The storage of boats, RVs, cars and other vehicles has become an exciting and often profitable service at many self-storage facilities, offering longer rental commitments with little additional maintenance expense. Unfortunately, with these benefits comes some burden for operators. Without careful planning, the profit center can quickly become a great risk for loss.
Vehicle storage is a different kind of business than traditional self-storage, particularly as vehicles are often stored anywhere but in a separate, enclosed unit. Whether you’re renting storage in an open lot, covered building or individual units, vehicle storage presents several unique issues. This article highlights key factors of offering this service.
Creating a Bailment
With the exception of vehicles stored in individually enclosed units, the first consideration is whether vehicle storage creates some sort of bailment. In traditional self-storage, if you don’t keep a key to the unit and the tenant has the ability to store and lock his own personal property, you don’t have a risk. But when you store vehicles in a common area—even if you don’t keep the keys—a bailment could exist.
A bailment is the “transfer of possession, but not ownership, of personal property for a limited time and for a specified purpose such that the individual or business entity taking possession is liable to some extent for the loss or damage to the property” (from Webster’s Dictionary of Law). When vehicles are not stored behind four walls and a door, a bailment is arguably created and you have a greater duty of care. You have a responsibility to protect the vehicle from damage, perceive issues of damage and maintenance, and report these issues to the owner.
If the vehicle is visible while being stored with you, you have a different relationship with your renter. You’ll need to amend or create operating procedures recognizing that you now protect tenants’ property, and create new lease clauses, including default clauses to address the special considerations involved with vehicle storage.
Defining the Space
It’s difficult to define the specific space being leased to a customer if you don’t have a paved, striped or numbered area for vehicle storage. It’s important to have language in your rental agreement that describes the space rented, but doesn’t define it so closely that you’ll be in violation of the lease if another renter parks in all or part of it. You should have some type of exculpatory language in your lease disclaiming a default in this event, along with some punishment rules for those who interfere with other tenants’ ability to use their spaces.
Consider having one or more spaces labeled as “overflow parking.” You can then put a provision in your lease stating that in the event an occupant ever finds the premises unusable or filled, he’s required to park in the overflow spot, and this doesn’t represent a default by the operator under the rental agreement.
Moreover, there can be lawsuits about the actual size of a space being different than that represented to the tenant in the rental agreement. This type of claim is much more likely to occur with outdoor storage space. Make sure you include lease language that indicates sizes are approximate, and you’re renting by the space, not the square foot.
Some operators go even further in the bailment and provide additional services, such as parking tenants’ vehicles and retaining keys so they can move them in and out of the way as necessary. Some offer ancillaries such as vehicle-cleaning, dump-out, stocking, warm-up and pull-out. When you provide these types of services, you have gone beyond storage, and there’s no doubt you’re in a bailment situation, and adding extra risk.
The best thing way to address these services is in your written rental agreement. You may need additions to your lease or addendums for the various types of services offered. Some vehicle-storage leases contain 20 or more addendums to support different types of related services. These addendums cover items such as dump stations, wash stations or potable water supplies.
These matters must be addressed to ensure liability is properly allocated between the storage operator and customer. For example, let’s say you provide a dump station and a tenant uses it improperly. If this isn’t covered in your lease or addendum, it’s going to be difficult to charge the tenant for the damage. Further, if you charge for any of these services, make sure costs are clearly delineated, and always reserve the right to close or terminate a service from a single tenant and from the facility.
Have your lease and other documents reviewed often by an attorney familiar with this area of the law. Also review the entire business plan to see if it’s in your best interest to set up and separate entities to hold various “risky” parts of your operation. For example, if you’re going to actually move boats to the water from your facility, you may want to hire a separate entity to handle the transportation portion of the business, with a separate contract.