As self-storage operators review their rental agreements for possible 2018 updates, the three hottest issues revolve around consent for text communication, arbitration for dispute resolution and mandatory tenant-insurance requirements. These are the newest topics being discussed as they consider provisional changes to their tenant leases. Let’s take a closer look at each.
Consent for Text Communication
Based on the recent enforcement of the Telephone Consumer Protection Act (TCPA), self-storage operators who intend to call or text their customers would be wise to include specific consent from their tenants in their rental agreements. This is especially true for any robo-calling by telemarketers or debt collectors. The “established business relationship” exemption no longer can be used to avoid the liability of contacting your tenants by automated calls or texts without their consent.
Though tenant consent may be given on the front end, consumers still retain the right to “opt-out” by notifying the facility operator (or its representative making the call or text) to stop contacting him. In such a case, the original consent is withdrawn.
The below example demonstrates the type of clear consent that is needed if you intend to contact your customers via phone or text. Though not addressed as part of the TCPA, this draft provision also provides consent to contact a customer via social media. This has been added to address the likelihood that, as our technology and social media connections expand, it may be far easier to contact a customer through Facebook or Instagram than by phone. Here’s some sample text:
PERMISSION TO COMMUNICATE: Occupant recognizes that Operator and Occupant are entering into a business relationship as Operator and Occupant. Occupant hereby consents to Operator phoning, texting (including automated calls and texts), faxing, e-mailing and using social media to communicate with Occupant with marketing and/or other business-related communications.
Arbitration for Dispute Resolution
If there’s a single hot button that highlights most everyone’s thoughts about rental agreements these days, it’s arbitration. In recent history, most self-storage leases provided for court resolution with jury-trial waivers; however, the wave of class-action lawsuits to hit the industry has motivated many operators to consider alternatives to their dispute-resolution procedures. Most notable is the inclusion of arbitration provisions in rental agreements, with class-action waivers.
Arbitration is unusual in that it’s a method of dispute resolution where the parties agree, in lieu of using a public court and typical lawsuits, to instead address concerns though a private service. These typically have relaxed procedural rules to make the process easier for the consumer. Since it’s an agreed private form of resolution, the parties can further agree to limit their disputes solely to the limited issues that affect each party. Therefore, the courts have upheld the rights of the contracting parties to waive the right of class-actions in an arbitration venue.
Essentially, by using arbitration with a class-action waiver, self-storage operators are able to resolve disputes with aggrieved customers without the threat of minor disputes turning into massive class-action claims. For matters that are small and can be contained within the monetary jurisdictional limit of local small-claims courts, the parties can still resolve their dispute in small claims. Generally, small-claims courts don’t permit class-action filings.
Here’s a sample arbitration provision that could be considered for a self-storage rental agreement:
ARBITRATION: In the event of any dispute between the parties, the parties agree that all claims shall be resolved by final and binding arbitration in front of a single mutually agreeable arbitrator. Each party shall bear its own costs and fees, including travel expenses, out-of-pocket expenses (including, but not limited to, copying and telephone), witness fees, and attorneys' fees and expenses. The fees and expenses of the arbitrator, and all other costs and expenses incurred in connection with the arbitration, shall be shared and borne equally by the Owner and Occupant. The decision of the arbitrator shall be final and binding. Arbitration shall be commenced by making written demand on the other party by certified mail within the appropriate prescriptive periods (statute of limitations) set by law. The demanding Party must provide the other Party a demand for arbitration that includes a statement of the basis for the dispute, the names and addresses of the Parties involved, and the amount of monetary damages involved and/or any other remedy sought. The parties shall select the arbitration company from a list of approved arbitration companies located within 15 miles of the Facility. The arbitration will be conducted under the arbitration company’s rules in effect at the time of arbitration. THE PARTIES AGREE THAT BY ENTERING INTO THIS AGREEMENT, THEY ARE EXPRESSLY WAIVING THEIR RIGHT TO A JURY TRIAL AND THEIR RIGHT TO BRING OR PARTICIPATE IN ANY CLASS ACTION OR MULTI-PLAINTIFF ACTION IN COURT OR THROUGH ARBITRATION AND AGREE THAT THIS WAIVER IS AN ESSENTIAL TERM OF THIS ARBITRATION CLAUSE. For Claims that do not exceed the jurisdictional limit of small claims court, Owner and Occupant agree to bring Claims in small-claims court instead of arbitration. The rules of the small-claims court shall apply.
Mandatory Tenant Insurance
After years of anxiety over making tenant insurance a requirement for self-storage customers, many operators are beginning to recognize their right to impose an insurance requirement on their tenants. To be clear, you can’t require your tenants to purchase the tenant-insurance product sold at your facilities; but you can require, as a condition of tenancy, that they provide proof of some type of coverage over the goods they’re storing in their units.
Requiring tenants to carry insurance on stored belongings is good for the customer as well as the operator. First, since self-storage is a non-bailment contract, operators generally aren’t liable for the risk of loss or damage to a tenant’s stored goods. Therefore, if something does occur, tenants benefit by having insurance to cover the loss. Without the requirement, many wouldn’t bother to insure their property.
Second, if a tenant is uninsured and can’t recover for the loss, he’ll most likely seek remuneration from the operator. Although this may not seem fair or right, it’s common for any party who has suffered a loss to sue the landlord of the property. Implementing the insurance requirement reduces the level of potential claims and litigation against the operator.
Here’s a good example of a provision with the requirement for proof of insurance:
INSURANCE: THE OWNER DOES NOT PROVIDE ANY TYPE OF INSURANCE WHICH WOULD PROTECT THE OCCUPANT’S PERSONAL PROPERTY FROM LOSS BY FIRE, THEFT, OR ANY OTHER TYPE OF CASUALTY LOSS. IT IS THE OCCUPANT’S RESPONSIBILITY TO OBTAIN SUCH INSURANCE. Occupant, at Occupant’s expense, shall maintain a policy of fire, extended coverage endorsement, burglary, vandalism and malicious mischief insurance for the actual cash value of stored property. Insurance on Occupant’s property is a material condition of this agreement and is for the benefit of both Occupant and Owner. Failure to carry the required insurance is a breach of this agreement and Occupant assumes all risk of loss to stored property that would be covered by such insurance. Occupant expressly agrees that the insurance company providing such insurance shall not be subrogated to any claim of Occupant against Owner, Owner's agents or employees for loss of or damage to stored property. Occupant shall provide evidence of the required insurance coverage in the form, of a certificate of insurance or declaration page (the “Insurance Policy”). Owner shall keep a copy of the Insurance Policy at all times, and Occupant shall be responsible for ensuring that the Insurance Policy does not expire and remains active during the term of this rental agreement.
Though these three provisions represent the hottest talking points as self-storage operators review their rental agreements for next year, there are other issues to consider. You must educate yourself on any state legislative changes that affect your self-storage statute, as they can often impact the language needed in rental agreements. Therefore, an annual lease review can be helpful. It can even sometimes prevent significant operator liability.
Scott Zucker is a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta, which specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. Zucker is a frequent speaker at self-storage industry events, 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 service for storage owners and managers. For more information, call 404.364.4626; e-mail [email protected]; visit www.wzlegal.com.