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The Story on Portable Storage

November 1, 1999

6 Min Read
The Story on Portable Storage

The Story on Portable Storage

By Scott Zucker

Thefollowing was reprinted with permission from the Mini-Storage Law Commentary: A Newsletterfor Owners and Managers, published by the law firm Shapiro Fussell Wedge Smotherman &Martin in Atlanta.

As the self-storage industry has grown over the last decade and business has becomemore and more competitive, so has the number of innovations that are used to differentiateone self-storage company or facility from another.

Just like the development of climate-controlled storage, the industry is nowexperiencing the development and growth of portable storage. Portable, mobile or"drop-box" storage is where a storage facility offers the delivery of a storagecontainer to a customer's home or office, and the container is packed by the customer andlocked with the customer's lock. The container is then picked up and returned to awarehouse where it is placed or stacked with other containers. Certainly this servicesaves a typical customer from having to rent a truck or hire a moving company to move hisproperty from his home or office to a self-storage facility. With portable storage, thecustomer is able to remove the transportation concerns involved in storing his property.

However, what is essential to understand is that portable storage is not self-storage.The key to self-storage lies with the lack of care, custody and control that a facilityassumes over the property being stored on the premises. Self-storage is based simply on alandlord/tenant relationship where the storage company rents space suitable for storage.Once the tenant stores their property inside the facility, the risk of loss for thatproperty (for the most part) falls on the tenant. The facility need not obtain insurancefor the contents of the tenant's storage space because the facility owner is notconsidered a bailee of the tenant's property.

With portable storage, once the company takes the locked container, places it on thetruck and stores it in the warehouse, it has assumed care, custody and control for thatproperty, and a bailment arises. As such, the storage facility now assumes the risk ofloss for the tenant's goods, and must insure itself from those losses. Going from alandlord to a bailee changes the level of diligence that is required in safeguarding thecustomer's property. Whereas a self-storage facility owner may be held liable for the lossof a tenant's goods upon a finding of gross negligence, a bailee can be held liablefor the loss of a tenant's goods upon a finding of the lower standard of ordinarynegligence.

The Contract Documents

Withoutquestion, when a self-storage company ventures into the business of portable storage, itis not as a landlord and, therefore, using a standard rental agreement would not beadequate. A more appropriate document to use comes out of the warehouse industry and wouldbe similar to a non-negotiable warehouse receipt, as that document is defined under theUniform Commercial Code. This warehouse receipt is a contract between a warehouseman andits customer for the warehouseman to take in the property of the customer, store it,assume liability for its protection and, ultimately, return it to the customer.

What makes a warehouse receipt substantially different from a rental agreement involvesthe explanation of the facility's liability for loss or damage to the customer's property.With portable storage, a facility can be held liable for loss or damage to the property.Facilities can limit their liability in this area by establishing a maximum limit of valueper container that can be stored at the warehouse (i.e., 60 cents per pound per article or$1,200 for all the property in the container.) This is commonly termed the "declaredvalue." Therefore, even though there is potential liability to a facility for loss ordamage to a customer's property in the container, limits of value can apply.

A portable-storage contract should include other standard provisions, as well. Forexample, the facility should recommend that the customer have his own insurance for thevalue of the contents beyond the $1,200 limitation. The contract should also include aprovision prohibiting certain property from being stored inside the container, includingcollectibles, jewelry or other items having high value or sentimental value to thecustomer. An additional provision should be added to a warehouse receipt to provide thatall claims by a customer for loss or damage to the property in the container must be madewithin 60 days of the time the customer first becomes aware of the claim. Further, thecustomer should have only 120 days in which to commence suit on such a claim, or the claimwould be deemed to be waived. Finally, the agreement should identify the warehouseman'slien on the property in the container, which allows the warehouseman, upon the customer'sfailure to pay the rent, to hold the customer's property for sale.

In certain states, those lien rights will be based upon the Uniform Commercial Code,which has a procedure for foreclosure and sale and is very similar to that used inself-storage. In other states, where a container for storage has been included within thedefinition of self-storage, the state's self-storage act itself can be used as thelien-and-foreclosure process for selling the customer's goods. In some states, the owner'slien is simply contractual, and the procedure for sale would be defined under the termsand conditions of the customer's contract with the facility owner.

Insurance

Unfortunately,insurance becomes an issue when operating a portable-storage business. Again, contrastedwith traditional self-storage, portable storage requires the use of a truck, fork lift anddrivers. Therefore, a portable-storage facility needs insurance coverage for the trucksbeing used to transport the containers and needs to apply a different workers'compensation classification for its employees than may have been used previously foron-site resident managers or maintenance workers.

Most importantly, insurance needs to be obtained for the contents stored on thepremises, which changes the coverage requirements for a standard self-storage facility.Certain insurance can be obtained to protect a portable-storage company from customerclaims arising from lost, stolen or damaged property. However, exclusions may only providefor coverage in the case of an accident with the truck or clear damage to the exterior ofthe container.

Accordingly, storage owners should provide restrictions in their contracts that holdtheir customers responsible for the proper packing of the container to prevent shifting ormovement of the property during transportation, and holds the customer liable for anyloss, damage or injury relating or arising from the packing of the property in thecontainer. Obviously, obtaining contents insurance not only raises costs for a business,but acknowledges the shift in the risk of loss to the facility rather than the customer.That is a dramatic shift that, once again, does not apply to traditional self-storage andthe rental of space.

Conclusion

Clearly, the growth of portable storage means that storage companies have recognized acustomer need and have acted to provide that service. However, if a storage companychooses to offer portable storage, it needs to understand that it cannot be a simpleextension of its self-storage business, but is a new business altogether, with differentresponsibilities and liabilities. The key thing to remember from all of this is that whenyou take the "self" out of self-storage, the rules change, and new rules must befollowed.

Scott Zucker is an attorney with the firm of Weissmann & Zucker, P.C. Mr.Zucker, who specializes in self-storage law, is a frequent contributor to InsideSelf-Storage and a regular speaker at Inside Self-Storage Expos. He may be reached at(404) 364-4626.

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