I’m the first lawyer in my family. My father and grandfather were entrepreneurs and, like many from their generation, they believed a handshake was all you needed to make deal. “A man's word is his bond,” they would say. If only it were that simple. They would look at a contract, shake their heads in frustration and wonder why so much formality was necessary. “It's those [darn] lawyers,” they would say. Today, the lease agreement is the life-blood of the landlord/tenant relationship, and a spit-in-your-palm handshake doesn’t cut it.
I recently drafted a lease agreement for a self-storage owner. The only criteria he gave me was to limit it to one page. Although I understand the desire to make a contract logical and simple, there are essential parts to a self-storage rental agreement that protect the owner from opportunistic plaintiffs. Here’s an overview.
A contract is simply an offer from one party and an acceptance from another. It can be drafted on a napkin. It can even be oral (although each party’s memory may be different if and when a dispute arises).
In the self-storage industry, the contract isn’t just the legal agreement between you and the consumer, it’s also a marketing tool. For this reason, the first essential part of your contract is the aesthetics. It should be concise and printed in a readable font on as few pages as possible. It should display your company logo and contact information.
Draft it so it’s less burdensome for you and the customer to understand. A reader-friendly, simple-language, to-the-point contract that’s fair and succinct makes the customer feel he’s getting a fair deal. A 10-page, 6-point-font diatribe that rivals the “Book of Leviticus” won’t make him comfortable. Take the time to read it over with the tenant and make sure he comprehends it.
The next and most obvious necessities are the actual terms of the agreement. Of course, the monthly rental amount, payment due date and any late fees that might be assessed are important, but there are many more elements that must be considered:
- Term: Month to month is the most logical term. Neither party wants to be locked into an extended term for this type of lease.
- Purpose of unit: The purpose is the self-storage of personal, non-perishable property. Define in logical terms what can and can’t be stored in your facility. Feel free to limit the value of the items stored. Have your customer agree that the total value of all stored items will not exceed $5,000, or whatever amount makes you comfortable. State that tenants are not to store documents, photographs, heirlooms, artwork, deeds, receipts for items in the unit, items of emotional value and anything else you don’t want stored at your property. For example, an urn containing Aunt Nancy's ashes should probably be excluded.
- Rate changes: Include a provision that allows you, upon 30 days written notice, to increase the rent at your discretion so you can keep up with market rates.
- Alternate contact information: If you collect it, plan on using it before sending the unit to auction. If you sell a unit before attempting to call the alternate, the jury will wonder why you bothered to request the information in the first place.
- Termination: If you have a tenant who’s causing problems, you want the option to end the agreement, even if he isn’t in default. Include a clause that allows you to terminate within whatever notice window your state requires.
- No oral representations: Every lease should state that “this agreement contains the entire agreement between the parties,” and “no oral statements or promises from any employee or agent of XYZ Storage that conflict with this agreement have any binding effect” (or something along those lines).
- Lien fees: If you’re going to charge them, they should be clear (when, how much, etc.).
- Posted rules: If you post any rules at the facility, include a phrase in your lease that says, “All rules posted at the property are hereby included as material terms of this agreement.”
- Notice: Add a sentence that allows all notices—rate changes, late or lien notices, etc.—to be sent to the last physical or e-mail address provided by the tenant.
Controlling the Climate?
Many self-storage facilities offer indoor air-conditioned or heated units. Across the country, these are called “climate-controlled.” This is a dangerous term. It implies that you, the facility operator, will “control” the climate. If you have this wizard-like power, you can never allow the air get too cold or hot, or the humidity to become too high.
Make it clear to the customer that “climate-controlled” doesn’t mean anything more than an attempt to maintain the temperature at no greater than 80 degrees and no colder than 60 degrees—or whatever range you believe you can truly maintain. It should also be clear the term doesn’t mean you’ll have any control over humidity, power outages or other environmental factors that may cause fluctuations in air quality. I’ve handled several lawsuits over the years where this was the main issue in a mold/mildew claim.
Limitation of Liability
Every state Supreme Court has written cases defining what’s acceptable in regard to limitation-of-liability clauses. Some states allow you to limit certain types of liability, but not all. You need a lawyer for this. Ask your counsel to draft a clause for your lease that covers anything you can limit by agreement. Make sure this clause is bold, conspicuous and easily identifiable.
End such a clause with a sentence that reads, “By initialing here, Tenant acknowledges that he/she has read, fully understands and agrees with this provision. _________ (Initials).” Not every judge in every county/parish will uphold these provisions, even when he should; but many will.
Your lease should include multiple statements reminding the tenant that storage is at his own risk. It should be clear you don’t provide security for his belongings, and any security that’s implied by cameras, gates and keypads is for the safety of your employees and the facility, not individual units or tenants.
This is important. Tenants who are burglarized may decide to sue the property owner. In many states, owners aren’t responsible for third-party criminal acts as long as they haven’t agreed to provide security in their lease agreement or otherwise. Break-ins will happen. Make sure your lease clarifies that tenants should have insurance, since they’re solely responsible for the safekeeping of their unit contents.
There are many other aspects to leases. Most states require operators to inform tenants of the lien procedure and warn them about possible auction of their items for non-payment. Some require every page be signed or that certain paragraphs be initialed. Above are some of the most critical elements; but to ensure you’re protected, pass your ideas and drafts by a lawyer who knows the law in this area. A few dollars in legal fees could save you hundreds of hours and thousands of dollars in the future.
Murphy Klasing, an attorney with the law office of Weycer, Kaplan, Pulaski & Zuber P.C., 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 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; e-mail [email protected]; visit www.wkpz.com.