The Modernization of State Self-Storage Laws: Recent Changes and the Modifications on the Horizon
Self-storage laws in many states have undergone a substantial transformation in recent years. Luckily, many of the updates have benefited facility operators. Let’s look at an overview of these modifications, how they may be impacting your business and what other changes are on the horizon.
While each state has its own laws regarding the operation of a self-storage business, there are often similarities among them. Every few years, we see nationwide trends in industry legislation and how it evolves. Let’s explore some of the common updates from the last few years, how they might affect your business, plus the modifications on the horizon.
Recent Changes in Self-Storage Legislation
Some years back, many states proposed and eventually passed laws that allowed self-storage operators to send lien notices to tenants via First-Class Mail instead of Certified Mail. Eventually, this became the standard in almost every state. Soon thereafter, state laws began to change again, allowing operators to send lien notices to tenants via email. Over time, that has become an accepted practice.
National and state self-storage associations also began pushing state legislatures to adopt laws that allow operators to place a limit on the value of the property stored in a unit, thereby also limiting business liability. This change has been wildly successful and is now a cornerstone of any rental agreement.
Another widespread change occurred as a result of issues operators faced when they had to auction off a vehicle that was stored in a defaulted space. Several state self-storage associations were successful in getting their legislatures to pass new laws permitting operators to have the vehicle towed instead of selling it. This change has taken a little longer to take hold and is still an ongoing battle in some regions.
Over the last few years, a number of states have passed laws allowing self-storage operators to advertise lien sales online instead of requiring an advertisement to be published in a local newspaper. This has been a noteworthy development due to the significantly increasing costs of media ads. This shift will allow operators to avoid expenses that have generally proven difficult to recover through the lien process.
Up and Coming Modifications in Self-Storage Legislation
The push to modernize state self-storage laws hasn’t stopped. In fact, a new wave of updates is taking hold. Here’s a summary of the most recent changes.
Non-monetary default. A monetary default occurs when a self-storage tenant fails to pay rent. The operator’s recourse is the lien-foreclosure process, eventually ending in the sale of the tenant’s property. A non-monetary default occurs when a tenant breaches any provision of the rental agreement other than the requirement to pay rent or fees, for example, they commit a crime at the facility such as living in their unit. A lien sale is never an option for these cases, however, the operator can terminate the rental agreement and tell the tenant to vacate the space.
This is where things can get complicated. If a self-storage tenant fails to move out after receiving a termination notice, the operator must file an eviction action with the local court and go through the hassle of removing them. This is often an expensive and time-consuming process that can tie up the space for several months. However, a recent wave of legislative changes directly addresses this issue.
California, Georgia, Idaho, Kansas and Utah have all enacted legislation that entitles self-storage operators to terminate a tenant’s rental agreement and dispose of their property if the tenant doesn’t vacate the space within a certain amount of time. Each of these laws requires the operator to send notice to the tenant clearly stating the demand timeline. This is a significant industry development. The statutes will allow operators in these states to remove troublesome tenants and free up their storage units much quicker and at a fraction of the cost.
Unsigned rental agreements. Georgia, Idaho, Kansas, Utah and Virginia have passed laws that make it possible to enforce an unsigned self-storage rental agreement. If the requirements in the statute are met, the contract and its terms can be enforced simply by the act of the self-storage tenant continuing to rent the space.
Any new contracts generally require specific language and must be sent to the self-storage tenant, but they don’t have to be signed. This new legislation will allow operators to change the terms of their rental agreements without the worry of getting each tenant to sign a new one before it becomes enforceable.
Junk fees. This is a new topic that’s becoming more popular. Junk fees are generally defined as unexpected or hidden fees that a company charges customers for a service. They’re used widely in the airline industry as well as in sports and entertainment ticketing. California recently passed a law making it illegal for a company to advertise a product at a low price but then add mandatory fees. It’s important to note that California isn’t the only state to move in this direction, as multiple others have proposed similar laws.
This new focus on junk fees will have a direct impact on the self-storage industry as more operators offer discounted pricing through internet advertising. If you charge additional fees on top of that initial rent discount without previously disclosing them, you may soon find yourself on the wrong side of the law. As such, it’s important to update your website to clarify your pricing and any additional charges, making sure to disclose any administrative or other fees that are added on top of the rent.
The lynchpin of new junk-fee laws is disclosure and transparency. It's become a trend self-storage to lure customers in with low web pricing and then increase their rent within a few months of lease signing. When offering an initial, discounted rate, you should disclose how much it is, how long it’ll last and the rent the tenant will be charged once it ends. Additionally, update your website and other marketing materials to explain your right to increase the monthly rent with 30 days’ written notice to the tenant. More than ever, it’s important to be transparent about move-in rates, the right to increase rent, and any and all fees that can be charged to the customer.
The self-storage associations have done a remarkable job at lobbying to modernize industry laws. The most recent updates are reminders to stay current. It’s imperative to ensure that your rental agreement is up to date so it complies with and takes advantage of any new legislation or best practices.
Ashley Oblinger is a senior attorney with the Atlanta law firm of Weissman Zucker Euster + Katz P.C., where he specializes in business and self-storage law, advising operators nationwide on all legal matters, including lease preparation, lien enforcement, tenant issues, tenant-claims defense, and employment policies. To reach him, call 404.760.7434 or email [email protected].
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