D. Carlos Kaslow

Self-storage operators know the importance of awell-drafted rental agreement. This knowledge is either theresult of direct experience or from the legions of lawyers whorepeat this axiom at every opportunity. However, the importanceof the rental agreement should not be underestimated simplybecause its importance has become an industry cliché.

Articles on rental agreements usually examine contractualprovisions designed to protect storage operators from claims ofloss or damage to stored property or those required by stateself-storage lien laws. In this article, we will examine threeprovisions that deal with problems confronted by everyself-storage operator.

Prohibiting the Storage of Hazardous Materials

First, let's consider hazardous materials. There is a greaterpotential for a major uninsured loss from a tenant leaving alarge quantity of hazardous materials in a storage unit than anyother occurrence. Under current federal and state law,self-storage operators are responsible for the cost of legallydisposing of hazardous materials discovered on the premises.There have been numerous reports of storage operators who havediscovered spaces containing hazardous materials costing $25,000to $50,000 to legally remove. Six-figure cleanups are rare, butthere are one or two events reported each year. One of thelargest incidents occurred in the San Francisco Bay Area, wherethe storage operator incurred cleanup costs exceeding $250,000.The Environmental Protection Agency recently sent the SelfStorage Association an advisory concerning individuals who aredumping hazardous materials at self-storage facilities in theSouthwest.

A rental agreement provision cannot stop a tenant from dumpingtoxic chemicals at your facility. However, banks, insurancecompanies, and building and zoning authorities are now insistingthat self-storage rental agreements contain a provisionprohibiting the storage of toxic substances. This provisionprohibiting the storage of hazardous material does not have to befive pages long. A paragraph along the following lines should beunderstandable to customers and satisfy the concerns ofinterested third parties:

HAZARDOUS OR TOXIC MATERIALS PROHIBITED: Tenant isstrictly prohibited from storing or using materials in thestorage space or on the facility classified as hazardous or toxicunder any local, state or federal law or regulation, and fromengaging in any activity which produces such materials. Tenant'sobligation of indemnity as set forth below specifically includeany cost, expenses, fines or penalties imposed against theLandlord arising out of the storage or use of any hazardous ortoxic material by Tenant, Tenant's agents, employees, invitees orguests. Landlord may enter the storage space at any time toremove and dispose of prohibited items.

The provision not only prohibits customers from storing orusing hazardous materials, but also requires them to indemnifythe storage operator for any cost incurred in their removal. Sucha provision will not stop the toxic material dumper or drug-laboperator from bringing toxic substances onto your premises, butit may cause your honest customers to be more selective as to theproperty they store.

Controlling Tenant Access

Simply prohibiting your customers from storing toxic materialson the premises is obviously not enough to prevent your storagefacility from being used as a toxic-chemical dump site.Preventing customers from bringing hazardous materials onto yourfacility is the real goal. Here again the rental agreement canhelp. Limiting customer access rights to hours when sitepersonnel are at the facility can reduce the likelihood ofhazardous materials being dumped there. Consider the followingprovision:

TENANT ACCESS: Tenant's access to the premises may beconditioned in any manner deemed reasonably necessary by Landlordto maintain order on the premises. Such measures may include, butare not limited to, limiting hours of operations, requiringverification of Tenant's identity and inspecting vehicles thatenter the premises.

This provision gives the storage operator a broad right tocontrol customer entry on the storage facility. It specificallypermits the storage operator to:

Each of these rights is important in today's operatingenvironment. Few facilities in urban areas permit unlimited24-hour access to the facility. Technological advances ingate-access control have made controlling access far easier thanin the past. The right to verify and inspect vehicles isprimarily designed to deter persons from renting who may not wantthe storage operator to know who they are and what they arebringing onto the premises. These rights should be usedjudiciously. However, site personnel should exercise these rightswhenever they see suspicious activity or a covered truck or othervehicles that could contain hazardous materials entering thepremises. Remember, the concept of self-storage does not preventthe storage facility operator from controlling his property. Acredible threat of inspection can deter a toxic dumper fromchoosing your facility a dump site.

It's the Tenant's Lock

The last rental agreement provision we will consider dealswith locks. At most storage facilities, the tenant is responsiblefor locking his or her unit. This duty creates two potentialproblems for the storage operator: tenants often use low-qualitylocks to secure their storage units, and even worse, theyfrequently don't lock the storage unit. A "Locks"paragraph can help with both these problems.

LOCKS: Tenant shall provide, at Tenant's expense, a lockthat Tenant deems sufficient to secure the storage space.Landlord may, but is not required to, secure any storage spacethat is found unlocked.

This provision places the responsibility for determining thetype of lock to be used solely upon the tenant. Most storagefacility managers encourage their customers to use quality locks,but leave the final selection to the customer. This provision isdesigned to prevent later claims that the facility operator mayhave some responsibility for lock selection.

The second sentence gives the facility operator the right, butnot the responsibility, to secure any space that is found withouta lock. What should storage operators do when a rented space isdiscovered without a lock? The best course of action is to securethe space and contact the customer. Some storage operators arereluctant to do this because of the fear that they assume care,custody and control over the storage space and therefore greaterliability if they secure the space. While there is a possibilitythat securing a storage unit with a company lock may increase thefacility's exposure to a lawsuit for loss or damage to the storedproperty, we believe it is a risk that is usually worth taking.

A California case, Sackett v. Public Storage Management(222 Cal. App.3d 1088), examined this very issue. The court heldthat a storage operator who secures an unlocked space incurs noadditional liability by taking a step that primarily benefits thetenant. Whenever a space is found unsecured, the storage operatorshould always notify the customer by telephone and in writing.

Storage operators who are reluctant to have direct access to acustomer's storage unit may want to secure the storage unit witha lock and mail the keys to the tenant's last known address. Ifthe keys are returned by the post office, the sealed mailer isheld in the office until the tenant returns. This approach allowsthe storage operator to secure an unlocked storage unit withouthaving access to it once the keys are mailed to the tenant. Itshould also eliminate any contention that the storage operatorhas taken control over the tenant's space.

Controlling Your Self-Storage Facility

The rental agreement should state the scope of the tenant'sand the storage operator's rights and responsibilities in the useof the storage facility. Each of the three provisions is designedto give the storage operator more control over his property. Theylimit tenant's-use rights and permit owner action but areconsistent with the basic landlord/tenant relationship. Placingreasonable restrictions on customers' use of the facility hasbecome a critical element of premises management given thevulnerability that storage operators have to dumping of hazardousmaterials and failure of some customers to act responsibly. Thesethree provisions have proven to be useful in providing storageoperators with some protection from the occasional malicious orirresponsible tenant.

D. Carlos Kaslow is editor of The Self Storage LegalReview, a bimonthly newsletter on legal issues pertaining tothe self-storage industry. For more information or to obtain asubscription, contact Mr. Kaslow at 2203 Los Angeles Ave.,Berkeley, CA 94707; (510) 528-0630.