A question I am frequently asked by self-storage operators is what they should do if a tenant passes away. Before society became so litigious, I used to recommend having co-tenants, if possible, on each space. For example, if the person renting was married, he would name his spouse as co-renter so she could have right of access to the unit. In recent years, however, I have changed my position. I now recommend allowing only one person to be listed as tenant. However, this creates a problem when the tenant dies.
The general proposition is when a renter dies, it is not up to the self-storage operator to decide who gets the property stored in the unit. If you accept rent from someone other than the deceased, you may be improperly impacting the decision as to who gets ownership. While laws are different in every state, there are some general concepts of which you need to be aware. Most important, when your tenant dies, and you do not have a spouse or other co-tenant listed on the unit, you cannot simply turn the contents over to anyone who comes to collect.
The most common mistake I see is an operator accepting payment from a friend or family member. Accepting payment—at least in the form of a personal check—may, in theory, validate the argument you have accepted this person as the new tenant. The preferred way to be paid is by check from the probate estate. The check would be written by the estate of the deceased tenant, rather than another individual.
When any person dies, his estate may or may not go through probate. Probate is normally determined by the type and size of the assets left behind. Often, if the deceased has minimal assets--no real estate, stocks, bonds, etc.—and is married, the estate does not probate because none of the assets need to be transferred via the court to the surviving spouse; they transfer automatically by the way they are titled. Further complicating the process is not everyone has a will naming an executor or an administrator.
When a tenant dies, several questions should be asked of the person listed as the emergency contact on the lease: Did the deceased have a spouse? Did he have a will? Is that will being probated? That is, are there sufficient assets that the court will open a probate case to dispose of the assets and manage the deceased's debts?
Probate is the best situation for the self-storage operator. If the estate is probated, you need only find out from the court the name and address of the administrator or executor of the estate. Most probate courts issue what is called a certified letter of authority, which puts the world on notice a particular person is the authorized executor or administrator to act on behalf of the estate. If someone tells you he is the administrator or executor of your tenant's estate, you need only ask for the certified entry. A copy in your file is sufficient to allow that person to pay rent, remove possessions, or enter a new lease agreement.
Do not be surprised when, in some instances, the probate estate cannot pay rent immediately after it is opened. Sometimes it takes time to martial assets, and the probate court needs to approve certain expenditures. If you have a certified letter of authority and the rent cannot be paid immediately, you should contact an attorney to help you file a claim against the estate, to be paid before the estate is closed. Depending what state you are in, that could be six months or more; but you can at least have reasonable belief you should be paid.
The next situation is one in which the deceased had a will naming an executor or administrator, but the assets are insufficient or not of the character that would require, under normal circumstances, the estate be probated. The best solution here is to request the heirs open a probate estate anyway. It is unlikely, but it could happen that a relative arrives to take claim of property you have already turned over to another. If the heirs have opened an estate, you have the protection of the probate court and a letter of authority.
Your second option is to open a probate estate yourself on behalf of the deceased. This is a less attractive option because of the cost to the self-storage facility. The best you can do in this situation is obtain a copy of the will and a release with indemnification from the executor/administrator and as many of the relatives as you can. Ask the people who come to the facility looking to get into the unit to provide a list of all of the deceased's relatives.
If you are forced to collect such releases, obtain them from as many relatives and others who might have lien interests in the property. Relinquish the property to whomever the releases indicate. Get a receipt, and check proper identification. Be sure you understand the risk of litigation when proceeding with this alternative and, if possible, have an indemnification provision in your release. Under this option, you are always at risk. There can be claims from relatives, friends or creditors that possessions in the facility belonged to them and you had no right to release them. The best you can do is obtain as many releases as possible and proceed with caution.
You will want to open the unit and see if there is any property that appears to belong to anyone other than the deceased—for example, mail, a car or some other item that obviously belongs to someone else. That person would need to be notified, if possible. Please keep in mind, however, that proceeding without actually opening an estate does not offer you any protection from all possible claims. The only failsafe way to proceed—especially where assets have value—is to open an estate.
Your third and final option exists when there is no will, no executor/administrator, and no assets to be probated. In this situation, you'll need to force the opening of a probate estate on behalf of the deceased or obtain releases with indemnification agreements from as many people as possible.
By this point, many of you are asking, "Why don't I just send out the notices required by my state's self-storage statute and sell the goods?" There are several problems with this line of thinking. First, a relative may have tried to pay rent, which means it isn't actually delinquent. It just means you weren't able to accept rent without the inference of entering a lease agreement with the new party. Second, most state statutes require you send certified-mail notice to the tenant. If you know that the person is dead, by most statutes, you have not effectuated service such that you can proceed with a lien sale. If you proceeded with a sale, it would be at great risk of a lawsuit.
The better the documentation you have now, the fewer problems you will have later. Gather as much information about your tenant as you can: who your tenant is, who his relatives are, emergency-contact information, who may have liens on the property, and who may store property in the unit. The more information you have, the better armed you will be to release property in the event of your tenant's death, and the less likely you will be sued for doing the best you can.
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, call 513.721.5151.