What Would You Do? Common Self-Storage Legal Conundrums

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I strongly recommend that self-storage operators use multi-part paper to create a copy of the signed lease, or copy the signed lease and retain the copy in their files, to avoid future disputes over what the “final executed lease” may look like (especially to avoid claims that changes were made and approved by the owner).

What would you do if your state updated its lien laws?

According to the Haesslers, Texas updated its lien laws last year. They got all their tenants to visit the facility and sign a new lease. MRV says his state changed its laws a bit, but the provisions didn't require a new contract to be signed by existing tenants. He didn't even have to update his existing rental agreement. Geraldine1051 would take it to her attorney again. It's a safe bet!

What SHOULD you do?

Greenberger: This depends on your rental agreement. Many attorneys draft rental agreements years in advance of statute changes to anticipate certain improvements. For example, I've taken out references to Certified Mail in rental agreements for years so operators are not obligated to send Certified Mail if their statute is changed to make it superfluous.

You'll need to meet with your attorney as quickly as possible after the statute changes to determine the effect. Sometimes the result is minimal on the rental agreement but significant on lien-sale activities. A change in your statute is not the time to be pennywise and pound foolish. Speak with your attorney about changes that may be necessary to the rental agreement as well as your lien-sale and other operational protocol.

Typically, there's some advance notice that a change of some form is coming, either because an industry group sponsored the change or because industry watchdogs are looking for potential changes that might affect the business. This is a great reason to stay in touch with your state association and various publications and websites: to make sure you are aware of legislation that might affect your operation.

Zucker: Self-storage is somewhat unique in that each state, except Alaska and Nebraska, provides statutory provisions that explain what self-storage is and is not and the rights of the facility owner should a tenant fail to pay rent. One of the greatest liabilities for operators is failure to comply with the laws that govern their operation.

What's fascinating to watch is the rapid spread of legislative revisions being motivated and spearheaded by the national and state self-storage associations.  

Because of those ongoing changes, it's more important than ever for operators to stay aware of updates and revise their leases and lien policies accordingly. Any sale conducted in violation of state law could constitute a wrongful sale. Bottom line: If you’re in the self-storage business, you need to know your current state law and stay tuned to any modifications that may occur on a yearly basis.

To read more great content in the ISS "What Would You Do?" business-challenges series, type code WWYD13 in the search box at insideselfstorage.com.

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