The Top 5 Reasons to Update Your Self-Storage Rental Agreement
Copyright 2014 by Virgo Publishing.
By: Scott Zucker
Posted on: 09/26/2013



 

The single most important piece of paper used in operating a self-storage facility is the rental agreement. This document provides the essential outline regarding the relationship between the tenant and the landlord, including each party’s rights and responsibilities.

Rental agreements cannot be static; the self-storage business continues to evolve, so it's necessary that the agreement be updated in line with ongoing industry changes, whether they involve the law, operational upgrades, case decisions or experiences individual operators may have with their own facility. Here are five reasons your self-storage rental agreement deserves a second look today.

1. Lien-Law Statutory Updates

The majority of state self-storage laws were crafted more than 20 years ago, and facility rental agreements were drafted to address the statutory requirements at the time. But in just the last year, the national Self-Storage Association, in conjunction with multiple state associations, has embarked on an aggressive and successful campaign to modify and modernize those state laws. The changes focused on:

  • The use of e-mail for tenant communication (including lien notices)
  • Validating the enforceability of a contractual limitation of value
  • Creating a statutory “safe harbor” for charging late fees
  • Adding the right for operators to tow away abandoned cars and boats
  • Permitting online auctions

The states that have effected some of these recent changes include Arkansas, Connecticut, Georgia, Maryland, Nevada, New Jersey, North Carolina, Oregon and Utah, although many other states have updated their laws in recent years as well.

Along with many of these lien-law changes comes the requirement to change the express language contained in the rental agreement. For example, a number of states have permitted the use of e-mail notification as long as the tenant has agreed in the rental agreement to accept such notices via e-mail and provided an e-mail address. Similarly, many states approved the enforcement of a contractual limit to the value of goods stored as long as such limit is stated clearly and boldly in the body of the rental agreement. Further, the right to charge late fees includes the absolute requirement that the amount charged be clearly stated within the terms of the written agreement. As such, operators need to stay updated to the ever-changing laws that regulate the self-storage industry, and then make the written changes to their leases that are required to meet the terms of their current state law.

2. Insurance-Law Statutory Updates

Just as statutory lien laws have changed, many states have recently adapted a change to their insurance laws, permitting self-storage operators to “sell” tenant insurance through a limited insurance license held by the facility owner. These “limited licensing” laws, similar to those rights given to cell-phone retailers and car-rental dealers, permit managers to provide tenants the ability to purchase tenant insurance directly from the facility. This ability to sell can affect the terms of the insurance provisions in the self-storage rental agreement.

The insurance provision should state the tenant is obligated to obtain his own insurance to protect the value of his stored property. The provision should provide that the requirement to obtain insurance is a material condition of the agreement and failure to obtain such insurance would be a breach of the agreement. Now, where permitted by law, that insurance can be purchased directly from the facility manager.

3. Operational Upgrades

Many form rental agreements were drafted when the self-storage industry was in its first generation cycle and facilities were built with such limited fanfare as single-level metal buildings, occasionally with perimeter fencing. All these years later, with the industry being in what some would say is its fourth generation, facilities often include multi-story buildings, climate-controlled spaces, access-control systems and a plethora of technological features that have enhanced facility management and operation.

 

Similarly, facilities are embarking on operational changes to permit online and mobile payment and contracting. It’s important with all of these alterations that the rental agreement be updated to address how these features can be used, what warranties are offered, if any, and the limits of liability for the operator.

4. Case Decisions

There have been a number of case decisions over the last few years that apply to the self-storage industry. It's helpful for facility operators to consider the lessons learned from these cases, even if they relate to a specific state. It may be the case was won because of specific language included in the rental agreement—or lost for the same reason.

It can be helpful to analyze these rulings and adjust facility rental agreements accordingly. Some agreements have been changed over the last few years to address issues such as:

  • The approximate size of the rented units
  • Whether operators have the permission to fax information to their tenants
  • Whether giving authorized access to non-tenants converts them to tenants
  • Whether operators have the right to enter storage units to perform repairs

5. Tenant Issues

Over time, every operator experiences situations that make him wonder whether the particular issue is covered in his lease. Rental agreements are often updated after something has happened at a facility and the operator wants to protect himself if the same situation arises again. Such issues include denial of access to non-tenants, tenants claiming mold or mildew damage, tenants using the space for unauthorized business activity, tenants claiming oral amendments to their leases, or tenants claiming climate-controlled units failed to maintain a specific temperature. For each of these circumstances as well as many others, rental agreements are commonly revised to create clarity and avoid future disputes.

It’s important for owners and operators to take the time to review their rental agreement and confirm the document they’re using is up to date and effective for its intended purpose. Consider some of these questions:

  • 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 changes you’ve made to your operation, recent court decisions, and tenant issues that have occurred at your facility?

Depending on your answers, it may be time to consider updating your rental agreement.

Scott Zucker is a partner in the law firm of Weissmann & Zucker P.C. in Atlanta. He specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He’s a frequent lecturer at national conventions, author of “Legal Topics in Self-Storage: A Sourcebook for Owners and Managers,” and a partner in the Self-Storage Legal Network, a subscription-based legal services for self-storage owners and managers. To reach him, call 404.364.4626; e-mail scott@wzlegal.com .