Many owners, either as a courtesy or business necessity, accept deliveries of packages for tenants in their office or keep keys for certain tenants so deliveries can be made directly to their units. A common example is pharmaceutical representatives who rent space to store promotional materials and drug samples. The representative goes to the facility once a day or week to pick up the supplies he needs, then spends the day or week on the road visiting doctors and hospitals. He cannot be available to receive his shipments. The self-storage operator, to keep a good, paying tenant, agrees to receive and hold the supplies or keep a key for a UPS or FedEx delivery driver.
This practice raises two concerns. The first is the creation of a bailment if you receive and hold the goods in your office, whether or not you charge a fee. The second is the potential violation of your state's definition of a self-storage facility, which could cause you to lose your statutory lien rights. The problem with accepting deliveries or keeping a key for your tenants is you take on additional liability.
The simplest example of a bailment is when you valet park your car at a mall or restaurant. Despite what the back of the claim check may say, you are turning possession of your personal property over to someone else. The person parking the car--the bailor--is generally liable for any damage that occurs while your property is in his care, custody and control. The standard of care varies, depending on whether the bailor charges a fee.
The same is true in self-storage when you agree to take and hold a tenant's property. You are creating a bailment and you, as bailor, have a duty to care for that property while it is in your possession. If you charge a fee, your duty of care is ordinary; if you do not charge a fee, your liability is limited to your gross negligence, willful conduct and/or fraud. While your self-storage statute is designed to help you eliminate or reduce your liability to tenants for damage that occurs to their stored property, that same exclusion does not exist for packages you hold in your office.
You may choose to assume this kind of risk because certain tenants are long-term and always pay on time. Before you make that decision, remember if a package containing memo pads, magnets, tubes of toothpaste or nonprescription drugs are lost or stolen while in your possession, and you have a proper package-acceptance addendum, you can set a contractual limit to compensate the tenant for that loss. However, if the same package contained samples of a prescription drug, not only is someone going to raise their eyebrows, the drug representative cannot simply order new pills. This loss has to be reported to the Drug Enforcement Agency, and an investigation has to be commenced that may focus on you. Given this scenario, perhaps your good, paying tenant does not warrant such a risk.
The simplest solution to these problems is to arrange for the tenant to have a combination or push-button lock or numeric alarm code on his unit. The tenant can then give the delivery driver the code, leaving you out of the loop. With all arrangements made without your knowledge, you are not liable for the deliveries any more than you are for regular stored goods.
If you are in a position where you cannot use combination or similar locks, or you need to accept deliveries to maintain good tenants--and you are willing to take the risk--you should at least have a package-acceptance agreement addendum. This provides the terms and conditions under which you will accept the packages, the amount of time you will hold them, a release and indemnity clause for any loss that occurs while they are in your possession, a request that the tenant insure the delivery, and limitation on the value of the package if lost. I have included a sample addendum for your consideration.
This Addendum is to a contract for self-storage dated _______________________________ between_________________________(Lessor) and _________________________(Lessee).
WHEREAS the parties have entered into a contract to rent a self-storage unit at ______ Self-Storage to Lessee commonly referred to as unit ________; and
WHEREAS Lessee requires the Lessor to receive certain deliveries on a no more than _________________________ a month basis; and
WHEREAS Lessor normally does not accept deliveries for its Lessees;
IT IS THEREFORE AGREED, that Lessor, no more often than ______ a month, will accept deliveries for Lessee and store said deliveries for Lessee in its office. Lessor shall not charge a fee for this service. Lessor shall not be responsible for placing the delivery in the Leased Premises. Lessee by the end of the next business day that the delivery is received by Lessor, shall pick up and remove the delivery from Lessor's office. (Optional: If the delivery is not removed from the office by close of the business day the day after the delivery was received, Lessee shall pay to Lessor a handling fee of $ ______ per day.)
LESSEE FURTHER AGREES that in the event there is any loss or damage to the deliveries while in Lessor's possession, the maximum liability for any loss or damage value of any delivery shall not exceed $ ______ ; or $ ______ per pound whichever is lesser.
LESSEE FURTHER AGREES that he/she shall release, hold harmless, and agree to indemnify ____________________ Self-Storage, its shareholders, officers, owners, directors, employees successors, heirs and assigns from any and all liability for ____________________ Self-Storage's negligence resulting in any loss or damage to any package or packages held by Lessor in the office pursuant to the terms of this Addendum.
LESSEE FURTHER AGREES, to insure all Lessee's sole expense all deliveries for their actual cash value, said insurance is for the mutual protection of Lessor and Lessee. Failure to insure said deliveries shall be deemed a default of this Agreement and Lessee shall assume all risk of loss that would have been covered by insurance.
The liability-waiver provision of the sample may not release you from liability, but it is the best you can do if you have to accept packages in your office as a matter of business survival. Most states will honor the value-limitation portion of the addendum. If you wish to use this sample form, take it to your attorney to ensure it is appropriate for the lease in your state.
The type of arrangement where owners maintain keys or codes for their tenants is much more troubling than those in which they simply accept packages. Interestingly, most owners who have adopted the policy of retaining a key or code for delivery drivers think they are getting around this problem of a bailment because the package is never actually in their possession. I contend that by keeping a key or code, you have created a bailment over everything stored in their unit at all times. That is, you have possession and control of tenant's unit because you have maintained a key. Thus, not only do you have a bailment on the recent delivery, but you would create a bailment over everything held in that unit.
To further complicate matters, most of the states that have self-storage statutes loosely define a self-storage facility as one designed to rent individual spaces where tenants have access and store personal property themselves. They specifically provide that self-storage facilities are not warehouses. There is a reason for that clarification in our statutes, and that is to maintain control over the property in some way, i.e., the ability to lock and unlock the space makes you a warehouseman, not a self-storage operator.
In most states, once you become a warehouseman, there are certain bond and insurance requirements you must maintain. To avoid being characterized as a warehouseman, you do not want to maintain any sort of access right or control over the goods in any space. If you are acting as a warehouseman, you do not have lien-sale rights under your state's self-storage statute. Depending on the statute, you may lose lien rights to solely those units to which you have keys. In states with more strict definitions of self-storage, you may lose lien rights in the entire facility.
As always, an ounce of preparation and prevention will spare you a pound of cure when these situations arise. Use caution when offering package acceptance to tenants. One package could deliver disaster to your door.
Jeffrey Greenberger practices with the law firm of Katz Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, Mr. Greenberger can be contacted at Katz Greenberger & Norton LLP, 105 E. Fourth St., Suite 400, Cincinnati, OH 45202, or by calling 513.721.5151.