Rental Agreement Reviews

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When was the last time you looked at your rental agreement, reading it word by word, paragraph by paragraph? Did you see some provisions that surprised you? Confused you? Worried you?

The rental agreement is one of the foremost business tools for self-storage operations. It outlines both tenant and operator rights. Therefore, it’s important—especially if you haven’t reviewed your agreement for a few years—to read it again and consider the following issues.

Tenant Identification

Every rental agreement should include adequate space to obtain pertinent information about prospective tenants, not just names and last-known addresses. Facility operators should always request cell phone numbers and e-mail addresses.

To secure the premises from possible security risks and also to locate tenants for notification and collection purposes, managers should be able to properly identify tenants, what they look like and how they can be contacted. Photographs should be made (either in the office or from picture IDs) of tenants. Work information or alternative contact information should be collected. In addition, facility operators should request tenants’ Social Security and driver’s license numbers.

The key to requesting this information is making sure all customers are treated consistently. Facility operators who give exceptions run the risk of discrimination claims.

Mold and Mildew

Over the last few years, an abundance of claims relating to mold and mildew damages have been made against storage facilities. Most rental agreements include release language for risk of damage or loss to stored property, but contracts should specifically mention mold and mildew, especially in areas where humidity is high and facilities offer climate control.

For example, language could be added to read: “Due to the excessively humid climate conditions, owner shall not be responsible for any damages whatsoever caused or contributed to by mold or mildew or moisture-related contamination.”

Release of Liability

Standard rental agreements state that property is stored at the “sole risk” of the tenant and the landlord is not liable for the “loss of or damage to” the tenant’s personal property. In addition, the lease should say the landlord won’t be held liable for such property loss or damage arising from the “active or passive acts or omissions or negligence of the owner, owner’s agents or employees.”

In some cases where this language is included, certain court decisions have allowed landlords to be released from liability even if their own negligence caused the loss or damage to occur. This release section of the agreement can also address liability for personal injury to the tenant while at the facility. Although many states won’t uphold a personal injury waiver such as this, some mention of it should still be included in your agreement. To be effective, these exculpatory provisions should be in bold print and unambiguous or the courts may not enforce the terms.

Statutory Updates

Almost all state laws require that rental agreements notify tenants of the landlord’s right to lien and sell their stored goods in the event of default. Some even require the notice be in bold print or a larger type.

Again, it’s crucial that whatever is required by the statute be followed in the agreement. Courts most likely won’t uphold a facility’s lien enforcement rights if the facility hasn’t properly complied with the statute. Many states have updated and revised their lien laws (or late-fee laws) within the last few years. If that is the case, your rental agreement (or addendums) must also be updated to reference the new provisions.

One of the more sweeping legislative changes regards late fees. A number of states such as Missouri, Kansas, Ohio, Wisconsin, California, North Carolina, West Virginia, Arizona and Maine have all changed laws on self-storage late fees. Revisions must be reflected in current leases.

Request for Information

Another recent issue has been an increase in police investigations at storage facilities. When approached by law enforcement, many operators are uncomfortable providing any information to authorities, believing they’re at risk for violating claimed privacy rights by tenants.

Although facility operators have rights to control their rent-roll information, operators may include language in their lease asking tenants for approval to release data without the risk of liability. Such language could read: “Occupant hereby authorizes operator to release any information regarding occupant and occupant’s occupancy as may be required by law or requested by governmental authorities or agencies, law enforcement agencies or courts.”

Civil Relief Act

The Service Members Civil Relief Act was amended over the last few years to protect military members and their families from the risk of foreclosure for the non-payment of rent on self storage units. For the protection to apply, the facility operator must be notified of the tenant’s military status.

Accordingly, a provision should be included in the lease informing tenants of their obligation to notify the operator of military status. For example, the following could be inserted into the lease: “If you are in the military service, you must provide written notice to the operator. The operator will rely on this information to determine the applicability of the Service Members Civil Relief Act.”

Additionally, the act allows a service member to waive the protections provided by the law. The waiver is valid when signed by the tenant during or after his period of active service. The agreement waiving rights must specify it applies to the rental of storage space. Without a waiver, an operator must get a court order to foreclose on the property if the delinquent tenant is on active duty.

Descriptions of Space

Recently, the industry has seen a rise in tenants arguing their rented units fail to “measure up” and really aren’t a true 5-by-5 or 10-by-10. These cases have escalated to include claims of unfair, deceptive trade practices and fraud by the facility.

To avoid this, operators’ marketing materials (including brochures and Yellow Pages ads) should state sizes are approximate or represent rental-space “type.” Any operator using measurements to describe units must include the following language in rental agreements: “Occupant understands that all unit sizes are approximate and enters into this agreement without reliance on the estimated size of the storage space.”

Value Limitations

Don’t forget to include a value provision, explaining stored property can’t exceed a certain amount (commonly $5,000) unless previously approved in writing by the facility owner. Under this type of provision, the facility would allow a tenant to store property with a value greater than $5,000 if he provides proof of insurance for 100 percent of the estimated value.

These provisions should be highlighted in bold, stating: “Tenant agrees that in no event shall the total value of all property stored be deemed to exceed $5,000 unless owner has given permission in writing for tenant to store property exceeding $5,000 in value and tenant has provided proof of insurance to owner to cover the value of the stored property. Tenant agrees the maximum liability of owner to tenant for any claim or suit by tenant, including but not limited to any suit that alleges wrongful or improper foreclosure or sale of the contents of a storage unit, is $5,000.”

Are there other provisions you should consider? Has an issue or problem arisen at your facility that is not already addressed in your lease? Every facility is somewhat unique and you may need to add language to your lease addressing your specific concerns.

You have the right to update and revise your agreements. Self-storage tenancy is on a month-to-month basis. Therefore, if you give your tenants at least 30-days notice of new terms and conditions, and they choose to stay, they can be found to have agreed to the new terms. Otherwise, since the terms are monthly, tenants can choose to vacate at the end of the month.

This short-term tenancy is what makes self-storage different from other commercial tenancies where lease provisions can’t be changed except by agreement. Here, the tenant is only provided a monthly right to use the premises, as long as they pay and as long as the owner allows them to stay.

No rental agreement is perfect, nor does it have to be. What a good agreement must do is contain language identifying it as a self-storage rental agreement vs. other types of leases. Enough confusion already exists about the rights and liabilities of self-storage without using a poorly written or incomplete rental agreement.

Take time to read your agreement and test it to see whether it needs updating. To secure your rights, you must make provisions for them in your agreement. Your lease should be concise, clear and complete so tenants can’t make any unrighteous claims against your self-storage business. 

Scott Zucker, a partner in the law firm of Weissmann & Zucker, P.C., in Atlanta, specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He is a frequent lecturer at national conventions and author of Legal Topics in Self Storage: A Sourcebook for Owners and Managers. Mr. Zucker is also a partner in the Self Storage Legal Network, subscription-based legal services for self-storage owners and managers. For more information, call 404.364.4626; e-mail scott@wzlegal.com

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