U.K. company Lok'nStore Group PLC, which provides self-storage and records-storage services, has exercised its extension option on a five-year, £40 million revolving credit facility with Royal Bank of Scotland PLC. The original credit agreement was executed last year. The two-year extension will expire in January 2023. The funds will be used for acquisitions and working capital, according to a press release.

“This extension of our existing banking facility with its extremely competitive terms and flexible structure underlines the financial strength of Lok’nStore,” CEO Andrew Jacobs said. “Following the sale of 1.975 million shares held in treasury in November 2016, our pro forma loan-to-value ratio is down to 14.9 percent and pro forma cash position is £11.4 million. With our modest gearing, valuable property assets, and strong and growing cashflow, the group will continue to execute its current growth strategy.”

The company is expected to publish its preliminary, interim financial results for the six-month period to January 2017 on April 24.

Founded in 1995, Lok’nStore builds, buys or leases large warehouses or industrial buildings and rents storage units to customers on a weekly basis. It operates 26 self-storage facilities and two records-storage locations in Southern England. The self-storage portfolio is comprised of 12 freehold or long-leasehold properties, eight leasehold sites and four locations under management. It owns 20 of its operating facilities.

World Class Capital Group LLC (WCCG), which operates the Great Value Storage brand, is expanding its self-storage presence in Texas. The real estate firm has purchased land for a new development as well as two existing storage properties.

The undeveloped parcel is at 5402 S. Congress in Austin. The acquisitions are both in Texas City. All three additions are intended to enhance the company’s national storage portfolio, according to a press release.

Last summer, WCCG acquired an aging retail center in Austin with the intent to build a four-story storage facility. At the time of the acquisition, the property at 2209 S. First St. was known as “Slackerville.” It featured an eclectic mix of retailers including a record store and several boutique shops. The structure was originally built as a grocery store in 1946.

WCCG is a national real estate investment firm focused on acquiring, developing and managing real estate. Its portfolio includes investments in industrial, land, multi-family, office, retail and self-storage properties. The company is headquartered in Austin with a significant presence in New York City.

Great Value Storage, a privately owned self-storage company, operates 61 self-storage facilities in Illinois, Indiana, Mississippi, Missouri, Nevada, New York, Ohio, Tennessee and Texas.

Dollar Self Storage, which operates facilities in Arizona, California and Nevada, received the green light this week from Peoria, Ariz., officials to build a new facility in the city. The city council approved the rezoning of 4.5 acres north of the corner of Lake Pleasant Parkway and Pinnacle Peak Road, according to the source.

The facility will include 901 storage units and a management office that fronts Lake Pleasant Parkway. It’ll be designed to blend with nearby architecture, the source reported.

The Peoria Planning and Zoning Commission recommended approving the project during its Dec. 15 meeting. One person spoke during the meeting. The city has also received four letters and petition against the project.

Dollar Self Storage is the operating trade name of properties managed by Stadium Properties LLC, a privately held real estate company that owns and manages 13 self-storage facilities. Headquartered in Costa Mesa, Calif., Stadium plans to develop and expand its presence in the Southwest, according to the company website.