Marketing is an essential part of operating your self-storage business. Facility owners and managers know the importance of selling their services to the public. What many don't know are the risks of overselling them. You should avoid making representations about your products or services that you know to be false or made without regard for the truth, understanding that your customers may rely on those claims.
The phrase “truth in advertising” should govern your marketing activities. Whether in your website, brochures, signage or conversation with customers, it’s always best that statements are factual.
It’s equally important that you choose descriptive words carefully. For example, never use words such as “guarantee” or “promise” unless it relates to “friendly service.” You should certainly never promise or guarantee the safety or security of tenants' property, and always avoid using words such as “security” in advertising. Instead, use factual phrases such as "perimeter fencing," "personalized-code access gates" or "fenced and lighted."
Over the last few years, there have been a number of cases concerning representations made by landlords and whether they could be considered fraudulent. Let’s take a closer look at three of these cases and see what self-storage operators can learn from them.
DiSanto v. Safeco Insurance of America, Court of Appeals, Ohio, 2006
In this case, the plaintiff rented a storage unit and purchased a third-party tenant-insurance policy from the operator. The tenant subsequently discovered that his property had been damaged from water intrusion and made a claim to the insurance company. The claim was denied.
The tenant sued his homeowner’s carrier and the tenant-insurance carrier. After paying on the claim, the homeowner’s carrier brought a subrogation action against the self-storage facility and tenant-insurance company. The main claim against the facility addressed the use of the terms “climate-controlled” and “dry and safe” in the facility’s advertising.
The court held “there is a genuine issue of fact as to whether appellant (tenant) justifiably relied on the alleged representations of the [operator].” As such, the case was allowed to proceed against the storage facility. The key issue dealt with the lack of definition in the lease and other advertising as to the terms “climate-controlled” and “dry and safe.”
Robinson v. Sovran Acquisition L.P., Supreme Court, Alabama, 2011
This case dealt with a claim by a storage tenant whose unit was broken into during a time when the facility's cameras were not operable. He alleged the facility committed fraud. In this case, the tenant failed to establish his claim because, at the time the rental agreement was signed, the premises were protected by functioning surveillance cameras.
When the rental agreement was entered, there was no evidence that the storage facility intended stop using the cameras in the future. Additionally, the court found that when the facility’s surveillance cameras were rendered inoperable due to an ongoing renovation, the operator did not have a duty to inform the tenants of such and, therefore, the tenant could not prevail on a separate claim of deceit against it.
Dilbeck v. Yates, Court of Appeals, Georgia, 1992
In this case, a tenant whose property was stolen sued the facility for the loss. His property was taken during a break-in that left no signs of forced entry. The tenant testified that he questioned the manager about prior break-ins before leasing the space. The manager told him no one had ever broken into any of the units. Unbeknownst to the tenant, there had actually been numerous incidents.
The tenant claimed the facility had committed fraud based on misrepresentations as to the occurrence of prior breakins. He argued that had he known the truth, he would never have rented the space. Although the facility had a very strong lease protecting it from liability for such a loss, the court held the tenant's agreement was void due to the manager's false statement. The court ruled in favor of the tenant and against the facility for the value of the stolen goods.
What You Should Do
So what are the lessons learned from these three cases? First, the facility’s rental agreement should include provisions confirming the tenant maintains care, custody and control of the stored property, no bailment is intended, and the tenant is responsible for having insurance for his stored property. There should also be a provision in the lease establishing a limit to the value of stored goods, which cannot be increased unless the tenant has proof of insurance for the higher value. Finally, there should be language stating facility does not guarantee the safety or security of the stored goods, and it cannot be held liable in the event that alarms, gate systems or camera systems fail or malfunction. If cameras are employed, proper signage should make it clear that although activity is recorded, the cameras are not being monitored.
Next, a facility operator must be honest in answering questions posed by prospective and current tenants. For example, if a customer asks if there's ever been a fire, theft or flood at the property, the operator must answer honestly. He is allowed to say, however, what efforts, if any, have been made to prevent similar occurrences in the future. As we can see from the cases above, if an operator acts with deceit, the court can choose to invalidate his defenses contained in the lease.
Certainly, nothing can prevent a tenant from suing a facility for loss or damage to his goods. However, to enhance a facility's defense to such claims, it’s becoming increasingly important for operators to be clearer about the services they provide. As shown by these court cases, marketing is essential to self-storage success, but if not handled carefully and honestly, it can also be the reason for a facility’s failure.
Scott Zucker is a partner in the law firm of Weissmann & Zucker P.C. in Atlanta, where he specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. Zucker is 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].