By some estimates, the Canadian self-storage industry is 2,800 storage facilities strong and growing every day. Storage development reaches from St. Johns, Newfoundland, in the East to Victoria, British Columbia, in the West and Whitehorse in the Yukon to the north. With more facilities operating in multiple provinces, the time has come for Canada to have a national industry association of its own. No organization of a single territory can provide the services and data necessary to support current levels of expansion.

Until recently, most Canadian storage operators and those wishing to enter the industry had no resources for local data. They had to rely on research, publications and tradeshows produced by U.S. organizations, such as the Self Storage Association and Inside Self-Storage. While these entities have been tremendously helpful, the Canadian industry requires country-specific statistics and backing. Entering the storage business should be smooth sailing, not a shipwreck. But without relevant data, its impossible to plan for a successful business.

Enter the Canadian Self Storage Association (CSSA), navigated under the auspices of President John Madsen. The CSSA will support the Canadian self-storage industry, helping its members cope with continual change. The association is dedicated to business advancement through education and advocacy, and will keep members up-to-date with the legal and operational issues on the horizon.

Whos Who

Madsen has been part of the Canadian self-storage industry since 1978, involved with the development of approximately 20 facilities. He is supported by the following CSSA charter directors:

• Ken Hick is a commercial real estate broker with 30 years of experience in commercial revenue properties, including self-storage facilities.
• Sue Margeson has owned and operated her storage facility in Ontario since 1989. She has experimented with the marketing and sales of a variety of ancillary products for the industry, the results of which became a model for Chateau Products Inc.
• Joe Kormos has been active in the storage industry since 1976, when he joined the U.S. national association. Through his company, Canadian Storage Centers Inc., he has provided turnkey consulting services to the industry, from Halifax to Vancouver.

What You Need

Canadian self-storage developers need an industry profile for each province and major market area in the country. In addition to understanding trends in local economics and demographics, they need industry-specific information on market conditions, occupancy levels, rental rates, security, marketing, management and training. They also require access to a complete list of product and service suppliers, including those who provide property management, valuation and financing.

When considering expansion of a project or construction of a new facility, a storage owner has to make important business decisions regarding the viability of that action. He has to know whether the current market will support additional storage or if it is overbuilt. Without an organized body to gather statistics and analyze their significance, Canadian owners are left to rely on foreign data.

Access to Canadian statistics through a national association would be welcomed by appraisers and real estate professionals specializing in the valuation, sale and financing of self-storage, says Candace Watson, a Canadian appraiser specializing in self-storage valuation. In her career, she has relied on decades of information gathered by analyzing the industry in British Columbia.

But most appraisers and consultants attempting to estimate the feasibility of a Canadian storage project generally adapt U.S. statistics to the Canadian experience, Watson says. While there are many similarities between the U.S. and Canadian markets, there are significant differences as well. For example:

• Property taxes in Canada comprise a much higher portion of operating expenses than they do in the States.
• Military tenants comprise a significantly smaller proportion of the self-storage customer base in Canada.
• Self-storage per capita in Canada is less than half that of the United States.

In addition, U.S. occupancy dipped considerably in 2000, recovered slightly through 2001 and 2002, and remained stable or dropped in 2003. This trend was due to weak economic conditions combined with a significant increase in supply. By comparison, Vancouver Lower Mainland occupancies have continued to strengthen from 2001 to the present, primarily due to lack of supply in most submarkets and steady increases in rents.

Laying Down the Law

In addition to the pressing need for informational support in Canada, there are also several federal and provincial legislative issues that can detrimentally affect Canadian storage owners. Most can be effectively handled with the assistance of a national association.

First, there is the matter of whether to define self-storage as an active or a passive business. It can be both; however, if it is defined as active, the corporate tax rate will be about 22 percent. If it is defined as passive, the rate will be about 40 percent. The difference lies in the number of full-time staff members a business employs, and the small operator gets the short end of the stick. This formula was adopted before self-storage existed and intended to be applied to other types of businesses. The association can work toward making changes in the application of this standard.

In Ontario, new Reform Taxation Legislation was passed in 1998, which had the effect of increasing property taxes by as much as 45 percent. A capping procedure later limited the increase to 5 percent; however, at the same time, property assessment was changed to be based on market value. If the tax capping is lifted, storage facilities in Ontario will see a substantial tax increase. Without a professional association to assist them, it will be difficult to make their voices heard when it comes time to address the issue.

Lien provisions, which differ from one province to another, are another key concern. British Columbia operates under the Rent Distress Act. In Ontario, they use The Repairers and Storers Lien Act. In some territories, there is a complete lack of suitable lien provisions available to storage operators. It will be necessary to define appropriate legislation in these areas. The CSSA can help pave the way.

Membership Opportunities

The CSSA invites self-storage owners and vendors to join its efforts. Members will benefit from the leadership, information, benefits and services offered. In this day and age, when a single change in legislation can have a devastating effect on a business, its not an option to sit idle. There are many critical issues facing the Canadian self-storage industry. To have any significant impact, there must be a national association to support. Who knows? It might even help keep the country united!

For more information and to receive a membership-application package, call 604.541.8538 or (toll-free) 888.898.8538.

It's a basic, critical component of storage facilities across the globe. Few people pay it much heed. But without it, our industry would lose its trademark image: clean rows of buildings, perfectly lined with colorful quadrangles in symmetrical pride.

The self-storage roll-up door is not an American invention, but an evolution of products influenced by many cultures. By some accounts, the earliest roll-up, curtain-style doors were founded in the Middle East, probably a creation of Greece, Israel or Southern Italy. The first curtain doors were simple corrugated sheets of steel, cold-riveted together to form the door curtain. The dead-axle assembly was counterbalanced with clock-type wound springs.

Australian Ingenuity

In 1946, Arthur Byrne and Paul Davidson founded a steel-fabrication and boiler-making business in Australia, which they named B&D. A door design from the Middle East is believed to have inspired them to revolutionize a modern and more marketable roll-up curtain door. In 1956, the company launched its new product and coined the Roll-A-Door name.

The door was manufactured from a press-braked curtain sheet and featured several patented ideas, such as a curtain-wear strip known as Nylofelt, still used by many manufacturers. In 1968, Byrne & Davidson Industries Ltd. became a public company, and the Roll-A-Door name was licensed to Porcelain Veneer Inc. for production in the United States. By 1977, Roll-A-Door was sold and licensed in 17 countries.

Porcelain Veneer originally manufactured porcelain enamel panels for the service-station industry. The company later added facings to its product line by manufacturing sun and shade screens. With the addition and success of the roll-up door, the company formed a new business, Porvene Roll-A-Door.

Which Came First?

Timing could not have been better for Porvene, as self-storagewhich would fuel the popularity of the roll-up doorwas about to take off. But some speculate the revolutionary door was actually responsible for the industrys success. If not for the roll-up door, what alternatives would have been available to developers? Metal swing doors are not only costly, they arent very marketable. And while sectional garage doors are economical, theyre still more expensive than roll-ups. Their use becomes even more impractical when you consider the high installation labor.

The roll-up door seems to have added financial feasibility to the storage industry. At the very least, the two have been mutually beneficial. The first-generation roll-up doors manufactured in North America provided the self-storage market a cost-effective product. It offered easy operation afforded by its dead-axle design; Nylofelt curtain-wear stripping provided durability; and the strong corrugated sheet provided the necessary security.

Changing Market

In the mid-1970s, Harry Finch and Gaza Sayer introduced the first live-axle design, which made use of a glued-on curtain-wear strip, under the name Roll-Right. This second-generation door provided significant cost savings in manufacturing, material and labor. Arguably, the door did not operate as well or provide the same durability as its forerunner, but it found a home in the price-conscious storage industry.

As acceptance and awareness of the industry grew, the self-storage service boomed across the country. With increased use came new demands for all facets of the product, including doors. The second-generation model began to thrivejust like the industry in which it was usedand competing companies emerged to serve an expanding customer base and its needs.

Mother of Invention

The second-generation doors did not hold up well to increased use. Original live-axle designs allowed the steel axle to rotate within a steel collar on the bracket. With heavier wear and tear, doors began to experience a shearing of the axle at the bracket. While applying grease at the point of metal-to-metal contact helped prolong the life of the door, manufacturers found a long-term solution by using radial ball-bearings. In an effort to maintain production efficiency, most removed the wear strips from the curtain and incorporated them into the guide design. Because the doors remained in the down position virtually all the time, the springs would slowly relax, making the door difficult to open.

David Curtis introduced the first tension device for the second-generation door in 1998. It allowed facility-maintenance personnel to make easy and more accurate adjustments to the door tension, providing better operation. Other advancements were made by increasing the doors resistance to cosmetic aging through the use of siliconized polyester paints and stainless-steel latches. The installation process was also simplified to increase productivity of field labor while reducing costs. With time, most product innovations became standard to the industry.

Theory of Evolution

Today, the self-storage industry is being influenced by a third generation of roll-up door, which incorporates the best features of the first and second generation. The first generation provided superior operation through the dead-axle designso much so that the design is still incorporated into almost every door companys high-end commercial and industrial door lines. From the second-generation door, the new product has adopted other design innovations, such as radial ball bearings, tension devices and stainless-steel locks.

Because of its manufacturing and design efficiencies, the third-generation door has claimed wide-scale desirability in the self-storage industry. More and more door companies are likely to adopt its features and advance the market through new design innovations. The good news is better door products will continue to emerge, providing storage developers with more marketable facilities.

Bert Brown is director of marketing for Janus International Corp., which manufactures a complete line of storage-facility components, ranging from roll-up sheet doors to self-supporting hallway systems. For more information, call 770.562.2850; visit www.janusintl.com.

A lot has been written about how to make a sale, but I would like to address the ways in which you can fumble a simple self-storage transaction. There are plenty of means to this end, but the best can be summarized with a few general guidelines. If you really want to blow the sale:

1. Be disinterested.

If your prospect feels youre not interested in his needs, you will succeed in blowing the sale. Failure to make eye contact or smile, allowing yourself to be distracted, and showing general disinterest in what your customer has to say are great ways to get him to walk out the door empty-handed. Put this guideline into practice early in your sales presentation and you wont need to learn any of the other great ways to lose a sale, because youll never get that far.

2. Dont ask any qualifying questions.

If you dont know anything about a prospects situation or needs, you will certainly blow the sale. Let the customer tell you whatever he wantsjust dont ask him any questions that relate to how he might use your product and service or what hes looking for in a provider.

3. Dont paint any visuals for the prospect.

If a customer cant visualize himself putting his belongings into storage or picture what a particular unit might look like, he will not do business with you. You can also blow the sale by failing to describe your security features and conveniences. If a prospect cant see how his storage experience will be great, hell choose not to have the experience at all.

4. Dont make any agreements with people.

During a sale, you are negotiating a storage contract, and there are many items on which you and the customer must agree. If you fail to see eye to eye, youll be sure to blow the sale. So dont encourage the customer when he compliments your location or pricing structure, and dont go out of your way to help him or give him anything he wants.

5. Dont ask any closing questions.

If you fail to ask closing questions that help people make the small decisions that go into renting a storage unit, you will blow the sale. So dont ask if the property is conveniently located or if they like the extra effort youve made to keep the place clean and secure. Dont ask if they think the size unit you showed them would suit their purpose. Dont ask if your price sounds right. If youre careful to avoid asking closing questions, people will shrug their shoulders and walk away.

6. Dont ask for the sale.

This is the easiest way to blow a deal. If you never ask a prospect to rent with you or invite him to sign a lease and move in, chances are he wont. If you do not ask for the business, most people will be glad to oblige and move on to the next facility on their list.

Now that you know exactly how to botch a sale, I hope youll weed these common errors out of your selling repertoire. Were all guilty of failing to focus on prospects from time to time. But theres always a chance to redirect our energy on maximizing revenue. Every sales interaction has the possibility of going south, but by keeping these anti-guidelines in mind, youll avoid the most common pitfalls. Good luck and good selling.

Tron Jordheim is the director of PhoneSmart, an off-site sales force that turns missed calls into rentals. This rollover call service serves as a backup for self-storage managers. Mr. Jordheim has started several successful businesses in addition to assisting with acquisitions as general manager of the Missouri-based Culligan Bottled Water franchise. For more information, call 866.639.1715; e-mail [email protected].

Those self-storage adventurers who seek to offer more than traditional products and services have long been intrigued by records management. But like any pioneering excursion, entry to the business requires preparation. You must gather your charts, understand the terrain and set a course. The unknown becomes less frightening when you have a plan and resources to forge ahead.

Every week, I receive questions from self-storage operators about offering records management as an ancillary service. This column reflects some of the more important questions that should be considered before you enter the records-storage business. The answers can assist in business-plan development and will help identify available options.

How much space do I need?

In self-storage, you already have space. You can start with just a few storage units and expand from there. Many operators start with a row of 10-by-10s, and then later add larger units or buildings designed for records storage on their properties. Start wherever you are with whatever you have.

Do I need special software?

Yes, but it comes in inexpensive, entry-level, small-business packages from all of the major vendors. Don't try to start without it.

Do I need my own delivery resources?

No, deliveries are a commodity these days. Every part of your pickup and delivery process can be outsourced for a larger profit with no capital or human-resource cost to you. You will stabilize your margin dollars by outsourcing your courier services.

Are will-call services practical for small clients?

Will-call allows clients to pick up their own records rather than use a courier. The records are pulled and are waiting for them at your front office. This is a very good option for small nearby businesses.

What about additional manpower requirements?

Except for the management role, all manpower can be outsourced. My column in the November 2004 issue ("Manpower for RS-Lite") identifies several options for skilled, flexible staff resourcesfor example, stay-at-home parents who generally have the hours of 10 a.m. to 2 p.m. available to earn some extra cash. Other resources include small moving companies and courier subcontractors.

How do I maximize my profits?

In a typical self-storage environment, the rental of cubic footage rather than square footage increases the revenue of any space. Higher ceilings are great but not even necessary; you can work with your current unit height. Services must be designed around margins and driving new customers to your core business: storage.

What services do I have to provide?

The difference between records storage and records management is storage is passive while management is active. If you want to provide storage only, all you need to provide is space. To move to records management, seven services are a must:

1. Box/file storage 2. Box/file retrieval 3. Delivery (via courier, will-call, fax or scan-on-demand)
2. Pick-up (via outsourced courier)
3. Box/file re-filing
4. Box/file indexing
5. Box/file destruction (outsourced to a document-destruction company)

Can I easily convert from records storage to traditional records management?

Yes, without a missed stepif you plan and understand the opportunities from the very beginning. One minute of planning saves 10 minutes of doing.

How do I sell records-storage services?

You have an opportunity to sell with seven levels of sales, and you can choose to stop at any point. The methods are:

• Converting existing business clients
• Converting existing competitor business clients
• Over-the-counter sales
• Telemarketing
• Agent sales (paid agents of other businesses)
• Part-time sales (in-house staff)
• Full-time sales (in-house staff)

Do I need a different contract?

Yes, the standard industry contract specifies limitations of liability, terms (usually five years), evergreen renewals, price increases and many other important items. The industry considers this nearly a permanent contract.

Is there a downside to records management?

Yes. It requires hard work and attention to detail; but it isn't rocket science. It is simply inventory control. The business is straightforward, but you must be disciplined to run it successfully.

How can I get out of the business if I don't like it?

Interestingly enough, you can get out anytime you want. There is a very easy, accessible market and a formula for selling your book of business. Today, there are 10 buyers for every sellerwith no real estate transaction involved. It's simply a matter of selling the contracts. Of course, this means contracts must be in the proper form and have the right components to ensure maximum value.

Conclusion

Commercial records management has long been important to large businesses. Because of the need for privacy, security, confidentiality, regulatory compliance and litigation avoidance, even the smallest businesses are eager to find a better way to manage their records. You are the first place a small business goes for storage, since you are close by, easily accessible and a known commodity. As such, you may want to consider adding records storage or management to your portfolio of ancillary services.

Regular columnist Cary McGovern is the principal of FileMan Records Management, which offers full-service assistance for commercial records-storage startups and sales training in commercial records-management operations. For help with feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; www.fileman.com.

To maximize the effectiveness and financial success of your self-storage operation, you must track and measure the results of your sales and marketing programs. This will help you develop a strategy for consistently improving the operation of your business. Results can be monitored in several key areas, including phone skills, lead management, consumer information and marketing.

Phone Skills

One way to measure and improve employees' phone skills is to monitor the quality of their calls using a mystery-shopping service, which will provide an evaluation and audio record of its findings. Everyone involved in the selling process, even part-time staff, should be included in this process, as it will help develop consistency in the sales presentation. It will also give the person being shopped an opportunity to listen to how he handles callers and recognize areas in which to improve.

Consistent phone-skills monitoring can help increase a facility's call-to-visitor and visitor-to-renter conversion ratios. But for the system of evaluation to be effective, it must be used as a training tool for improvement, not a source or method for punishment.

Lead Management

Every self-storage operation should use a customer-lead system to record every phone call and walk-in at the store. Lead management is great way to measure weekly and monthly sales activity. It can also be used as a method for follow-up and prospecting future rentals.

A lead-tracking system will not only help you schedule more sales appointments, it will help monitor various components of the sales process, such as conversion ratios, rentals, new-prospect calls, walk-ins, retail sales, etc. In addition, the log can be used to gauge the effectiveness of advertising and marketing programs by keeping count of how many prospects traffic the site and how they found out about the store.

Consumer Information

Another means of obtaining vital market information to improve your operation is to conduct a customer survey. This should be a mandatory part of the move-in process for every new rental. It will help you develop a profile of who your customers are as well as a strategy for advertising to your target markets. The survey should include questions like:

1. How did you find out about (facility name)?
2. Why did you choose (facility name)?
3. What, in general, will you be storing?
4. How long do you anticipate using storage?
5. Are you a homeowner, renter or business?
6. How close do you live to the site: within 3 miles, 3 to 5 miles, 5 to 7 miles or more than 7 miles?

These are just a few examples. Your questions should be based on the market conditions of your specific location. Each survey should be documented via a spreadsheet or other method so results can be measured on a monthly and annual basis. The findings can be invaluable in making future decisions and becoming more effective in marketing your business.

Marketing

A properly developed and implemented marketing plan should include a means to measure how your efforts are working. For example, if you know how customers heard about your facility, you can estimate how many rentals to expect from each method or referral source. This will enable you to set goals and create a plan of action to achieve them.

Document the results of your marketing and pay careful attention to any variances to your plan, which can indicate areas of weakness. For example, let's say there is a large apartment community within 1 mile of your facility. If your records indicate you receive an average of three referrals per month from this key influencer and one month you only get one, you have to ask yourself why that is. Is the lack of results due to a poor relationship with the apartment manager? Does the complex have a newsletter in which you should be advertising or an introductory packet for new residents where you could include a flier or brochure?

Carefully examining the performance of your marketing methods (Yellow Pages, direct mail, etc.) as well as following the source of your rentals (i.e., via customer surveys) will help you fine-tune and strengthen your business. Tracking and measuring the results of sales and marketing programs is a powerful way to maximize profits. It eliminates the guessing game and allows you to adapt to changing market conditions, a profound advantage in today's competitive environment.

Brad North is the founder of Advantage Business Consulting, which specializes in on-site sales, marketing, feasibility and operational training for the self-storage industry. He has produced two live videos and a workbook titled Maximizing Your Sales and Marketing Program, which can help managers improve their sales and marketing efforts. He most recently launched A TelePro, a mystery-shopping service that assists in educating, evaluating and improving the phone-sales performance of self-storage professionals. For more information, call 513.229.0400; visit www.advantagebusinessconsulting.com.

There's no end to the tangible and ethereal dangers we face in this day and age. It's a wonder we endure as a world culture, thriving where we should realistically fail, escaping castigation where it is often warranted, mercifully slipping through the hands of jeopardy. If ever you feel unlucky, put out or unaccomplished, it's easy to gain perspective: Simply sit back at the end of a long day and give thought to all the perils you managed to avoid in the preceding 24 hours (keep in mind these lists are by no means exclusive):

• PhysicalDisease, illness, criminal attacks, accidents, crossfire, natural disasters and (my personal favorite) basic mortality.
• EmotionalLove, betrayal, fear, love, distrust, anger, love, sadness, grief, love, frustration, disappointment, despair, etc. Did I mention love?
• MentalOverwork, underpay, familial stress, financial stress, health-related stress, low self-esteem, a full gamut of diagnosable disorders, sleep deprivation, bad relationships (personal and professional) and general demoralization.
• IntellectualLost brain cells from too many controlled substances (preservatives, additives, alcohol, drugs) and uncontrollable substances (radio waves, microwaves, radiation, pesticides). Poor information, misinformation, lack of information, lack of desire for information. And finally, evolution, which aims to make Mankind more skilled and less gifted with each passing year.
• FinancialIdentity theft, virtual theft, credit-card fraud, unstable investments, a fluctuating economy, lay-offs, costly accidents, losing (or lost) lottery tickets, and other unpredictable tragedies.
• SpiritualLack of faith. Too much faith. Lack of answers. Oversimplified answers. Lack of conviction. Zealousness.
• MoralA shortage of working ethics and guidelines (and respectable bodies to educate and enforce), and too many laws upheld by corrupt power-holders.
• TechnologicalViruses, hackers, spam, crashes, breakdowns, meltdowns andthe letdown of all letdownsthe television show missed thanks to poor VCR/DVR/TiVo performance. The only thing worse is the eBay auction lost due to a poor network connection. Ouch!

Notice I failed to address business in this list of hazards. There's no need: This month's authors have duly covered the topic. Industry experts in the field of law and insurance will explain your liability exposures and how to rectify them, as well as how to protect yourself from threats outside your control. Today's self-storage operators not only face the dangers of natural disaster and breached homeland security common in every industry, they confront specialized risks as well.

From tenants who won't or can't pay to those who sue for damaged goods or the unlawful sale of their property, you're fortunate to shut the books on an average business day and be well in the black. Add the increasing need to verify customers' identity, make available tenant insurance and consistently modernize your rental agreement, and you've got even greater impetus to count your blessings.

Every day, you face a whirlwind of business risk. But appropriate insurance coverage coupled with proactive legal measures will keep you in the clear. Some days it's a miracle just to be alive, healthy and (mostly) sane. Why add a list of liabilities to an already full supply? Don't let fate hit you where it hurtskeep your business covered, and thank whomever you thank for small marvels.

Bright blessings,

Teri L. Lanza
Editorial Director
[email protected]

By now, you’ve read dozens of articles recapping or reminiscing about the state of self-storage in 2004, and New Year’s resolutions may have come and gone. Nonetheless, I would be remiss in my duties as this publication’s legal columnist if I did not summarize some of the big issues in the industry and address possible matters arising in 2005.

Looking back, I will always think of last year as the one in which self-storage finally rose above the “low fly” zone and ended up on many legislators’ and regulators’ radars. I fear more government interference is on the way; but let’s start by looking at where the industry stands.

State Legislation.

Forty-six states now have some sort of statute that at least, in part, discusses the lien rights of a self-storage operator. Some have full chapters devoted only to self-storage, while others still lump it in with other lien rights. Only Alaska, Montana, Nebraska and Vermont do not have some sort of industry ruling. However, many of the current laws are in need of a good overhauling and modernizing. In some cases, they’re more than 30 years old and fail to reflect what the industry has become since they were written.

Eight states—Arizona, California, Maine, Maryland, Missouri, North Carolina, Ohio and West Virginia—have some type of law governing the late-fee amount that can be charged in a self-storage owner/tenant relationship. Most of these bills are favorable to the industry, and self-storage associations of the remaining states recognize the value of legislation to set a reasonable late-fee law that will protect operators from potential litigation. Several states have introduced legislation to impose sales tax on rents charged by self-storage operators. A few, including Ohio, have even been successful in passing on this new tax to industry consumers.

Homeland Security.

Storage operators have continued to receive nonspecific warnings from the Department of Homeland Security that their facilities might be used to store materials that could be unleashed in a terrorist attack or stolen property intended to raise money to fund terrorist organizations or opportunities. As a result, many have begun to use employee and tenant screening, sometimes in the form of credit reports but more often criminal histories.

In late 2004, the Self Storage Association introduced its first attempt at a criminal-screening package known as “Counter Measures.” Several vendors are also making screening tools available that will allow operators to instantly check criminal and credit backgrounds.

Many software providers are working to meet the demand by integrating screening abilities into their programs. I sincerely applaud those who have heeded the warnings of industry experts and the Department of Homeland Security, not only because it’s smart from a business perspective, but because it’s our patriotic duty to make sure we know who is renting at our facilities.

Overtime.

Last year, the government revised its overtime regulations. However, as many states have policies that are stricter than federal guidelines, the new rules do not apply. Further, the new law doesn’t really answer questions about whether a selfstorage manager is an exempt or nonexempt employee, nor does it clarify the definitions of these terms.

We at least know that any full-time employee earning less than $455 per week cannot be exempt and is entitled to overtime. There are many storage operators concerned they may be facing a potential overtime claim because of having treated their managers as exempt employees. I have seen a small number of class-action suits by employees against midsized operators claiming back overtime and other damages. A great summary from the U.S. Department of Labor is available at www.dol.gov/esa/regs/compliance/whd/fairpay/side-by-side_PF.htm. 

Zoning and Eminent Domain.

Zoning also continues to be an issue for new and expanding facilities around the country. Now that zoning boards tend to lump mobile-storage facilities in with self-storage, it is becoming increasingly difficult to get approval. Part of the problem is when the industry started, it gravitated toward high-visibility areas such as expressway exits or large intersections. This normally wouldn’t be an issue, but unfortunately, there are some unattractive or poorly maintained facilities out there, and public perception is hard to change.

I have even seen cases in which self-storage was challenged through eminent domain to be taken and redeveloped by the government or private developers for a “higher and better use.” Eminent domain is also taking part of the yards, driveways or corners of storage sites for the widening of a road or to add a new highway ramp.

Negative Publicity.

Finally, as the industry has proliferated, we are seeing more negative media coverage about the industry pertaining to burglary, property damage or misuse, and drugs. I see more articles than ever about the use of self-storage units to house methamphetamine labs, hide stolen propertyand gain access to a site with the intent of theft. I’m also seeing articles about people trying to live in what are often unheated, unventilated units or using them for some other inappropriate purpose.

Hot Issues in 2005

Do-Not-Fax Regulations.

Looking ahead, in June we expect reinstatement of the do-not-fax regulations (similar to the National Do-Not-Call List) that were placed on hold earlier in 2004. If you don’t have a provision in your lease agreement, you should immediately insert language that allows you to fax and email current tenants from the date they sign their lease until final move-out (including full payment of all amounts due). If you don’t, you will lose opportunities for marketing and lease enforcement/collection that you are probably already using.

For existing leases, do as banks, insurance companies and other providers have been doing—send out a notice amending your lease to include this language effective 30 days after the next rent payment is due. I predict that some time in the next several years, a facility that fails to make these changes will end up charged with a do-not-fax violation. Enforcement of spam will be tightened too, so also include e-mail language in your new permission clause. Do-not-call regulations are generally not an issue, however, because of the definition of “business relationship” they contain. In this case, there is no permission clause necessary.

Unit-Size Litigation.

One trend I can predict with some certainty is the continuing and spreading litigation regarding the size of rented space. Particularly in California and Maryland, class-action lawsuits have already been filed against several operators. The filing tenants have claimed that while they thought they were renting a certain size unit, in actuality, it contained less rentable square feet than advertised, stated in the lease or shown on a floor plan, and they’re looking to recoup a certain amount of money in back rent, plus other fees and legal costs.

While we may be talking about a small amount of money per each individual tenant, when the amount is multiplied by several tenants over many years, the bottom line becomes significant. Further, attorney’s fees are often awarded as part of the judgment, so while a claim may settle for little or no actual money to the customer, there may be a large payment in attorney’s fees to the class-action law firm.

There are several obvious ways to fix your potential exposure in this issue, including making sure all information that discloses the size of a space (leases, brochures and floor plans) clearly says the size is approximate and the tenant is not entitled to a rent adjustment if the unit contains more or less square footage than stated. You may also want to stop referring to units by size (i.e., 10x10) and refer to them instead as a “one-room unit,” “two-room unit,” “small-house unit,” etc. This is a bizarre concept, but it will protect against this ridiculous litigation. Adding language about approximate size is another change you must consider making to your lease, as I think we will find a lot more of these space-size lawsuits before they run their course.

Advertising.

I foresee more lawsuits relating to advertising. Many storage operators use statements in their marketing they cannot support in a court of law. For example, looking through the Yellow Pages, I have seen statements such as “Manager on site—24-hour monitoring of the premises.” While the facility may have a manager on site, he is not really watching out his window 24/7. Similarly, if the manager goes on vacation or the facility is without a manager at one point for any reason, the owner cannot back up his claim.

In past columns, I have discussed use of the words “safe,” “security,” “secure” or others that imply a facility is more safe, more secure or better protected than its competition. Unless these claims can be fully documented and supported, they can come back to haunt a self-storage operator.

I also continue to see questionable advertising, particularly in the offering of specials. If a promotion is too good to be true and has a catch, or if a facility is not really offering exactly what the public believes it to be, an operator may find himself in a lawsuit or charged by the state’s Attorney General for deceptive sales practices. For example, I have seen offers for “first month free” with no footnotes or restrictions stated, and it turns out the first month is only free with the signing of a six-month lease. Now that the industry is on the legislative radar, these sorts of advertising tactics are going to be judged with greater scrutiny.

Reliance.

Which brings us to the discussion of “reliance,” an argument being used more frequently in lawsuits against self-storage operators. The basic line of reasoning goes something like this: Because of something said, done or implied by the agent at the facility, or the advertising or marketing materials of the facility, the tenant relied on the facility to (fill in the blank): have more security, maintain a climate that would prevent mold, prevent theft, etc.

The reliance argument has multiple applications, but there are two significant ones pertaining to self-storage. First, if a facility’s advertising implies or states it is “safe and secure,” and a tenant’s unit is burglarized, the site owner may find himself in a lawsuit that alleges he is liable. The assertion is that because of statements made in the facility’s advertising, the tenant relied on the facility to be secure and chose to rent a unit.

Implied activity is the second area where storage owners run into trouble. For example, if you have dummy or nonfunctioning video cameras on your property, you could find yourself in the midst of a reliance argument that goes something like this: “Because of all thevideo cameras I saw on the property, I relied on the fact that my goods would be safe or, if it they were stolen, there would be a videotape to help police find the culprit. Therefore, I want to hold you liable for the loss, even though your lease says you are not otherwise responsible.”

Business Records.

In the upcoming year, you are likely to see more state and federal restrictions on the disposal of business records that contain tenant information, such as leases, applications and credit-card forms. Eventually, shredding will be required for disposal of almost all records.

Insurance Programs.

You will see more requirements imposed on pay-with-rent and mail-order tenant-insurance programs by state insurance-licensing departments. Some industry insurance companies have stopped writing new pay-with-rent policies and are even withdrawing existing policies in states where it is unclear whether an insurance license is required to collect premiums. Several states, including California, have begun providing guidance or issuing limited licenses for the purposes of allowing a self-storage operator to offer pay-with-rent insurance. I expect to see more of this type of licensing in other states.

State Advocacy.

My final fearless prediction for 2005 is we will see more legal advocacy by the state associations. We’ve already seen a good bit of fighting on the issue of sales tax in a few states as well as industry-sponsored late-fee bills. I think the associations will become more active in lobbying for industry rights, including updated self-storage statutes and changes to the lien-sale notice requirement. For example, several associations are already pushing for a switch in their state statutes that allows for a post office-issued certificate and proof of mailing rather than a signed certified-mail card when contacting delinquent tenants. This makes sense, as certified-mail notices are not only expensive, tenants rarely accept them.

Finally, I think the state associations will offer more local training and certification classes to self-storage managers and employees. They may also start issuing standards of practice and other guidelines.

Of course, if I had a working crystal ball, I would be playing the lottery from a beach in the Caribbean. But one fact remains: This is a relatively straightforward industry that can do a lot to self-regulate, keep operations simple and resolve tenant situations fairly. If you conduct business in a clean, careful, honest manner and support your state association in its endeavors to educate owners, members of state legislature and the public, 2005 should be a year of continued progress and growth for the industry.

This year, I will focus my columns on issues discussed in this article. Please keep your suggestions coming, and I will write about that which interests the majority.

Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to

Inside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151.

It was once considered unorthodox for an operator to photograph tenants for identity verification. Now we see facilities fingerprinting tenants and even performing background checks. Why? The first answer is potential liability. Owners may be considered liable if they rent space to individuals who use it to commit crimes, wherein people are injured or property is damaged. The second reason is the improved technology can help owners determine who might constitute a threat to a facility.

Using Tenant Information

Take, for example, the Self Storage Associations Counter Measures program. This service allows operators to quickly obtain tenant identity verification, credit scoring and even background checks via the Internet. Now even though that information may be available, the more difficult question is how to properly (and legally) use it. Will a tenant be turned away if he has bad credit, even though self-storage rental is only month to month? Will he be turned away if he has a criminal record, even if the crime has nothing to do with property theft? Storage operators need to make informed decisions regarding how to use tenant information properly.

What rights does an operator have in turning away prospective tenants, whether the decision is based on credit or criminal information or how the prospect fills out his lease? The answer is he has the right to choose his tenants, as long as leasing decisions are made consistently and without discrimination. It is illegal for a self-storage operator to deny rental based on a prospects national origin, race, color, religion, disability, sex or familial status. There are laws that declare people cannot be denied equal opportunity because they or their families are from another country, have a name or accent associated with a particular nationality, or are married to or associate with people of a certain origin.

For example, there have been court cases brought against restaurants at which one ethnic group was treated differently than another and hotels where certain visitors were required to pay higher rates and in cash as compared to other guests. Although racial profiling has been used by the police in the context of traffic stops and the search for contraband, it continues to be a hotly debated civil-rights subject.

After the events of Sept.11, Congress passed a law known as the USA Patriot Act, which focused on ways to limit terrorism in the United States. However, the act includes a law addressing concerns about the act of bigotry against Muslim and Sikh-Americans. This law condemns such prejudice and calls upon law enforcement to prosecute related crimes.

When it comes to self-storage, rather than judging tenants based on ethnic or racial criteria, operators can and should have a set of requirements for all prospective tenants. These criteria can include picture IDs, verifiable addresses and Social Security confirmation. They can also include credit and criminal background checks.

Whatever your policies might be, they should be applied consistently to all tenants to avoid discriminatory practices. If you have a required procedure for all prospects and someone fails to meet a requirement for tenancy, that person can be denied use of the facility. Whether to use strict identification or credit/criminal verification methods is an operational decision for each owner. The bottom line is if all tenants are treated the same way, there can be no claim of unfair treatment.

Security Devices

What else can storage operators do to secure their facilities? In the increasingly competitive industry environment, operators have pushed each other to enhance the security devices they use, such as secured fencing, code-access gates, individual unit alarms, video cameras, security lighting and even guard dogs. Each of these measures focuses on keeping unauthorized people from entering a facility and gaining access to units. They have almost become a requirement for protecting tenants goods; but theyve also strengthened a facilitys ability to protect tenants themselves.

As on all commercial property, there is the risk of a tenant being the victim of a crime while he is on a self-storage site. If this occurs, the property owner and facility management can potentially be held liable. Such cases have been filed against hotels and shopping centers, and storage facilities are not immune. The use of external security enhances a facilitys defense against claims. If an offense does occur, an owner can argue that he attempted to protect his tenants by the use of perimeter fencing, security gates, video cameras, etc.

Security devices also protect a facility and its employees from vandalism, robbery or other crimes. A facility can better protect itself and its customers by limiting access to regular business hours. The rental agreement should plainly state that access to the facility can be limited by posted hours as well as emergency situations (such as inclement weather or damage to the facility).

Finally, operators should encourage tenants to protect themselves from theft. For example, stress the use of disc rather than combination locks and suggest they create a list of their property (including any serial numbers) in case their property is stolen.

The Importance of Maintenance

Not only must a facility provide the security it advertises, it must maintain its systems so they are fully operational. Although there are always circumstances in which equipment will falter, once an owner is given notice of or discovers problems, he is duty bound to repair the system.

It is the same responsibility he takes to maintain the propertys structures, walkways, driveways and other areas that require upkeep. An owner who allows a driveway pothole to remain in a state of disrepair assumes the potential liability for an injury arising from that condition. Similarly, if he leaves a hole in his fence or the front gate open, he assumes potential blame for criminal activity.

When it comes to facility and security maintenance, it is crucial to maintain the proper documents and record your preservation and repair efforts. Again, an operator who does not adequately maintain his property assumes a tremendous risk of losses arising from unkempt conditions. On the other hand, a responsible business owner who uses proper record-keeping can defend his position in the event of a claim.

Property Inspections

Operators can further protect their facilities through regular facility inspections. You have the right to inspect property being stored at your facility. First, there should be a use provision in every rental agreement that limits what can be stored in a storage unit. A standard provision might read:

The space named herein is to be used by the Tenant solely for the purpose of storing any personal property belonging to the Tenant. The Tenant agrees not to store any explosives, or any flammable, odorous, noxious, corrosive, hazardous or pollutant materials or any other goods in the space which would cause danger or nuisance to the space or facility. The Tenant agrees that the property will not be used for any purposes unlawful or contrary to any ordinance, regulation, fire code or health code, and the Tenant agrees not to commit waste, nor to create a nuisance, nor alter or affix signs on the space, and will keep the space in good condition during the term of the Agreement. The Tenant agrees not to store jewels, furs, heirlooms, art works, collectibles or other irreplaceable items having special or emotional value to the Tenant. There shall be NO HABITABLE OCCUPANCY of the space by humans or pets of any kind for any period whatsoever and violation of these prohibitions shall be grounds for immediate TERMINATION of the Agreement.

Under this provision, a facility operator would have the right to ask what property is being stored by the tenant to ensure there will be no violation of the contract. If necessary, he may choose to specifically include in his contract a provision that allows all property and vehicles on the premises to be searched.

This inspection right is separate from a landlords right to enter a tenants unit if necessary for purposes of repair or emergency or to determine if there is a violation of the contract. Such a provision might read:

In cases where Owner considers it necessary to enter the space for purposes of examining the space for violation of this agreement or condition in the space or making repairs or alterations thereto, or to comply with this agreement, or due to emergency, Tenant agrees that Owner, or Owners representative, shall have the right without notice to enter into and upon the space and Owner reserves the right to remove contents to another space.

Search and Seizure

Self-storage facilities are common sites for law-enforcement searches and seizures. In fact, since the recent terrorist attacks, facility searches have become more prevalent as the government seeks evidence to avoid future incidents. Can a facility operator provide the names of his tenants without the need for a subpoena or even a search warrant? To the extent that he owns the proprietary right to his rent roll, he can choose to divulge whether a particular tenant is renting a unit at his facility. With that information, the authorities can better support their request for a subpoena of the tenants document file and a search warrant to inspect the property in the unit.

There have been some recent cases that have addressed the issue of plain-view searches and reasonable access. In the case of State v. Bobic, the Washington Supreme Court upheld a search by law enforcement of one storage unit when viewed by the police from an adjacent, empty unit. The court found the police were authorized to look into the locked unit through a hole in the wall. In another case, U.S. v. DeTurbiville, the Ninth Circuit Court of Appeals upheld the right of authorities to enter a locked storage unit where permission was provided not by the tenant, but a friend who had been given the key and code to the unit. The court found the tenant assumed the risk that his friend would allow others to enter the unit, even the police.

As the likelihood of police searches increase, facility operators should consider amending their rental agreements to explain their rights and protections in these matters. For example, the agreement should state that the facility retains the right to provide authorities information concerning all of its tenants. The rental agreement should also state that the facility has the right to enter a unit in which there is believed to be illegal activity. By establishing the operators rights in the rental agreement, there is less of a risk of tenant trespass claims. In this day and age, security is of the utmost importance. Self-storage operators should exploit as many avenues as possible to protect themselves, their businesses and their tenants.

Scott Zucker is a partner in the law firm of Weissmann & Zucker P.C. in Atlanta. Mr. Zucker specializes in business litigation, with an emphasis on real estate, landlord-tenant and construction law. He is a frequent speaker at national conventions and the author of

Legal Topics in Self Storage: A Sourcebook for Owners and Managers. He is also a partner in the Self Storage Legal Network, a subscription-based legal service for self-storage owners and managers. For more information, e-mail [email protected].

This article could have been titled How to Conduct a Lien Sale (Not!)." Though the title presupposes you are actually going to conduct a sale, it's probably the last thing you want to do, for many reasons. Lets examine the whole process, asking ourselves the really relevant questions.

Why the heck do I want to conduct a lien sale?

Until you can answer this question (and it shouldnt take but a few important minutes), I suggest you don't. When I was learning to fly, my instructors uniformly taught one preliminary step to take if I thought something was going wrong with the aircraft: Wind your watch. Yep, thats it. Take a moment to figure out whats going on before leaping into action.

When trying to decide on a lien-sale process, first analyze the situation. Was a payment made but not recorded? Have you tried making telephone contact? Is there some information the manager missed, such as a change of address? Is there someone other than your customer you can contact? Does someone know whether something catastrophic has happened to your customer? (A good example: One cautious operator waited several months to start a lien-sale process because she had a hunch something might be wrong. She was rightthe eternally grateful customer had been in a coma after an accident, and when she came to, contact and payment were promptly made.)

Have all notices (and anything else I routinely require) been properly sent?

This is a very important question. Every state lien law has notice and timing requirements. If these are not met and you conduct a sale, youre on the hook for damages. Every manager should have a pre-sale checklist and be tested on it regularly. Heck, every pilot has a checklist; your lawyer uses checklists when he interviews clients; your doctor uses checklists when he sees patients. Most everyone uses lists when they engage in an important decision-making process.

Your checklist should be designed by you. Its a great way to learn your lien law, by the way, and you and your managers should know that law cold. By all means, run the checklist by your lawyer, but only after you have made the effort to draw it up. Then verify everything has been done correctly and documented in the tenant file. Before even thinking about conducting a sale, this verification should be done by a fresh set of eyes, not the manager who sent the notices.

What am I proposing to sell here?

I know, I knowthe typical customers space is a jumble of stored stuff, and it takes some effort to find out whats in there. However, you can change this by providing packing materials that help your customer store things neatly, like boxes and box labels. What about a storage map that can be pasted to the inside of the unit door? Moving companies provide special boxes for storing clothing, dishes, glasses, etc., so why cant you? These items are also a profit center for your business, you know.

Beyond that, you can easily categorize whats in a unit. Household goods are the most common and least worrisome items. You should pay attention to special items, such as boxed retail inventories, electronics and tools, for example. Of course, this means you have to dig around a bit. Unfortunately, many operators dont go this far and, as explained below, their reluctance can generate problems.

Given what I intend to sell, how should I sell it?

This depends on the requirements of your state lien law, but even those that call for only a public sale by auction are flexible enough to account for the sale of items that have some real value. In those cases, contact someone who specializes in the type of item that concerns you and auction that stuff separately. (Knowledgeable buyers will quickly outbid the amateurs.) Many state lien laws call for a commercially reasonable sale, which really does require you to know what you are selling and sell it in a manner likely to bring the best price. Its a good idea to try to be commercially reasonable, even if your lien law doesnt include that language. So what does commercially reasonable mean? Adequate exposure to folks who are likely to be interested in whatever is being sold; adequate notice of the time, place and manner of sale; adequate opportunity for potential buyers to examine the merchandise; and a fair bidding process.

OK, I hear you: But my auctioneer wont do that. He just lets people look in the space from the outside, and thats it. Besides, if I handle the goods, doesnt that expose me to liability? Most operators, if not 90 percent of them, take just that position. Here are the answers:

1. Unless your lien law requires an auction, you dont have to have one. How about getting sealed bids from interested parties? All you have to do is advertise the particular type of sale and time frame.
2. You should have already made the determination as to whether just a look from the outside is sufficient, and you control the sale, not your auctioneer.
3. You are not exposing yourself to liability by handling the goods at this point. It could even be persuasively argued that you have an obligation under your lien law to handle them.

Timidity (or laziness) can be expensive if you mistakenly sell something of extraordinary value in an unreasonable manner (and for a pittance). Even if you follow your lien law to the letter, you may face a claim for damages.

What happens if the bidding gets wild and I think Im about to make a mistake?

Aha question most folks actually do not ask. As I said, you control the sale. Even if the sale is by an auctioneer, you can stop it anytime before the hammer fallsits in the Uniform Commercial Code, and your auctioneer (if you use one) should know that. Of course, you cant stop the sale if you're not there, so you or a trusted staffer should be present at every lien sale and have guidelines to follow.

You should also use a bid sheet everyone must sign to be allowed to bid. On that sheet, reserve the right to stop the sale, or reject any bid for any reason, in your sole discretion.

Another good reason to stop the sale: Your customer shows up offering to pay. Dont argue about the form of payment tendered. Stop the sale and try to honor your customers offer. You can always reschedule, but you can't undo a finalized transaction.

What if I think my customer, or someone representing my customer, is bidding in an attempt to get the property back for less than what is owed me?

This is not an unusual situation really. Except in those states where your lien law forbids the self-storage owner to participate in the auction, you yourself can bid all or any portion of the amount of your lien just as though it were cash. You can also establish a reserve (a minimum bid) in the bid sheet that you can drop or reduce at any time. Needless to say, you can do the same in a sealed-bid situation. Remember, you control the saleso long as it is done within the requirements of your lien law.

Is that it? There's nothing to worry about after the sale?

Theres plenty to worry aboutthats another reason you dont want to conduct a lien sale unless you have to. First, you must have complete information about your buyer from the bid sheet. Second, you must ensure the buyer has agreed to remove the purchased property from your premises in a timely manner. Some operators even build in a safety net by making the sale conditional on picking up the property on a deadline. Better and safer yet, some provide that the sale is not final for 48 hours, just in case the customer shows up with proper payment. If some of the property is not sold or not saleable, your rental agreement should provide that you can dispose of it any way you choose.

Dont forget that nagging problem of excess proceedsthat is, you get more at the sale than your lien amount. You must strictly follow your state lien law in handling those profits, which means you have accounting chores to do. Even if there is no excess, some states require you to account to your customer for what happened. Its not a bad idea to always do that, whether the lien law requires it or not.

Remember: You are not in the lien-sale business! A lien sale is a last resort. It represents an unequaled opportunity to make expensive mistakes and may generate headaches for you even if you do everything right. Communicate and compromise; only if that turns out to be impossible should you go through your lien-sale process. Finally, if you think you might have made an error, STOP! You can always start over, but you cant unring the bell of a wrongful sale.

Joseph D. Joiner has been giving self-storage operators legal advice for more than 25 years. A real estate and business lawyer doing litigation and transactional work, he practices in California and New Mexico. He and D. Carlos Kaslow are co-authors of the "Rental Agreement Handbook," sold through the Self Storage Association (SSA). He is also is a partner with Kaslow and Scott Zucker in the Self Storage Legal Network, a subscription consulting service for members of the SSA. For more information, visit www.selfstorage.org.

In addition to defending buildings and equipment against common hazards such as natural disasters and crime, you need to guard against lawsuits filed by persons who may have been injured on your premises and damage to tenants' property. You also need to protect your income against business interruptions that occur after a loss. There are many important insurance packages of which you should be aware, such as workers' compensation and flood insurance. Following is an overview of some coverage you need to adequately shield your self-storage operation.

Business Property

This coverage protects your property from direct physical loss or damage from covered causes of loss. Look for a policy that includes replacement costs on buildings and business/ personal property with no co-insurance. Most property coverage requires a deductible. Keep in mind that while a higher deductible will help keep your premium down, you want to make sure you can afford to pay the amount in the event of a loss.

Business Income

Business-income coverage, or loss-of-income insurance, is designed to minimize your risk in the event of a loss. "Loss of income" refers to the suspension of your operations by direct loss or damage. "Extra expense" refers to any extraordinary expenses you incur during the period of restoration, which begins with the date of a loss resulting from any covered cause.

As a rule of thumb, it's a good idea to secure a full 12 months of this coverage to protect against business interruptions. While it may only take three to six months to actually rebuild your business after a covered loss, you will first have to remove debris, obtain bids and building permits, and perhaps face ordinance and zoning requirements before starting.

Since most conventional coverage ends when rebuilding is complete, you should ask your insurance agent about an extended period of indemnity, which provides for loss-of-rental income during a specific period following reconstruction. While an average retail store or restaurant can begin generating profits as soon as it is reopened, self-storage facilities may take several months to generate enough new tenants to be fully profitable.

Business Liability

Owning and operating a storage facility comes with plenty of accountability. Even if you operate with the utmost care and provide the best service, a tenant can find you at fault for a personal loss. Business liability provides coverage for bodily injury and property damage that occurs on your premises and protects your facility in the event of a related lawsuit. It will usually cover damages from the suit as well as legal fees.

Depending on your needs, liability insurance can be purchased in many forms. Additional coverage available in a self-storage business policy includes:

• Sale and DisposalThis coverage provides broad-form coverage to protect you against negligent acts that arise from the sale, removal or disposal of customers' property when reclaiming space for which rental or other charges are delinquent or unpaid.
• Customers' GoodsThis provides coverage against loss or damage to your customers' personal property, if you are legally liable. It might also provide defense and legal costs, even if the suit is groundless or fraudulent.

Flood Insurance

Self-storage insurance, like most commercial policies, does not include flood insurance; and many facility owners don't realize their standard business policy doesn't protect them until it's too late. As a matter of fact, only a small portion of businesses exposed to the risk of flood damage are insured.

Fortunately, it's easy and inexpensive to protect yourself against flood through the National Flood Insurance Program (NFIP), which is backed 100 percent by the federal government. The NFIP divides risk areas into three basic groups: low, medium and high. Less than one-third of all reported flood claims come from high-risk areas, and more than one-quarter come from low-risk areas. That's why most business-insurance expertsstrongly recommend flood insurance, even if you are at low risk.

You can get good and affordable coverage even if your facility is in the boundaries of a flood plain. It costs an average of just a few hundred dollars per year for businesses in less-hazardous areas, and the NFIP and its write-your-own servicing companies guarantee coverage for a anyone in a high-risk area.

Depending where you are, it may not be necessary to purchase flood insurance at maximum amounts. If you are outside a designated high-risk area, you can purchase partial coverage and receive an actual-cash-value payout for damages up to the purchase amount. However, if you have a lot of equity in your buildings and property, you may want to consider purchasing excess flood protection, which is available up to twice the regular limit. This extra protection may be prudent given inflation and construction costs.

Workers' Compensation

In nearly all 50 states, you are required to cover your employees for workers' compensation. Regardless, it's sensible to carry this coverage. If you fail to warn employees of any existing danger on your premises, you can be held liable for damage suits brought on by an employee under common and workers' compensation laws. Therefore, this very important coverage must be considered a mandatory part of your insurance portfolio.

Choosing the Right Company

As a responsible self-storage owner, you know securing the right insurance can help reduce operating risks and guard your assets. That's why you've evaluated your exposures and worked with an agent to choose the coverage you need to protect yourself in the event of a loss. But if you want to get the best defense, you need to do more than just choose the right insuranceyou need to choose the right insurance company.

Why is this so important? If you fail to do your homework, you won't know how a particular company is going to perform until you have a loss, and by then it may be too late. You don't want to discover after a disaster that your carrier has a history of poor claims handling or its financial standing is in jeopardy. And there are other advantages to choosing the right company that can save you money and get you the specialized coverage you need.

Choosing the best insurance provider for you is easy when you have the right information. Here are the three most important things you need to know:

• The company's financial strength
• The company's claims performance
• The company's specialized knowledge of your business

Financial Strength

An insurance company's financial strength reflects its ability to meet obligations to its policyholders. In fact, financial strength is the very cornerstone of the promises on which insurance companies are built. To determine if a company will be able to meet your claims, make sure it has a solid balance sheet. The easiest way to do this is to check the rating report of an independent industry analyst, such as the A.M. Best Co.

A.M. Best has been reporting on the financial condition of insurance companies since 1899 and ranks as the oldest and most experienced rating agency in the world. Its rating is assigned to every major insurer in the United States. The company carefully evaluates each provider's performance in five critical areas: profitability, leverage, liquidity, reserve adequacy and reinsurance.

Best ratings range from A++ (superior) all the way down to F (in liquidation). Although a solid rating is not an actual guarantee of a company's financial strength, it is a strong indicator that you will receive prompt and fair claims handling today and in the future.

Claims Performance

Claims performance is the make-or-break factor that separates a good insurance company from a great one. Every year, millions of business owners file insurance claims that may be subject to careless handling and needless delays. As anyone who has ever suffered a loss can tell you, the trauma of a fire or theft is stressful enough without having to worry about your insurance company's performance.

What should you expect from a reputable insurance company? Fast, fair claims handling and courteous service. First, a responsive company should contact you within 24 hours of receiving your report to begin the settlement process. Second, the company should make every attempt to dispatch a claims adjuster to inspect any property damage if necessary. Third, and most important, the company should attempt to make the claim-settling process as smooth aspossible, avoiding unnecessary questions and issuing payment without delay once coverage has been confirmed.

Specialized Knowledge of Your Business

To protect your assets, an insurance company (and its brokers and agents) should have specialized knowledge of the self-storage industry, as well as a commitment to stay abreast of industry changes through education and training. Moreover, a concerned company will also be able to recommend measures that will help you safeguard against losses.

Some insurance companies have developed specialized coverage for the self-storage industry that can actually contribute to lower premiums. A company familiar with current construction costs or with in-depth knowledge of the latest security systems, for example, can more realistically handle any claims you may have as well as provide the proper coverage. Look for a company that will work with you to reduce losses in the workplace, which can help contain your insurance costs.

Understanding and Controlling Losses

Business-liability insurance is designed to protect you against claims that someone was hurt or property was damaged on your premises. As every self-storage owner knows, recognizing and controlling liability exposures is a prime concern in today's litigious society. Merely having coverage in place is not enough. Courts are getting tough on business owners who allow hazardous conditions to exist, and judging by the awards juries sometimes hand out, no amount of protection may be enough.

The single most important key to protecting your facility against lawsuits is awarenessof your responsibilities under the law, potential hazards at your facility and your need to do everything you can to prevent accidents. Court decisions can and do favor those who take proactive steps; and in the case of a lawsuit, an ounce of prevention is definitely worth a pound of cure.

Reduce Potential Liabilities

The best way to limit your liability in advance is to identify and eliminate (or at least minimize) potential risks. Take a walk around your facility and play a game of "What if." Try to imagine what things could go wrong and what you can do to prevent them from happening. For example, you may discover a glaring hazard, such as a large pothole outside of one of your units that needs to be blocked off until it is repaired. Or you may discover a less obvious risk, like a worn or curled floor mat, which was intended to prevent slips and falls but may actually cause them.

Since slips and falls account for the vast majority of liability claims, it pays to be extra careful. Slippery floors from rain and snow are the leading cause of tenant falls. You can reduce your liability substantially when you take reasonable and prudent care to prevent accidents. Begin by keeping floors dry. In bad weather, post "Caution" signs when the floor is wet; install nonskid moisture-absorbing carpet or mats; and keep a mop and bucket handy to control runoff.

A dangerous situation can even be created in an instant by a careless employee in the normal course of his work, for example, leaving a wet floor unattended for a few moments when cleaning. Courts can and will hold management responsible for the actions of its staff in these cases. Once again, a proactive response is the keyin this case, by advising of a specific risk by posting a sign that reads "Caution! Slippery When Wet."

There are other important procedures for reducing liabilities: conducting accident-training sessions with your employees; conducting regular quality-control measures of your facilities and equipment; and keeping documented records of preventive maintenance. Hire competent employees and regularly monitor their performance. If you are not at the facility on a daily basis, make a habit of dropping by periodically without notice to spot unforeseen risks.

When an Accident Occurs

No matter how carefully laid your plans may be, accidents can and do occur. If someone on your premises should suffer an injury, take immediate action by first calling an ambulance, then document all known facts surrounding the accident to accurately reconstruct the events in case of a lawsuit. For safety's sake, be sure to get all of the following information in writing:

• Name, address and phone number of the injured party
• Date and time of the accident
• Name of employees on duty and the names of any witnesses
• Details about what caused the accident (i.e., was it caused by the customer or by a pre-existing hazardous condition?)
• Information about when the site was last cleaned and inspected for hazards

It's also a good idea to take a picture or video of the site where the accident occurred, and to try to get a written statement from the injured party, if possible. If a trip to the hospital is necessary, call an ambulance; don't use a personal or company vehicle. You may expose yourself to a whole new set of liabilities that is much better avoided.

In the Event of a Claim

In the event of an accident, notify your insurance company immediately. Give your agent all of the information outlined above. If you are hit with a lawsuit, the number and nature of available defenses depends on the specifics of the individual suit. In an injury-related action, the underlying claims must be analyzed to determine available defense; while in negligence cases, the owner may be able to assert the claimant's degree of fault, which could reduce or even eliminate his right to recover damages. Assuming the circumstance is covered, your insurance company will come to your defense.

One final note: In today's litigious society, liability limits of $1 million should be considered a minimum. For maximum protection, look for a business-liability policy written on an occurrence basis with no aggregate limit.

Evictions and Auctions

Self-storage is a rental business, and the facility operator acts as a landlord, not a warehouseman. Unfortunately, sooner or later, every owner will be faced with the task of having to evict tenants for failure to pay rent and reclaim the storage space by removing or disposing of the tenants' property. The most common way to do this is to place a lien against the property and hold an auction.

In general, most states give self-storage operators extraordinary leverage against delinquent tenants. However, if the procedures are not followed to the letter, or if there is an error in any step of the sale-and-disposal process, an operator leaves himself vulnerable to lawsuits claiming loss or damage of stored goods. Even when the process is handled correctly, it is not uncommon for a disgruntled tenant to file a claim charging negligence.

Sale-and-disposal legal-liability insurance is a must-have coverage for all self-storage owners. It provides protection against conversion: the act of wrongfully taking, selling, using or destroying the goods of another party. Due to the diversity of goods stored and the wide range of values of the property, the penalty for conversion can be extremely high.

Recently, a self-storage operator was held liable for $250,000 in damages by a California court for the wrongful sale of a customer's goods. The court judged the storage owner's notice of intention of sale was defective, since his newspaper ad did not include the delinquent tenant's name, which was required by state law. As a result, the court ruled the operator was in violation of negligence and conversion.

Many such lawsuits are the result of trivial errors, such as reversing the numbers on an address. The chance of a mistake occurring is compounded by the fact most state statutes require that several letters of notification be mailed to tenants with delinquent accounts, and that the self-storage operator publish a legal notice in a general circulation newspaper in the judicial district where the sale will be held. There are, of course, many variations on these procedures, and each must be followed exactly to minimize the likelihood of a lawsuit.

The good news is, in many cases, litigation can be avoided. Start by familiarizing yourself with lien laws. Consult with an attorney about preparing a written procedure that outlines the exact steps for disposing of a delinquent tenant's property. Read and follow all state statutes to the letter. Always double check names and addresses; and don't make any changes to information on the rental agreement, even an obvious misspelling, unless you get a signed change-of-address card. Finally, document every step of the inventory and auction process in photographs and writing. In a lawsuit, you will have to show proof that the disposal of a delinquent tenant's goods conformed to state statutes.

If there is any reason to question the sale and disposal of a tenant's goods, don't hold the auction. Many owners prefer to let tenants retrieve their property at no charge rather than face potential liability. Be absolutely certain you have adequate insurance coverage. Sale and disposal is not normally available through regular business-insurance carriers and generally cannot be added to a standard business-owners policy. However, the coverage can be secured through insurers specializing in the self-storage industry.

Amy Brown is part of Universal Insurance Facilities Ltd., which offers a comprehensive package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, call 800.844.2101; e-mail [email protected]; visit www.vpico.com/universal.