By Cary McGovern

Records-management services can be outsourced in a self-storage facility to a great extent. I consider a virtual records-management facility as one where all the parts are outsourced with a residual profit. This article discusses this concept.

Virtual Records Management

The concept of the "virtual business" has been around for a long time, with several books written on the subject. Frankly, the concept has always intrigued me. I define a virtual business as one where all of the components are outsourced--including the marketing--with a residual profit.

What exactly does this mean? That any business can be broken down into its parts. Each of the parts has specific focus and work processes directly related to it. I will attempt to describe how the virtual concept can relate to a records-management business in a self-storage environment. If you own or operate a self-storage business, you probably are already in the records-storage business. The switch to records management is comparatively easy and can be developed as a virtual business.

Two Virtual Concepts to Consider

There are at least two somewhat different virtual concepts you might want to consider for records management in the self-storage environment. The first is one you operate yourself and the second is one in which you provide the components for another individual or company to operate out of your facility. Let's describe each and then look at the components and their ability to be considered virtual.

Option 1: Operated by Your Management Team in Your Facility

In this option you own and operate the records-management business as an adjunct to your self-storage business. You will determine all of the components and how each will be outsourced.

Option 2: Operated by Another Individual or Company in Your Facility

In the second option, you will sell the business concept to another individual or company who will operate the business out of your facility. You will assist the tenant-operator in the development of the company and selection of vendors to outsource each component. In this model the operator may choose to perform some of the component processes himself or may outsource all parts.

Where This Concept Developed

Early in 1999, at one of the Inside Self-Storage Expos, a prospective client approached me with an interesting idea. He told me he did not own or operate a self-storage facility, but would like to provide records-management services using rented units as his locus of operation. Initially, I thought that this was a particularly unusual idea. After some thought, I concluded this is just one more way the business can be operated. There are some obvious benefits to this method I never considered before. First, the cost of overhead is very limited. The operator only rents units when they are needed, keeping his space requirement limited to only what he sells. After the operator has developed his business volume, he could consider a larger space or larger units.

Virtual Components

The components of records management are always the same, whether it is a traditional commercial record center, a records-management business operated within a self-storage business or a virtual records-management business.

Facility

The primary component, of course, is the space in which you operate. The traditional model utilizes warehouse space with high ceilings to maximize the number of cubic footage (the basis of monthly storage charges) per square foot. The self-storage model maximizes existing storage units and can generate from three to five times the storage revenue per unit. In the virtual model you only use units that are needed when new sales are made or as growth occurs. The cost of your facility overhead is limited to space that generates revenue. If you are an operator running a records-management operation in someone else's facility, you may negotiate your rates.

Racking

Racking is definitely a requirement. In order to maximize density, you must design and purchase racking intelligently. You may want to refer to last month's column titled "The Shelving Paradox." Shelving can be leased one unit at a time.

Hardware

The hardware requirements are few indeed. You need a relatively fast PC with a modem and printer, direct-connect bar-code reader, and a portable bar-code reader with its attachments to download data into the PC. Total cost of all hardware is usually less than $5,000. This can also be added into the lease package.

Software

Although software in the records-management business can be pricey if you buy it, an Internet-based software product is available that you lease by transaction. You only pay when your customer pays. The alternative is to purchase software from either O'Neil or Andrews (the only products I recommend) and add this to your lease. You can find additional information about this software in past columns or by contacting me.

Business Processes

Business processes are all related to inventory control. We have assisted more than 150 companies in the development of their operating processes for records management. Never vary from your adopted business processes that insure internal control.

Limitation of Liability and Storage Agreements

The most important first step is to limit your liability in your storage agreement and to clearly state your prices in your contract. Prism International (www.prismintl.org) has for more than 25 years been the professional resource for the commercial records-storage industry. As part of its membership package, Prism International provides an industry standard contract that is used by most of the industry leaders.

Courier Services

Courier services are required for three separate activities. The first is regular daily delivery; the second is weekly or periodic pick-up; and the third is for first-time pick-up of records from a new customer. This was discussed in detail in an earlier column. Past columns are available from either www.insideselfstorage.com or www.fileman.com at no charge. All courier services can be outsourced based on a 60/40 split. You can earn 40 percent of the gross revenue with no courier overhead.

Monthly Billing and Accounting

Billing requires some time at the end of each month. Both Andrews and O'Neil systems include a comprehensive billing module. The FileMan Internet based system (FIRMS) provides the billing automatically for its clients.

Sales and Marketing

Both marketing and sales can be done on a casual or highly professional basis. Obviously, the results of your marketing strategy are directly related to the growth of your business. Sales can be outsourced to other related businesses as a "value add" to their sales force. For example, if you offer the local office-supply business owner to sell your services for a commission, it adds another product to his portfolio and additional revenue for his salespeople.

Virtual businesses are growing worldwide. Outsourcing services have grown into lead offerings by major companies. A little creative thought can bring you additional revenue with little or no new cost and very little trouble.

Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]; www.fileman.com.

By Teri L. Lanza

There's no more gratifying feeling than when hard work pays off. You know you've reached that brass ring when you can kick back at the end of a long day to sip an ice-tea or crack open a beer, breath a deep sigh and think, "Life is good. Occupancies are up. My software program didn't even blink at the new year. I've got that problem with delinquent tenants nipped in the bud. I even did a routine maintenance check on the roof. I've got it all covered."

But before you revel too much in self-satisfaction, here's a newsflash for you: If your facility is running smoothly and things look good, the truth is, they could be even better. If you're wondering how that's possible, ask yourself whether you could stand to make greater profits with minimal effort this year. Similarly, if your scenario isn't as picture-perfect as the one described above, and you'd like to see things turn around, here's a concept for you to entertain: ancillary products and services.

It isn't unusual to find a facility operator who sells the occasional lock to his residents. But these days, ancillary products, such as locks, boxes, mattress covers, etc., are playing a much greater role in your average self-storage operation. Managers are discovering that these products--and their related services--are a fantastic way to draw business and boost revenue. Whether you offer a few incidentals or feature a solid retail space within your office area, what you are truly offering your customers is convenience, and that translates into better customer relations, better overall business.

"I find facilities are searching to use their office space as a place to sell retail product," says Nancy Martin, national sales manager for Chateau Products, which has been catering to the self-storage industry for nine years. "They're making that space bigger and brighter, including display and wall equipment to exhibit products; and they're starting to lean towards the moving-and-storage center idea, where a person can come in and buy anything he needs, including boxes and packing materials and, of course, locks for their storage units and rental trucks." According to Martin, most new sites are being built with space for an actual retail store included.

Ken Stephan, sales manager for Stuart, Fla.-based Key Mart Inc., agrees that the sale of ancillary products has boomed in recent years. "I walked into a store the other day while out visiting customers and was shocked--it was like walking into a little retail store. A lot of the items being sold are bigger and take a little more place to display, but it all looks very uniform once it's on the floor or the wall," he says.

What items are being sold? Aside from the predictable locks and cardboard boxes, facilities are expanding into the sale of such items as mattress covers, Styrofoam peanuts, tape and tape dispensers, dropcloths, tie-down cords and straps, bungee cords, razor knives, shelving, moving blankets, gloves, flashlights, marking pens--anything that will facilitate a move or the organization of a storage unit. Let's not forget the inclusion of services, such as truck rental, or the rental of other common equipment, such as that you might rent at a grocery or hardware store.

That's not all. According to Kathleen White, senior vice president of Dahn Corp., a national real-estate investment and asset-management company based in Irvine, Calif., "The ancillary business has changed considerably in recent years. Most facilities entered the market offering boxes, locks, tape and other moving supplies. Today, some offer conference rooms, mailbox rentals, message services, truck rental, fax services, packing services, business-record retrieval, etc." With so many money-making options, an owner would be foolish not to at least consider the sale of ancillary products or services.

Getting on the Bandwagon

Of course retail may not be plausible for every facility--each market is different. "A prudent self-storage operator should know the market and needs of the tenant before offering ancillaries," says White. "Inventory-control procedures are an important part of ensuring successful sale of these products."

Martin suggests examining your surroundings before taking on retail sale of items. "You want to look at what your market is like," she says. "Is there a university close by with lots of college students? You can gear your product towards different segments: housing, office, industrial. You want to look at your visibility from the road and make sure you mention that you sell boxes, for example, on your sign. Definitely have some kind of signage--inside and out--that lets people know you carry moving supplies. Also have reminders on your phone message. In your Yellow Pages advertising, make sure you list the products you sell."

While White feels less is better when offering ancillary products and suggests you only offer those items your tenants have requested, Stephan asserts that to be more aggressive in the marketplace, you have to offer more. "It doesn't take much--just the right display. And the earnings are definitely worth it. If you have more products on the wall being advertised, you sell more. And your little retail items add up after a while." Just decide beforehand how much you want to invest in the sale of these products. But as with most things, you get out what you put in. Martin agrees: "The more you offer, the more money you're going to make, and the more walk-in business you're going to have."

"We've got basically two types of operators," points out Kirk Nash, vice president and chief operating officer of On the Move Inc., which sponsors a turn-key, truck-rental program for self-storage among other industries. "We've got the cutting-edge operator who wants to offer as much as he can to the customer, because it's a lot easier to keep a facility full than it is to get it full. Then there's the last guy on the block, who's only doing it because everyone else has done it, and if he doesn't, he's going from 60 percent to 40 percent occupancy, so he goes kicking and screaming.

"An argument can be made that the sale of ancillaries takes the manager away from other business. The flip side to that coin is that you want to serve your customer so he comes to you instead of going to someone else. Personally, I think the cutting-edge storage operations are giving customers everything they can in an ancillary product without detracting from their primary purpose: selling storage."

Profits To Be Had

According to Chris Shope, Southwest sales manager for LAI Group, which specializes in security products, "In all the facilities I make sales calls on, I would say probably 90 percent are selling locks or some other product to their customers." While he has come across some smaller facilities that are not participating in the selling of retail product because of a reluctance to pay taxes on those sales, he says he doesn't believe that cost would be sufficient enough to override the profits to be made.

"It's to their advantage to sell these items," he says. "We sell locks to the managers and owners at a great price, which allows them to sell to their customers at a great price, and they're still coming in below the Home Depots and Kmarts. If you can offer your customers security and, above all, great security, and they can purchase it right when they rent their unit, that's definitely convenient for them. You can make a good profit and offer your customers the best service. You make out, the customer makes out, and we make out. It makes everyone happy."

As Stephan points out, offering ancillary products encourages customers to think of you as more than just a self-storage operation. "If you advertise 'space available,' that's one thing. Someone will drive by and really not think twice about it. But if they see a sign that says, 'boxes and packing material,' they might not have even thought that a storage place would have something like that. It does draw in your customer."

Choosing What to Sell

The question of whether less is more when selling products and services on the side is debatable. One item may sell extremely well, but who's to say five won't sell better? Whatever you decide, be certain to listen to your customers' requests and honor them. They'll let you know on what they're willing to spend their hard-earned money.

"We are constantly adding new products to the line, thinking of what a self-storage facility could possibly sell," says Martin. "We added 10 new pages to our catalogue this year, and a lot of what we added were things customers suggested to us. Each one of our telemarketers here keeps a running list of things people ask for and we don't have. When we do our catalogues, we source these products."

LAI also takes its ideas for products from one-on-one conversations with the managers and owners. According to Shope, locks are the number-one choice for ancillary products, with boxes a close second. But what if you could take these items one step further? Private labeling is becoming a popular choice among operators, because in addition to offering the convenience of the product to customers, it becomes additional advertising and reinforcement for your facility.

"Before you get into the sale of ancillary products, think about just how much you want to get into it," suggest Stephan. "I suggest you go the whole way and private label every product you can. In business today, name is everything--product recognition is everything. I have a client in Miami with 15 facilities, and everything that goes into his stores has his colors and name on it. He's actually selling his name throughout the community."

Martin agrees private labeling has its advantages. "Companies with anywhere from three to 300 facilities are now wanting to have their name out there. They want people to have boxes with their name on them so that they are more visible. I find that--big and small--the smart people are going private label, because they're trying to build up their name and make it so people come to them with their needs."

Once you've decided what to buy, the issue becomes, how much? White says all of Dahn's facilities have set quantities they order, as well as set reorder amounts. "Each property has a different volume of business, and we keep approximately $500 of inventory at the facility," she says.

Martin says her clients report the sale of ancillaries absolutely helps their business, and the profit margin can be great, but it's important to carry a large variety and keep plenty of stock. "It's important to look like you're in business," she says. "When people walk in the door, it's important to have lots of options. Very rarely will someone buy something when there's only one left on the shelf. But if they see that you have a supply, and it's priced fairly, you'll sell it."

She stresses you should be sure you're competitive with the market around you. "Really think about the customer walking through the door and what he would pay for something. You want to make sure you're making at least a 30 percent profit margin--and with most things you can make 50 percent--but make sure also that you're being fair and competitive with all the major retailers around you. The customer is not stupid--he knows if the product is cheaper somewhere else. You can't get away with charging too much for your products."

Choosing a Distributor

You won't want for options when it comes to selecting a distributor with which to do business. There are several vendors who specialize in self-storage and sell all the pertinent ancillary products. When you choose, be sure to keep in mind your level of service. "Find out how quickly you can get your product and what your freight costs are," Martin suggests. "Compare different products, and make sure you're comparing apples to apples in terms of quality."

According to Stephan, the most important consideration when selecting a distributor is whether or not they have knowledge of the industry. "There are new suppliers that import all of their product out of the Orient, and there are suppliers that offer a variety of products, but you should support your industry," he says. "Sometimes a local vendor won't anticipate the products you need. Yes, they can get it, but what about when you need something down the road? Keyed-alikes, for example? Will they be able to get the same keys for you down the line? The distributors in the industry know the industry, and they can better help you with your decisions."

At the same time, Shope points out there are several companies selling multiple products, and while one-stop shopping can be convenient, there are other options. "Every major city across the United States has a box supplier, for example. And most of the time, they deliver for free."

Truck Rental

In addition to products, there are services you, as an operator, may want to offer your tenants, either for cash or to secure the rental. One particularly profitable option is truck rentals. "I would say the most important ancillary product after locks is trucks, because everybody coming into your facility is coming in a truck," says On the Move's Nash. His company sells or leases trucks to the self-storage industry, ultimately for rental to the general public. On the Move also supplies all the necessary insurance and rental forms.

The primary benefit to offering this service is convenience for the customer--not to mention that it offers managers a means of sealing the deal for a wavering prospective tenant. "If someone's moving into a facility, they're probably going to need a truck," says Nash. "To have that truck available at your facility so they don't have to go elsewhere to rent it is a service to the customer. But it also adds a profit center--and a very large one--for some operators. The operator purchases or leases the truck, then rents or comps it out to tenants. Often, they'll comp a truck instead of running a special on the unit price. The other added benefit is that they now have a moving billboard advertising their business."

What about the expense? Although offering truck rentals will involve an initial investment, Nash says an owner can expect to see a return on his investment within three months. Out of the 3,000 trucks he's providing to the self-storage industry each year, he only sees maybe two come back a year on their guarantee, indicating the turn-key program to be successful. "We don't want trucks out there that aren't working for people," he says. "But we've had steady growth over the nine years we've been in business in this industry, so the popularity is increasing--there's no doubt about that."

Nash points out that while all operators have the option of becoming a Hertz, Ryder, U-Haul or Penske dealer, this doesn't afford them the advantage of having their own facility name advertised on the side of the truck. He does confide, however, that offering one of these truck-rental services is still better than offering none at all.

Wrapping (or Packing, or Locking) Up

In terms of offering convenience for your customers, and creating extra profits for your business, the retail sale of ancillary products and services is a difficult avenue to miss. The planning, inventory and initial investment involved will prove to far outweigh themselves for the operator who can afford to make more money and have a better relationship with his customers. Remember: Creating a retail space at your facility not only offers an opportunity to improve your financial picture, it's another way to interact with tenants and respond to their needs, generating word-of-mouth referrals and overall satisfaction.

"Today, even your little mom-and-pop operations own five facilities, and they've gotten away from the little countertop business," says Stepan. "They've moved on to bigger and better things, like the sale of retail items. To keep up with the changing times, it's worth it. I think in the future, business is going to come down to selling a lot of retail product."

By Harley Rolfe

For many of you, marketing is not much of an influence. Competition is an annoyance, not a threat. As long as you are staying full, why bother? I agree. Marketing is not kid stuff. But if you need to address competition, marketing is good news.

Last time, we talked about the risks of competing outside the rules of the federal anti-trust laws. You know I think the impulse to abridge those FTC rules abound within self- storage facilities initially encountering competition. Upon feeling the sting of rivalry many may break those rules, even unknowingly. But how do you get relief this side of the pokey? Many self-storage operations suffer because they weren't "raised" with competition in their life. All they know is that it stings, and they want relief the quickest way possible.

Aside from the examples I cited in last month's column, I have recently had a number of conversations about the initial Microsoft findings. Many of those conversations centered on the disbelief that the government position is proper. "What ever happened to the free enterprise system?", etc. What is ignored is that thousands of businesses compete legitimately and lucratively in the glare of intense competition. This isn't to say that most suppliers wouldn't like to see the competition go away, but they have mastered the techniques of marketing such that they prosper in the face of their business rivals.

For most businesses, no competition would be a charmed life. For them, besting their rivals is a way of life. They must meet and surmount competition daily. How do they do it? Ask them and they probably can't tell you. It may even sound like a dumb question. For them it is instinctive--they never started. They don't remember ever not knowing how. Since I had to learn, I'll try.

Most new idea businesses start out having no competition. Initially, self-storage was such a business. Growth took place in the form of new facilities being built in areas without previous service. Operators charge the utility price for the service--the price the service will bear when the other choice for the prospect is to go without. Time passes and most places receive service, so the next phase adds service where there is already some. Fortunately for the second operator, entry into the industry was easier. Outside of financing, there were no barriers to their entry (technological, patents, etc.) Since the initial operators were entering a new and unproved industry, they built a conservative number of units, leaving room for more operators. The next wave of facilities could enter knowing that there was probably ample unsatisfied demand. Thus, there was little pressure on pricing for number two. We're still in that continuum where the fine reputation of self-storage has legitimized the industry among investors and financing sources, encouraging more facilities to be built. That presages for each current operator the time when there will be price pressure. That's usually the first signal to an existing facility that there is need for marketing.

The Marketing Dilemma

With much at stake, self-storage operators can become stalled. Most have not incurred serious marketing or sales expenses (Yellow Pages notwithstanding). Anything compared to that base seems like a lot. At exactly the time that they should rise up and become more aggressive, they may want to hunker down and (hopefully) wait out the storm. It's a dilemma.

For any supplier, the hope is to establish or maintain a monopoly. That brings with it the greatest opportunity to control prices. Once new facilities arrive, there is temptation to do something in concert with the new rivals to mute the effect of a potential competitive relationship. That's where the FTC trouble can begin. The only other choice the operator has is to engage in the process of product or service differentiation. That is what marketers do.

How Would You Do It?

If a supplier is perceived as the same as his rivals, then the buyer is free to pick the least expensive. That's exactly what you do when you shop. Similar suppliers are set up for naked price competition. That's a game of "Who will cave first?" Marketing wars against that situation. If you cannot control the supply (new facilities) and do not want to be pummeled by price wars, then converting your offering to a product rather than a commodity is the way forward.

Examine how you make any decision. Your prospects are no different. What makes marketing teachable is that the process we all go through in making a buying decision is identical. If we can unscramble that, we're on our way. Here's the secret: You must arrange your offering so that you and you alone offer something that is indispensable to the prospect. If you don't, he will do it for you. He must reduce the choices to one in order to proceed with the decision. Left to themselves, self-storage prospects will make it on location and price in that order. If that's OK with you, then you escape any marketing efforts. If not, then there's more.

Too Simple

I hope you don't dismiss this examination because it seems simplistic. Without getting the most fundamental objective in mind, the more complex stuff will seem just that--complex and undoable. Here's an analogy: I like to ski. As a reasonably proficient athlete, I got the skiing motion pretty well, I thought. On the milder slopes I did fine. Then, for a challenge, I headed for the black-diamond areas. I quickly found out how bad I was. On the bunny slopes, I could fake it, but my fundamentals weren't really there. I needed to master the basics if I ever wanted to be with my skier friends. So bear with me as I outline the marketing for your "slopes" that are no more forgiving than black-diamond territory.

I belabor this because of reactions from self-storage operators who look at serious marketing as too much trouble. The treatment is worse than the ailment--I admit it. What I suggest only makes sense if (and that's a big "if") the facility is beleaguered by competition. There are some other benefits of moving into a marketing mode, which we will treat in another column. The thing that will usually motivate an existing facility to move from offering a commodity to a product--i.e., a marketing approach--is a pretty severe marketplace threat.

The most ideal position for a supplier is to be a single-source supplier of a product in demand. That makes you a monopoly. But a monopoly of what? We have established that, compared with the alternative, using marketing techniques may be the way out. That term has bad overtones because of the anti-trust laws. It suggests that a supplier is out to fleece customers. Bad PR. Get over it so that we can freely discuss the subject.

You are striving to be or become a monopoly. Say it. You must do so without cooperating with your rivals. But you must do it. That's really two things: generating compelling and unique features plus getting the word to prospects. That's it. Next month we examine the "hows."

Harley Rolfe is a semi-retired marketing specialist whose career included executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at (208) 463-9039. Further information can also be found in Mr. Harley's book Hard-Nosed Marketing for Self-Storage.

By Scott Zucker

Reprinted with permission from the Mini Storage Law Commentary, published by the law firm Weissmann & Zucker, PC.

By far, the self-storage rental agreement is one of the most important tools in operating a self-storage facility. Therefore, it is important for facility owners and operators to take the time to stop and review their agreement to confirm that the document they're using is up to date and effective for its intended purpose.

Consider some of these questions when looking at your rental agreement: When was it drafted? Does it follow your state's self-storage law? Has your state law been amended since the agreement was written? Does your agreement consider recent court decisions that interpret self-storage agreements? Depending on your answer to some of these questions, it may be time for you to consider updating your agreement.

As a general guide, in addition to provisions regarding term, rent, late fees and other charges, your rental agreement should explain the owner's role as landlord, the tenant's risk of loss and the need for insurance for the stored property. The agreement should generally outline the rights of the facility owner, the obligations of the tenant and what happens when the tenant doesn't pay the rent.

Nonbailment

One of the most crucial ingredients to a strong self-storage lease is the discussion that the relationship between the party leasing the space for storage and the party storing his property is that of a landlord/tenant. The self-storage owner is not a bailee of the tenant's property and there is no warehouseman relationship between the parties. That limitation must be included in a self-storage rental agreement. A statement that the self-storage owner is not a bailee, and does not take care, custody or control of a tenant's goods, must be explicitly addressed in the agreement. Keep in mind that judges who are deciding cases concerning tenant's claims will look primarily to the rental agreement to determine the facility owner's obligations to the tenant. A bailee is held to a much higher standard of care than a landlord. Therefore, the agreement needs to be clear that the facility owner is not a bailee of the tenant's property.

Limitation of Liability

The effort to potentially limit a self-storage owner's liability in case of tenant claims should be included in the self-storage agreement under three separate provisions. First, there should be a limitation of value provision that explains that the value of the property to be stored cannot exceed a certain amount (commonly $5,000) unless previously approved in writing by the facility owner. Under this type of provision the facility would allow a tenant to store property with a value greater than $5,000 if the tenant could provide proof of insurance for 100 percent of the estimated value of the property.

Next, there should be a statement in the agreement that the tenant agrees not to store property having special or sentimental value and the tenant specifically waives its right to make claims for emotional attachment to its stored property. This provision lessens the likelihood of claims for emotional distress arising from the loss or damage to the tenant's property.

Finally, there should be a jury trial-waiver provision in the agreement that would attempt to restrict the tenant's rights to bring his claim before a jury. This provision is important because tenant cases heard before a jury have a greater likelihood of larger verdicts than a similar case heard only before a judge. Unfortunately, there is a caveat to the limitation of liability provisions addressed above. Certain states will allow these provisions to be upheld. Other states will not.

Release of Liability

Another significant section of the rental agreement should specifically address the tenant's release of liability against the landlord. The language in the agreement would normally include statements that the property is stored at the "sole risk" of the tenant and that the landlord is not liable for the "loss of or damage to" the tenant's personal property due to burglary, mysterious disappearance, fire, water damage, rodents and acts of God.

It is also important to include in the rental agreement that the landlord will not be held liable for such property loss or damage arising from the "active or passive acts or omissions or negligence of the owner, owner's agents or employees." Where this language is found, certain court decisions have allowed landlords to be released from liability where their own negligence has caused the loss or damage to occur. This release section of the agreement can also address liability for any personal injuries that may occur to the tenant while at the facility. However, many states will not uphold a personal injury waiver such as this, although some mention of it still should be included in your agreement.

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 the value of his stored property. The provision would provide that the requirement to obtain insurance is a material condition of the agreement and that the failure to obtain such insurance would be a breach of the agreement. Certainly, the agreement should identify that the tenant has the right to be self insured, but that it assumes full risk for the loss or damage to its stored property. Another vital provision that should be included under the insurance section of the agreement is a waiver of subrogation. This provision prevents a tenant's insurance company from pursuing claims against the self storage facility after it has paid its insured. Without such a provision, if a tenant collects from its insurance company on a loss or damage claim, the insurance company would have the right to then seek recovery back against the facility for their payment of that claim.

Indemnification Provision

Related to insurance, a good self-storage agreement should also contain an indemnification provision whereby the tenant agrees to indemnify and hold the self-storage facility harmless for property loss or damage or personal injury he causes from his use of the facility. In other words, where a third party is injured as a result of the tenant's acts, and that third party seeks to recover against the facility, the facility can look to the tenant to recover for any damages it is required to pay that injured third party.

Lien Sale Rights and Procedures

Almost every state self-storage law requires that certain language be incorporated in the rental agreement to notify the tenant of the landlord's right to lien its tenant's goods and sell those goods once the tenant is in default. Certain state laws even require that this notice be in bold print or that the print be in a larger type size. Again, it is crucial that whatever is required by the statute be followed in the agreement. Courts will likely not uphold a facility's lien enforcement rights if the facility has not properly complied with the requirements of the statute.

Other Important Provisions

Self-storage rental agreements should also include language addressing restrictions as to what can be stored in the unit, the termination rights of both the landlord and the tenant, and what defines a tenant's abandonment of its property. Other provisions should address warranties, partial payments, the landlord's right to obtain access and his right to change the terms of the agreement upon proper notice to the tenant.

No rental agreement is perfect, nor does it have to be. What a good agreement must do, however, is contain certain language that identifies it as a self-storage rental agreement as compared to any other type of lease. Again, there is enough confusion regarding the rights and liabilities of self storage owners as it is. There need not be further confusion based upon a poorly written or incomplete rental agreement. 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.

Scott I. Zucker is a partner in the law firm of Weissmann & Zucker, P.C. Mr. Zucker is an expert in the field of self-storage law and represents self-storage owners and managers throughout the country in matters that include contracting for construction, preparing lease agreements, defending tenant claims and handling employment disputes. He can be reached at (404) 364-4626; [email protected].

By Pamela Alton

The holidays have passed, and we are in a new year. As always after the holidays, people tend to be in a less friendly mood. Why? One of the reasons is because those charge-card bills are now coming due, owners usually choose to raise rents on Jan. 1, and money seems to be tight for a lot of people.

This is the time of year that you, the manager, must double your efforts in collections. You must also field those nasty calls about rent increases or late fees. At times, you may find yourself feeling like a punching bag. Try to remember that these people are not mad at you personally, but just need to vent a little steam. Try to be compassionate and listen to their complaints, yet remain firm in your efforts to collect the rent and late fees owed to your company.

If a tenant calls in screaming and yelling at you, and you feel your temperature rising, your face getting hot and that you are about to explode, take a deep breath and ask if you can place them on hold. Clear your thoughts and calmly come back on the line and try to resolve the situation. If the tenant is there in your office making a scene--and they usually do when another tenant is in the office--ask them to remain calm and tell them you will just take a minute and deal with the other tenant first so you can give them your undivided attention. After the other tenant has left, deal calmly with the irate tenant.

If you find you cannot control the situation, you might want to say to the tenant, "Please calm down and keep in mind, your $25, $50 or $100 a month only gives you the right to rent space at this facility. It does not give you the right to verbally abuse me. If you don't calm down, you will have to leave this office or I will call the police." You will probably not have to take any situation that far, but if you find yourself in a situation you can't handle, it's not unreasonable to contact authorities.

When it comes to fielding those rental increase calls, remember: Money is usually tight this time of year. Most rental increases are for $2 to $20 dollars, depending on the current rental rate and size of the unit. Keep in mind the cost it takes to rent a truck and the hassle of moving items from one facility to another. Most tenants may threaten to vacate, but in reality, most of them won't.

Try to be compassionate when dealing with rental increases. You probably shop the other facilities in the area on a regular basis and should know their rental rates. You might want to say something like, "We are all within a few dollars of each other; however, if you feel you can find a facility as clean, convient, with the same hours, etc., then you do owe it to yourself to go elsewhere. We would hate to lose you as a tenant, but we would certainly understand." Statements such as these let the tenant know you understand his concerns. You may lose some tenants, but that is a fact of life in the storage game. They move in--they move out.

As for the owner reading this article, try to remember that your manager is the person on the front line. He must deal with tenants on a day-to-day basis, and most managers know their tenants very well. They know who is the dead beat, who is the one who complains all the time, and who pays the rent on time and is a pleasure to deal with. Trust your management's judgment when dealing with tenants.

I might not always agree with the managers under my supervision, but we never disagree in front of a tenant. I try to back my managers 100 percent, and we'll discuss the situation and how to handle it better next time later. There is nothing more demoralizing than being a manager, getting yelled at by a tenant, and taking a stand, only to have your owner back up the tenant and overrule your authority. Remember owners: It's easier to find tenants than good managers. If you don't trust the judgment of your management staff, then you should consider letting them find a position more suited to them while you find a staff member more suited to your management philosophy.

Managers, do the best job you can at handling those irate tenants. Try to remember not to take it personally. Stay calm, and don't explode at the tenant--that will not solve the situation, and in most cases only makes it worse. Most of the time, an irate tenant only needs someone to listen to his complaints, so try to be helpful and understanding. You'll be the winner in the end.

On a more personal note, I would like to thank all of the managers and owners who have called, written, or stopped by our tradeshow booth over the past several years to share their appreciation for this column. I have been privileged to write for Inside Self-Storage and look forward to writing more articles over the year. If there is a particular subject you would like me to address, please don't hesitate to contact me and let me know. I hope 2000 is the best year ever in the self-storage industry.

At times, you may find yourself feeling like a punching bag.

Try to remember that these people are not mad at you personally, but just need to vent a little steam.

Most of the time, an irate tenant only needs someone to listen to his complaints, so try to be helpful and understanding. You'll be the winner in the end.

Pamela Alton is the owner of Mini-Management^®, a nationwide manager-placement service. Mini-Management also offers full-service and "operations-only" facility management, training manuals, inspections and audits, feasibility studies, consulting and training seminars. For more information, call (800) 646-4648.