By D. Carlos Kaslow
The 2001 legislative year has been a good one for the self-storage industry. Eight state legislatures considered more than a dozen bills that would directly affect self storage. Four states enacted laws supported by the industry, and only one of four bills opposed by the industry has any chance of passing this term.
Arizona and Missouri enacted industry-sponsored late-fee bills. Both efforts were based on model legislation developed by the Self Storage Association. Both bills contain four elements that are vital to positive late-fee legislation:
- They define a late-fee as a charge for the untimely payment of rent.
- They clearly distinguish between late fees and lien-enforcement costs and permit a storage operator to collect lien-enforcement costs in addition to late fees.
- The laws provide storage operators with a late-fee safe harbor. If an operator charges a late fee described in the law, it is presumed reasonable and cannot be challenged. For example, the Missouri law states that a late fee of $20 or 20 percent of the monthly rent is presumed reasonable.
- A storage operator may charge a higher fee if it is justified by the his costs of doing business.
Arizona, California, Maryland, Missouri, North Carolina and West Virginia now have laws that affect the way storage operators set late fees. The North Carolina law is the most restrictive and was passed three years ago at the instigation of a legislator who had a bad experience at a self-storage facility.
West Virginia became the 47th state to enact a self-storage lien law, which includes a section on the late fees a self-storage operator may charge. So the state's operators were able to take care of two issues with a single bill. Alaska and Nebraska are the only other states that have not enacted self-storage lien legislation. There is a lien bill pending in Vermont, but prospects for passage do not look good.
While the industry had several successes in passing industry-supported legislation, it was also successful in stopping anti-industry bills. The Arizona Mini Storage Association was able to derail one of the strangest bills ever introduced. The bill would have amended the state self-storage lien law to make lien sales far more difficult to conduct. Some investigation revealed the bill was the handiwork of a frequent buyer at self-storage lien sales. He thought auction prices were too high and believed that by making the sale process more difficult, auction sale prices would drop. This was a truly crazy legislative idea and AMSA was able to kill this bill in short order.
California self-storage operators faced the prospect of being regulated by the state Public Utilities Commission. The real target of the bill was the storage-to-go business, but traditional self-storage operators were being included in the bill's regulatory scope as well. The SSA opposed the regulation of any aspect of the storage business as a public utility but was especially concerned that traditional self-storage business, which is part of the commercial rental real estate industry, might become a regulated utility in California. Fortunately, the bill was amended several times and its application to traditional self-storage was deleted. There is still hope the bill will not pass, but final legislative action had not been taken at press time.
The self-storage industry is too large and too successful to be ignored by the nation's state legislatures. Storage operators need to stay alert for legislative developments in their states. More important, they need to be organized so they can take action to promote their legislative agenda and to react swiftly when hostile legislation is introduced. The SSA is working to assist the industry in achieving this goal. The association now tracks legislation in all 50 states and is working with storage operators at the state level to have networks in place to promote the industry legislative agenda. One question every storage operator should ask is: What would we do if a nutty piece of legislation like that bill in Arizona were introduced in our state? If you don't have a good answer to this question, you may want to give the SSA a call.
D. Carlos Kaslow is an attorney in Berkeley, Calif., and is the founding partner of the Self Storage Legal Network and author of the Self Storage Legal Review, a bi-monthly newsletter covering self-storage legal issues. He is also general counsel for the national Self Storage Association. For more information, visit www.selfstorage.org.