Updating Your Rental Agreement

By Scott Zucker

Reprinted with permission from the Mini Storage Law Commentary, published bythe law firm Weissmann & Zucker, PC.

By far, theself-storage rental agreement is one of the most important tools in operating aself-storage facility. Therefore, it is important for facility owners and operators totake the time to stop and review their agreement to confirm that the document they'reusing is up to date and effective for its intended purpose.

Consider some of these questions when looking at your rental agreement: When was itdrafted? Does it follow your state's self-storage law? Has your state law been amendedsince the agreement was written? Does your agreement consider recent court decisions thatinterpret self-storage agreements? Depending on your answer to some of these questions, itmay be time for you to consider updating your agreement.

As a general guide, in addition to provisions regarding term, rent, late fees and othercharges, your rental agreement should explain the owner's role as landlord, the tenant'srisk of loss and the need for insurance for the stored property. The agreement shouldgenerally outline the rights of the facility owner, the obligations of the tenant and whathappens when the tenant doesn't pay the rent.

Nonbailment

One of the most crucial ingredients to a strong self-storage lease is the discussionthat the relationship between the party leasing the space for storage and the partystoring his property is that of a landlord/tenant. The self-storage owner is not a baileeof the tenant's property and there is no warehouseman relationship between the parties.That limitation must be included in a self-storage rental agreement. A statement that theself-storage owner is not a bailee, and does not take care, custody or control of atenant's goods, must be explicitly addressed in the agreement. Keep in mind that judgeswho are deciding cases concerning tenant's claims will look primarily to the rentalagreement to determine the facility owner's obligations to the tenant. A bailee is held toa much higher standard of care than a landlord. Therefore, the agreement needs to be clearthat the facility owner is not a bailee of the tenant's property.

Limitation of Liability

The effort to potentially limit a self-storage owner's liability in case of tenantclaims should be included in the self-storage agreement under three separate provisions.First, there should be a limitation of value provision that explains that the value of theproperty to be stored cannot exceed a certain amount (commonly $5,000) unless previouslyapproved in writing by the facility owner. Under this type of provision the facility wouldallow a tenant to store property with a value greater than $5,000 if the tenant couldprovide proof of insurance for 100 percent of the estimated value of the property.

Next, there should be a statement in the agreement that the tenant agrees not to storeproperty having special or sentimental value and the tenant specifically waives its rightto make claims for emotional attachment to its stored property. This provision lessens thelikelihood of claims for emotional distress arising from the loss or damage to thetenant's property.

Finally, there should be a jury trial-waiver provision in the agreement that wouldattempt to restrict the tenant's rights to bring his claim before a jury. This provisionis important because tenant cases heard before a jury have a greater likelihood of largerverdicts than a similar case heard only before a judge. Unfortunately, there is a caveatto the limitation of liability provisions addressed above. Certain states will allow theseprovisions to be upheld. Other states will not.

Release of Liability

Another significant section of the rental agreement should specifically address thetenant's release of liability against the landlord. The language in the agreement wouldnormally include statements that the property is stored at the "sole risk" ofthe tenant and that the landlord is not liable for the "loss of or damage to"the tenant's personal property due to burglary, mysterious disappearance, fire, waterdamage, rodents and acts of God.

It is also important to include in the rental agreement that the landlord will not beheld liable for such property loss or damage arising from the "active or passive actsor omissions or negligence of the owner, owner's agents or employees." Where thislanguage is found, certain court decisions have allowed landlords to be released fromliability where their own negligence has caused the loss or damage to occur. This releasesection of the agreement can also address liability for any personal injuries that mayoccur to the tenant while at the facility. However, many states will not uphold a personalinjury waiver such as this, although some mention of it still should be included in youragreement.

Insurance

One of the most important clauses in a self-storage rental agreement involves the issueof tenant insurance. This provision should state that the tenant is obligated to obtainhis own insurance to protect the value of his stored property. The provision would providethat the requirement to obtain insurance is a material condition of the agreement and thatthe failure to obtain such insurance would be a breach of the agreement. Certainly, theagreement should identify that the tenant has the right to be self insured, but that itassumes full risk for the loss or damage to its stored property. Another vital provisionthat should be included under the insurance section of the agreement is a waiver ofsubrogation. This provision prevents a tenant's insurance company from pursuing claimsagainst the self storage facility after it has paid its insured. Without such a provision,if a tenant collects from its insurance company on a loss or damage claim, the insurancecompany would have the right to then seek recovery back against the facility for theirpayment of that claim.

Indemnification Provision

Related to insurance, a good self-storage agreement should also contain anindemnification provision whereby the tenant agrees to indemnify and hold the self-storagefacility harmless for property loss or damage or personal injury he causes from his use ofthe facility. In other words, where a third party is injured as a result of the tenant'sacts, and that third party seeks to recover against the facility, the facility can look tothe tenant to recover for any damages it is required to pay that injured third party.

Lien Sale Rights and Procedures

Almost every state self-storage law requires that certain language be incorporated inthe rental agreement to notify the tenant of the landlord's right to lien its tenant'sgoods and sell those goods once the tenant is in default. Certain state laws even requirethat this notice be in bold print or that the print be in a larger type size. Again, it iscrucial that whatever is required by the statute be followed in the agreement. Courts willlikely not uphold a facility's lien enforcement rights if the facility has not properlycomplied with the requirements of the statute.

Other Important Provisions

Self-storage rental agreements should also include language addressing restrictions asto what can be stored in the unit, the termination rights of both the landlord and thetenant, and what defines a tenant's abandonment of its property. Other provisions shouldaddress warranties, partial payments, the landlord's right to obtain access and his rightto change the terms of the agreement upon proper notice to the tenant.

No rental agreement is perfect, nor does it have to be. What a good agreement must do,however, is contain certain language that identifies it as a self-storage rentalagreement as compared to any other type of lease. Again, there is enough confusionregarding the rights and liabilities of self storage owners as it is. There need not befurther confusion based upon a poorly written or incomplete rental agreement. If youhaven't done so in a while, take some time to read your agreement and test it to seewhether it needs updating.

Scott I. Zucker is a partner in the law firm of Weissmann & Zucker, P.C. Mr.Zucker is an expert in the field of self-storage law and represents self-storage ownersand managers throughout the country in matters that include contracting for construction,preparing lease agreements, defending tenant claims and handling employment disputes. Hecan be reached at (404) 364-4626; [email protected].