DEAR WALDMANS: My question concerns giving prorated refunds if a customer leaves in the middle of the month or any other time before the first of the month. My manager says it's good customer relations to refund the balance of the month along with their refundable deposit of $20. I say, if you let them know up front (for example, that we only prorate if they are out before the 15th), they will accept this as part of the rules to be abided by in the lease. What are your opinions on this matter?
--To Do or Not To Do in Calaveras, Calif.
DEAR TO DO OR NOT TO DO: Your question is a good one. Prorating is a practice that is often misconstrued in the business world, being coupled with the belief that it's good for the customers because it will make them come back again, they will remember our facility forever, etc. The truth is, however, sometimes people are very loyal and remember that you saved them some money or time, but when you have a business and you have a lease, then consistency is always the best way to go.
The logic is: You set the rules and you follow the rules. This kind of thinking makes it easier for everyone. What if Mr. Doe returned to your facility two years later? He tells the new employee (let's pretend that you have been replaced), "Whoa! Wait a minute. You can't charge me that price--I want more of a refund. Ms. Mary, a former employee, always let me pay for only 15 days." You, as the new employee on the block, would feel a little nervous about this situation. Maybe your manager isn't feeling so liberal with the money lately. Maybe the facility had a couple of really bad months. This places you in a difficult situation and makes it hard because the rules have been changed.
We agree wholeheartedly with your belief. Apply the rules in the lease up front, explain the refund rules and your prorate policy. Remember, even if the customer completely misunderstands and he did sign the lease and rent the unit, then he must abide by the lease. This kind of business operation will make it simple and easy, not only for the employee, but for the tenant as well. Everyone knows from the beginning what is expected of them. Whether you use a prorate date or anniversary date, there are no surprises and no misunderstandings.
In our state, we are required to use a prorate date, but states differ. Many give you the choice of either a prorate or anniversary date. We have to go by the first day of the month, known as the prorate date. We are overwhelmed with payments the first of each month. If we had a choice, we would prefer to use the anniversary date, which keeps the business more staggered, allowing more freedom to keep things running on a constant basis throughout the month. Using the prorate date is a lot more tedious. Whatever option you use, stick to the rules. Many self-storage facilities completely ignore the codes that are set by their state's regulations. This is great until they get caught for not following the rules--and lawsuits are no fun.
Finally, approach your manager about consistency. But be careful--he still is the boss. He sets forth the rules. If you choose to try and change his mind, we wish you luck in enrolling him in your way of thinking.
A father-daughter team, the Waldmans are self-storage owners/operators and attorneys.
In addition, Ms. Waldman holds a master's degree in labor and employment law from
Georgetown University. The Waldmans are co-authors of the industry's leading series of
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Views and opinions on legal matters are those of the authors. Professional counsel should be obtained before any determination or positive action is taken.