The combined efforts of the national Self Storage Association and state associations have led to significant and substantive legislative developments that directly affect the rights of self-storage operators and their responsibilities to tenants. As many as 20 states have recently amended their laws regarding facility operation, including:
- New Jersey
- North Carolina
- Rhode Island
A number of other states are targeted for changes this year. It’s critical that operators in states where laws have changed review the revised legislature and amend their leases and operational procedures to match the current requirements.
Most of the changes have been focused in five main areas: notice to tenants, late fees, limitation of value of stored goods, vehicle towing, and online advertising and sales. Here’s a look at these changes and how your self-storage operation might be affected.
Notice to Tenants
One of the most significant shifts in the majority of states with legislative changes is the use of an alternative method for notifying tenants of impending lien sale of their stored property. In most prior laws, lien notices were required to be sent via Certified Mail. Now many states permit the use of either verified mail (the sending of a First Class letter with a U.S. Postal Service certificate of mailing or other method of sending that confirms mailing) or e-mail.
However, not all states are consistent on the use of e-mail. A number require that if e-mail is used, there must be proof of receipt by the tenant. Fortunately, there’s self-storage management software available to meet this requirement. If the e-mail is unable to be verified as delivered, the operator is required to resend the notice via verified mail.
This shift recognizes that many self-storage tenants are mobile, and using e-mail may be a much better way to notify them an impending sale than the use of Certified Mail to a physical address at which they may no longer reside. The burden remains on the tenant to provide a valid last known address to the operator for notice purposes, as well as to update the operator about any changes to that address, including the tenant's e-mail address.
The recent changes to late-fee laws have generally resulted in states creating a “safe harbor” of fair and reasonable late fees to be charged to tenants of $20 per month or 20 percent of the monthly rental rate, whichever is greater. These updates have recently occurred in Arkansas, Illinois, Maine, Maryland, Nevada, North Carolina, Ohio, Oregon and Tennessee. Facilities in these states that are charging more than this amount need to reduce their late-fee charges or be able to demonstrate the fee being charged is tied to the actual costs incurred by the facility associated with late-paying tenants.
It’s very important to note these late-fee provisions don’t relate to the fees incurred by a facility as part of its lien process. These amounts are limited only to those that can be charged to a tenant that arise from his rent delinquency prior to the enforcement of a facility’s lien rights.
Limitation of Value of Stored Goods
The change to statutes to add a limitation of value to stored goods provide statutory support for the contractual provisions that are already common in most self-storage rental agreements. Pursuant to the state laws now included in Arkansas, Georgia, Illinois, Maine, Maryland, New Jersey, Oregon, Rhode Island and Tennessee, if the rental agreement contains a provision limiting the value of stored goods, the tenant is limited to that maximum value if he makes a loss or damage claim. The following is a typical provision that should be included in a rental agreement (the $5,000 amount is a generally used value but may not apply in all jurisdictions):
Limitation of Value: Occupant agrees that in no event shall the total value of all property stored be deemed to exceed $5,000 unless Owner agrees in writing to a higher value. Occupant agrees that the maximum value for any claim or suit by Occupant, including but not limited to any allegation of wrongful or improper foreclosure or sale of the contents of a storage Space is $5,000. Nothing in this section shall be deemed to create any liability on the part of Owner to Occupant for any loss or damage to Occupant’s property, regardless of cause.
The addition of a towing right in lieu of having to enforce a lien against titled property like a car, boat or RV has lifted a significant burden for many self-storage operators, especially those who permit vehicle and boat parking on their property. Without such towing rights, operators would typically be required to not only fulfill the notice and advertising requirements of their state’s self-storage law, but to comply with motor vehicle lien-sale laws (or watercraft/vessel laws).
With this statutory exception, operators are able to request a licensed towing company to tow the vehicle from the site and require the towing company to then process the vehicle for eventual sale. The facility, by statute, is not liable for any damage caused to the vehicle after it’s towed, and the facility still reserves its rights to collect the unpaid rent through regular collection methods. By invoking the towing right, the facility simply releases its claim over the stored property as collateral held pursuant to its lien. The states that have added this towing right include Colorado, Georgia, Illinois, Maine, Maryland, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, Tennessee and Utah.
Online Advertising and Sales
Many of the recent legislative changes in states such as Arizona, Colorado, Michigan, North Carolina and Ohio have included provisions that permit online advertising in lieu of newspaper ads or alternative announcements of the sale as long as they are deemed to be “commercially reasonable.” Commercially reasonable has been defined in most instances to be a method of advertising that results in obtaining a minimum number of potential bidders. If online advertising, which arguably attracts more visitors than print, is able to attract a minimum numbers of bidders to attend the auction, then it will be considered sufficient.
In addition to the use of online or alternative advertising for lien sales, a number of states, including Georgia, Maryland, North Carolina and Oregon, have statutorily clarified the right of operators to conduct their lien sales via the use of online-auction sites. These few states have recognized the efficacy of selling a tenant’s property online. Such a determination supports a similar approach in other states.
These recent changes have a direct effect on how self-storage operators conduct business. If your state recently adopted new statutes, it’s up to you to ensure they’re followed. More changes are likely to come as the national and state associations continue to push current legislation that will benefit the industry. Keep up to date on the legal changes in your state, and then follow them accordingly.
Scott Zucker is a partner in the law firm of Weissmann & Zucker P.C. in Atlanta. He specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He’s a frequent lecturer at national conventions, author of “Legal Topics in Self-Storage: A Sourcebook for Owners and Managers,” and a partner in the Self-Storage Legal Network, a subscription-based legal services for self-storage owners and managers. To reach him, call 404.364.4626; e-mail [email protected].