This column addresses something of a controversial issue in self-storage: master-key lock systems. While I’m not in favor of these systems, the choice to use them is every operator’s prerogative. I only suggest you carefully weigh the pros and cons.
With a master-key system, an operator purchases locks for his entire facility, installing them on all the doors or giving them to tenants at the time of rental. Customers are not permitted to use their own locks, and the operator maintains a master key that unlocks all units. There are other types of systems in which the master key only disables or overlocks tenants’ locks. They are not part of the following discussion.
Two Types of Risk
There are fundamental risks involved in using a master-key system. First, you create a bailment over your tenants’ property. In some states, a bailment can represent a deviation from the requirements of the local self-storage statute. In all states, it implies what is called an “ordinary duty of care,” meaning you have an obligation to protect tenants’ goods. This is not the case when you have no master key or regular access to units.
If you choose to employ a master-key system, the best way to avoid creating a bailment is to include a clause in your lease that disclaims it; however, this may not be effective in a court of law. You can compare this to a valet-parking service. Even though there is language on the back of the valet ticket that says the operator is not liable for damage to your car, you would certainly expect the company to pay for damage that occurred if its employees did not demonstrate “ordinary care” for your vehicle, i.e., speeding down the parking lot and causing an accident.
The same principle could apply in self-storage under a master-key system. Though your lease language denies responsibility, you may be assuming a duty to ensure the safety, security and well-being of tenants’ stored property. For example, if your facility experiences an infestation of some sort of pest, you may be expected to inspect all units for intrusion. To not act could be construed as a failure to demonstrate ordinary care. Obviously, if you do not retain a master key, you are never expected to enter a tenant’s unit unless there is a dangerous condition that forces you to do so.
The second risk in retaining a master key is it opens you to liability for losses claimed by tenants, who might occasionally declare they are missing stored items. If there is no sign of forced entry or vandalism, they may look to you or your employees as suspects of alleged theft—and the total of the loss can be quite extensive if you don’t place limits on what can be stored in your rental agreement. While some of these claims will be false, operating a master-key system invites the possibility of criminal activity on behalf of dishonest employees.
One solution to diffuse the potential for litigation involving wrongful entry is to install individual door alarms on each unit. Records maintained by the computer database would show who accessed the unit and when. Of course, if you have entered a unit during the period when the theft allegedly occurred, these records can act as a proverbial smoking gun. Further, records of access must be retained for a long time, as claims often aren’t made until a tenant moves out. Seven years is the recommended length of time to keep these files.
On the Positive Side
There are also advantages to a master-key system. Many operators believe publicizing the use of such a system discourages tenants from storing inappropriate or illegal goods for fear of being caught. In addition, a master-key system makes it easier for officials to investigate potential dangers, such as fire or chemical odors. Grinding or drilling a lock could cause a spark, which can be fatal in the presence of flammable substances. Having a master key in this instance would reduce the risk of fire or explosion.
A master-key system also provides a marketing advantage for those operators who wish to accept deliveries on behalf of their tenants. Commercial customers, such as pharmaceutical reps, often find it advantageous to store at a facility that has access for the delivery of packages, mail or business equipment. In this situation, the tenant generally gives the operator authorization to enter his unit for such purposes or to investigate potential damage to inventory. Some operators have explored the option of a waiver that would relinquish them of any associated liability.
Finally, operators like that a master key-system allows them to perform routine facility maintenance as needed, reducing tenant complaints about problems with their units. For example, if a tenant calls the answering service and says his door is not functioning properly or there’s a leak in his roof, an operator generally finds it preferable to open the unit with his key rather than cut the lock and replace it or wait for the tenant to visit.
One final note: Among the questions some insurance carriers ask an operator when preparing a quote for a self-storage policy is whether you use a master-key system. In some circumstances, it is considered a liability and may cause an increase in your rates. This could also affect a policy renewal, so make sure you consult your provider before switching to a master-key system.
In the end, the choice to use a master-key system is a business decision, not a legal one. The question is whether you are prepared to accept the additional risks and potential liability exposure in exchange for the convenience and customer-service benefits. If you are, then a master-key system may be an option for you.
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 toInside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151.