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How to Draft a Self-Storage Rental Agreement That'll Protect Your Business in Today’s Booming Market

How to Draft a Self-Storage Rental Agreement in Today’s Booming Market
Many self-storage operators are enjoying record occupancies, which means having an up-to-date rental agreement has never been more important. A well-written lease will protect your business against unnecessary lawsuits. Here’s how to draft one.

In the midst of the unprecedented success many self-storage operators are currently experiencing, it’s more critical than ever to have a well-thought-out rental agreement. This important document may one day be the only thing standing between you and an unpleasant lawsuit. After all, there are many situations that can trigger unwanted legal proceedings such as a facility break-in, fire or other disaster, or even a customer being mistaken about what they stored in their unit. A well-written lease can help protect you from tenants who retaliate after these types of losses. Here's how to craft one.

Use Clear Language

Ambiguity is your worst enemy. Make sure the language in your self-storage rental agreement is clear, concise and non-repetitive. If it’s at all unclear about the rights and responsibilities of the parties mentioned, or it’s vague in its terminology, or it uses multiple terms to mean the same thing, you create uncertainty, which leaves your lease open to legal challenge.

Also, never use printed rules, checklists or a list of frequently asked questions in lieu of a formal rental agreement. It’s fine to distribute these resources in addition to your lease, but they should never replace a formal contract.

Know Your State Law

Know your local statutes. Almost every state has some form of legislation to govern self-storage. It generally outlines minimum requirements for what must be included in a rental agreement. It might dictate mandatory notices, type sizes or disclosures. It might stipulate that you use email in lieu of snail mail when sending lien notices. If you don’t know these requirements, they probably aren’t adequately addressed in your lease, which could put your entire rental agreement and business in peril.

Cover the Basics

Make sure your self-storage rental agreement includes, at a minimum, the most basic clauses to protect your business. I won’t provide a description of every option here, but your agreement should at least address the following:

Terms. Carefully define the term of the rental, whether it begins on the first of the month or the day the tenant rents the unit, as well as whether the lease is meant to be month-to-month or something else. Explain how the rental agreement terminates, too, including how much notice you ask for from the tenant as well as company policy in case you don’t want to keep the renter at the end of the term.

Units. Make sure unit sizes are clearly stated and described as “approximate.”

Fees. Clearly define all charges that’ll be imposed on the self-storage tenant, including those for non-sufficient funds and declined credit cards. You can’t levy fees once the tenant is in default simply by adding them in your lien notices. Make sure all late fees match your safe-harbor late fee, if applicable in your state.

Banned items. Include a prohibited-property clause, so tenants refrain from storing items you don’t want or can’t allow due to state law, mortgage requirements or your own rules.

Value limits. Define an appropriate value limit to protect against claims that stored goods were worth an astronomical sum. This clause should also limit any claims of negligence that could lead to high-dollar lawsuits against you.

Release of liability. This protects you against loss or damage to property stored as well as personal injury and death, if allowable under your state law.

Access control. A modern clause should allow you to control access if you need to shut down your self-storage facility in the event of an emergency, police activity, maintenance or any reason. You also need the right to enter a unit in clearly defined situations. In these cases, define what happens to the door lock after entry.

Indemnification. This is another protection clause. Understand what indemnification means, so you can include appropriate language that properly covers your business.

Waiver of subrogation. If a tenant has their own insurance, this clause prevents their provider from pursuing claims against you after it’s paid the insured.

Severability. This clause provides that if a portion of or an entire clause is found to be unenforceable and is removed from the rental agreement, the remainder of the lease remains in force.

Giving notice. Define how you give proper notice to your self-storage tenant as well as how you want your occupant to give notice to you. Carefully define how you want the tenant to provide you with a change of address, as this leads to most of the claims after a wrongful sale or disposal. A proper default clause describes all the ways in which the tenant can be in default as well as the remedies that follow if default occurs.

Prohibition against assignment. As with most contracts, you should include a prohibition against assignment as well as subletting, though the language should allow you to assign the lease in case you sell the facility.

Jury waiver. If permissible, this is always a good idea because nothing good comes out of a jury trial in self-storage.

The above clauses form the basic foundation for a good self-storage lease, however, not every clause may be available to you depending on your state requirements and allowances. As always, check with your attorney when drafting a contract to ensure the language you use is permissible.

Consider These Additional Clauses

Here are some additional clauses you may want to consider for a more thorough, modern self-storage rental agreement:

Payment. This describes how and when you accept payment and under what circumstances. This should include when you cut off acceptance of checks and credit cards.

Property damage. Consider a clause that makes the self-storage tenant responsible for damage they cause to the facility and their unit.

Insurance requirement. You may wish to require that all tenants to carry insurance or buy a protection plan for their stored contents.

Dispute resolution. Some type of alternative dispute-resolution clause can really help avoid lawsuits. This will allow you to force a case into mediation or arbitration before it can ever be heard in a courtroom.

Special services. If you offer amenities such as climate- or temperature-controlled space, package acceptance, boat/RV storage, etc., include clauses in your lease to address them. For example, you may need language that defines and disclaims temperature and humidity control. You might have a clause regarding the use, related charges and disclaimers related to electricity, dumpster, potable water, dump stations, and service or wash bays.

Other potential rental-agreement clauses to include are:

  • Disclaimers for security and alarm systems
  • Release from mold
  • Requirements for the type of unit lock and how it can be used
  • Requirement to inspect and accept the unit before signing the lease
  • Prohibition against loitering
  • Language addressing the tenant’s responsibility for providing pest control
  • Extended gate or door access
  • The use and sharing of elevators, lifts, carts and docks
  • Disclaimer of snow removal

Set Expectations

A well-written, well-thought-out rental agreement that’s specific to self-storage sets expectations and can help tenants understand your responsibilities to them. This helps avoid surprises and defines the relationship between the business and the renter. It also allows you to disclaim much of your liability to the customer. That which isn’t disclaimed will be shifted away from courthouses into releases, insurance and alternative sources of resolution, which ultimately keeps you out of court and allows you to focus on operating the business rather than a deposition or hearing date.

This article is for the purpose of providing general insight into the self-storage field and should not be construed to constitute legal advice. Before undertaking any changes to your policies and procedures, consult with your own attorney and insurance agent/broker.

Jeffrey Greenberger is a partner in the Cincinnati law firm of Greenberger & Brewer LLP. Licensed to practice in Kentucky and Ohio, he focuses primarily on representing the owners and operators of commercial real estate, including self-storage. His website, selfstoragelegal.com, contains legal opinions and insights as well as an article archive. To reach him, call 513.721.5151; email [email protected].

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