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The Top 5 Reasons to Update Your Self-Storage Rental Agreement

By Scott Zucker Comments

The single most important piece of paper used in operating a self-storage facility is the rental agreement. This document provides the essential outline regarding the relationship between the tenant and the landlord, including each party’s rights and responsibilities.

Rental agreements cannot be static; the self-storage business continues to evolve, so it's necessary that the agreement be updated in line with ongoing industry changes, whether they involve the law, operational upgrades, case decisions or experiences individual operators may have with their own facility. Here are five reasons your self-storage rental agreement deserves a second look today.

1. Lien-Law Statutory Updates

The majority of state self-storage laws were crafted more than 20 years ago, and facility rental agreements were drafted to address the statutory requirements at the time. But in just the last year, the national Self-Storage Association, in conjunction with multiple state associations, has embarked on an aggressive and successful campaign to modify and modernize those state laws. The changes focused on:

  • The use of e-mail for tenant communication (including lien notices)
  • Validating the enforceability of a contractual limitation of value
  • Creating a statutory “safe harbor” for charging late fees
  • Adding the right for operators to tow away abandoned cars and boats
  • Permitting online auctions

The states that have effected some of these recent changes include Arkansas, Connecticut, Georgia, Maryland, Nevada, New Jersey, North Carolina, Oregon and Utah, although many other states have updated their laws in recent years as well.

Along with many of these lien-law changes comes the requirement to change the express language contained in the rental agreement. For example, a number of states have permitted the use of e-mail notification as long as the tenant has agreed in the rental agreement to accept such notices via e-mail and provided an e-mail address. Similarly, many states approved the enforcement of a contractual limit to the value of goods stored as long as such limit is stated clearly and boldly in the body of the rental agreement. Further, the right to charge late fees includes the absolute requirement that the amount charged be clearly stated within the terms of the written agreement. As such, operators need to stay updated to the ever-changing laws that regulate the self-storage industry, and then make the written changes to their leases that are required to meet the terms of their current state law.

2. Insurance-Law Statutory Updates

Just as statutory lien laws have changed, many states have recently adapted a change to their insurance laws, permitting self-storage operators to “sell” tenant insurance through a limited insurance license held by the facility owner. These “limited licensing” laws, similar to those rights given to cell-phone retailers and car-rental dealers, permit managers to provide tenants the ability to purchase tenant insurance directly from the facility. This ability to sell can affect the terms of the insurance provisions in the self-storage rental agreement.

The insurance provision should state the tenant is obligated to obtain his own insurance to protect the value of his stored property. The provision should provide that the requirement to obtain insurance is a material condition of the agreement and failure to obtain such insurance would be a breach of the agreement. Now, where permitted by law, that insurance can be purchased directly from the facility manager.

3. Operational Upgrades

Many form rental agreements were drafted when the self-storage industry was in its first generation cycle and facilities were built with such limited fanfare as single-level metal buildings, occasionally with perimeter fencing. All these years later, with the industry being in what some would say is its fourth generation, facilities often include multi-story buildings, climate-controlled spaces, access-control systems and a plethora of technological features that have enhanced facility management and operation.

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