The Legal Implications of 'FREE' in Self-Storage
|Copyright 2014 by Virgo Publishing.|
|By: Jeffrey Greenberger|
|Posted on: 01/21/2009|
If you’ve been reading my column over the years, you probably know I’m creating a list of words that should be abolished from your self-storage vocabulary. This time, I’m adding the word “free.”
I see the word “free” often in relation to self-storage marketing. I’ve even written a critique about the self-storage offer of “free truck with move-in.” I’ve warned that, in the past, operators have had to buy toy trucks to hand out with move-ins to fulfill the obligation of literally giving away a “free truck with move-in.”
Further, I have cautioned you about making sure that the truck is really free, with no terms and conditions that cost money or change the deal. Some of you have told me that you do not take me as seriously as you should on this issue and maybe suffered consequences. Some realized the wording needed to be different, calling it a free use of truck.
Cell Phone Lawsuits and Lessons
Recently, multiple state attorneys general have joined together to file class-action lawsuits against all the major cell phone providers over the use of the word “free.” All cell phone providers have some variation on the following concept: “If you sign a two-year service agreement, you get the cell phone for free.”
That seems innocent enough; however, if you terminate your cell phone contract early, you have to pay an early termination fee. The explanation that the cell phone providers have given for years about the early termination fee is that it’s used to recoup the cost of the “free” phone. When you do not fulfill the entire service agreement, the cell companies have to recover that cost of the “free” phone. Guess what? It’s not free if the phone cost is built into the price of a contracted calling plan.
Turning again to the dictionary, as I am prone to do, there are multiple definitions of “free.” Here are two:
I have spared you the other 46 definitions, but I think you get the idea. When the cell phone companies say a phone is “free” but then say the cost is built into your monthly service charge, that phone is not, by definition, free.
Now let’s apply this lesson to self-storage. I have many operators who tell me that they work out a deal that if you will sign a 12-month lease, the “Xth” month is free. What happens if a tenant breaks the lease? Is the last month free, even if it’s not the 12th? If not, I could contend that the month is not free because it requires 11 months of paid rent.
Free or Not
The problem may be more apparent in other “free” items. Free shelving with the signature on an agreement or an extended term is not really free; it is actually built into the price you charge someone who rents a unit with shelving. Better yet, what about a free lock? Do you give locks away to anyone who walks into your office, or only those who sign a rental agreement? If you only give to new tenants, then is the lock really free?
The same is true with free truck-use at move-in. Is it really free? It may not be if a person has to sign a lease to use the truck.
Further, many self-storage operators charge insurance premiums and/or other usage charges. Also, many impose hour limitations, usage or mileage limitations on the truck. If that is the case, I do not believe that the truck is always provided “without, or not subject to, a charge or payment,” i.e., free. If I keep the truck for three hours and I was only supposed to keep it for two, I owe a fee, which means it’s no longer “free.” If I have to pay for insurance then I am not getting a truck without a charge or payment either.
You get the drift. If you are not really giving it away, if something is tied into or requires consideration of something else in order to obtain the “free” item, then that item is not free. I caution you about this because self-storage could be a target after the attorneys general finish up with cell phones.
Knowing competition in the industry is stiffening and some facilities may be suffering because of a downward economy, there is a lot more “creative” marketing and concessions being considered. I strongly caution self-storage operators to ponder concessions carefully and avoid the word “free” at all costs.
In fact, it may be better to offer the second month for $1, rather than free. While the dollar is not going to make that much difference to your bottom line, you are avoiding the idea that you are “giving away” the second month for no consideration. To the contrary, the occupant has to pay rent for the first month.
The same goes for truck use: How about $1 for use of truck for two hours if you sign a minimum one-month rental agreement? I know it does not flow off the tongue quite like “free truck with move-in” but it may save your hide from litigation.
As always, I am just warning you to be careful. It may only be a matter of time for private attorneys, who see the cell phone case, to start thinking about using the same strategy with self-storage facilities. Please consider banning “free” from your self-storage vocabulary to steer clear of costly legal battles ahead.
Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati. He primarily represents owners and operators of commercial real estate, including self-storage. He is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. His website, www.selfstoragelegal.com, contains his legal opinions and insights into the self-storage industry, as well as an article archive. For more information, call 513.721.5151; e-mail email@example.com.