Wield the Shield of a Good Self-Storage Rental Agreement! Update Yours Now With These Critical Clauses

Self-storage lease agreements have been standardized in most states over the past 20 years. In the practice of law, it’s often the case that once a lease looks good, serves the right purpose and protects against all the right liabilities, its users become complacent. They file it under the “if it ain’t broke, don’t fix it” category. However, a contract that was good in 2015 may not be so great in 2023 because of changes in the law and industry. This is why it’s important to regularly scrutinize your rental agreement and update it as necessary.

There was a commercial in the 1980s in which an old trail-rider cook would say, “When is the last time you had a nice, steamy bowl of Wolf Brand Chili?” Immediately, before you could answer, he would say, “Well … heh, heh, heh … that’s too long.” That’s how I feel about self-storage owners reviewing their lease. I strongly recommend having it evaluated by counsel familiar with the laws of your state, especially if it hasn’t been done in the last three years.

Many self-storage associations have been lobbying for positive change in industry legislation. Some have been wildly successful in obtaining better laws regarding lien-sale advertising, online auctions, vehicle towing, etc. Though this is all great for facility operators, if you want to take advantage of the benefits, it may require a change in your rental agreement. Don’t delay, because you don’t want a judge to say, “Well … heh, heh, he … that’s too bad.” Let’s look at a few areas of your self-storage lease that may require attention.

Climate- vs. Temperature-Controlled Units

I’ll start with an oldie but a goodie. If you offer climate- or temperature-controlled self-storage units, there are a number of things you need to do to protect yourself from claims related to a failure of your HVAC system. At some point, it’ll stop working or leak from a drain line. My guess is it’ll fail about five minutes after you close up shop for a long holiday weekend right in the middle of summer. That’s everyone’s favorite.

If you advertise your facility as being climate- or temperature-controlled, the implication is that you have the awesome (divine) power to control environmental conditions. But we all know you don’t, and the last thing you want is for a plaintiff to accuse you of promising something you couldn’t possibly deliver.

Therefore, make sure you have language in your self-storage rental agreement regarding what you are actually offering in regard to air conditioning and heating. For example, it could be a nice paragraph that states:

To the extent you have chosen to rent a climate- or temperature-controlled unit, please be advised that temperature and humidity levels within your space won’t be constant at all times. We don’t and can’t guarantee a particular temperature or humidity range anywhere in the facility, including in your space/unit. You hereby assume all risk of loss due to fluctuations in temperature and humidity in your space/unit, regardless of the cause.

This will put the tenant on notice that you aren’t Mother Nature and the risk is that machines sometimes break down, doors to the outside get propped or left open by other tenants, and the real Mother Nature disrupts the environment. None of this is the fault of the facility or its management.

Lien Rights and Auction Remedies

In a perfect world, all self-storage rental contracts would say, “I agree to pay rent, and you agree to give me a space; and if I don’t pay rent, you can have the space back and the stuff inside.” The end. That would be awesome! However, somewhere along the way, we elected legislators who were also lawyers (and we all know how that ended). So, one thing that should definitely be in your lease is language covering your lien rights and what that means to the tenant.

Some states require specific language; some require that it appear in a certain format. For example, your local laws may say that language informing a tenant of your lien rights and the fact that you can foreclose and auction their items must be on the first page, in bold, in all caps or otherwise conspicuous, or a combination of all these items and more.

If your lease was drafted years ago, have it reviewed soon. Being able to foreclose on the personal property of someone without a court order is an extraordinary privilege that must be handled perfectly. The last thing you want is to properly foreclose on a self-storage unit only to be sued and lose because the contract language wasn’t in accordance with your state law.

Terminating the Bad Tenant

Sometimes you have a self-storage renter who pays their bills on time but is otherwise a troublemaker. They might be living in the unit, loitering and bothering employees and other tenants, conducting illegal activity on site, storing dangerous materials, and other breaches of the rental agreement. It’s important that your lease includes a well-drafted termination clause for these situations.

It’s unlikely that your state allows for a public auction for violations of the lease agreement that aren’t rent-based, so your option is to terminate and evict. If you have no language about termination, you’ll default to whatever the state law is for notice of termination, which could be as long as 90 days. Therefore, make sure you have contact language that allows for the termination of the lease in less time (but double-check your state law for any restrictions). It might be something like, “Landlord has the right to terminate this lease upon ____ days written notice with or without cause.”

You can add shorter periods for certain violations; tie the termination to the end of the lease term, which is usually the end of each month on a month-to-month lease; or in whatever way suits your business needs. When the tenant fails to move out by the stated date, you’ll likely have to send another notice to vacate and start the eviction process.

Arbitration and Attorney Fees

Another key provision to consider in your self-storage rental agreement is an arbitration clause for legal matters other than eviction. This can be highly effective at removing a jury from deciding matters that would be better determined by a lawyer acting as an arbitrator. I believe strongly in the jury system, but it’s undeniable that there are pockets in our country where juries are heavily skewed toward plaintiff claims regardless of merit. Arbitration is an equalizer. In fact, I advise making it unilateral if your state law allows for it. In other words, make the choice to go to arbitration yours and not automatic.

An arbitration clause needs to be open and obvious in the contract and easy to read. Also, add a place for the self-storage tenant to add their initials next to it. States are very different in terms of how they require a clause to be written, but the general principle is the same: Its existence in the document should be clear.

As a caveat, include one of two types of clauses regarding attorney fees. Every state is different on whether these are automatic, not allowed, statutorily allowed, statutorily disallowed, etc. Check with your legal counsel. Hopefully, you can place a “prevailing party” or a “prohibition” clause in your agreement.

The former states that in the event of a lawsuit, the prevailing party shall recover attorney fees, costs and expenses. This potentially allows you to recover your fees when a lawsuit is brought against you and you win. However, if you lose, you’ll be paying the plaintiff’s fees. This is helpful in states in which the law allows a tenant to recover their fees but not you. If the tenant has no right to recover fees, then this clause may hurt you.

This is why I prefer the “nobody wins” clause. If allowed in your state, consider a section stating that regardless of the outcome of any lawsuit, all parties waive any right to recover attorney fees. This should assist in preventing frivolous or baseless claims being filed against your company. Notice I said “assist.” Nothing can completely prevent such an occurence.

Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” That’s really the key takeaway when it comes to your self-storage rental agreement. It’s worth the money to have your contract reviewed by someone in your state or jurisdiction that understands industry laws. There’s no suggestion here that you can protect yourself from actual mistakes or negligent acts. Nevertheless, a well-written contract can protect you from claims that should’ve never been brought and outlines the actual full agreement between the parties.

There’s no excuse for a customer to not read an agreement before signing it. When everyone knows the parameters of the relationship, the outcome of a disagreement can be more easily maneuvered. Self-storage leases aren’t magical, but they provide a great shield for your self-storage business.

Murphy Klasing is a partner with Weycer, Kaplan, Pulaski & Zuber P.C. He has a wide range of appellate, arbitration and trial experience, successfully handling numerous litigation matters. With more than a decade of experience in the self-storage industry, he serves as counsel for Public Storage Inc. in Oklahoma and Texas, and has defended matters involving allegations of breach of contract, code violations, employment issues, fraud, negligence, personal injury, premises liability and theft. To reach him, call 713.961.9045; email [email protected].