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The Legal Impact of the Pandemic on Self-Storage: Answers That May Help You Avoid Risk

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Never have the legal waters been murkier for self-storage operators. The coronavirus pandemic has led to new legislation and, with it, potential complications that could lead to serious operational risk. Here are answers to some questions you may be asking.

The coronavirus pandemic has affected all aspects of our lives. It has certainly impacted businesses. Still, it’s remarkable how resilient companies have proven to be. We’ve seen many adapt quickly to mitigate risk for customers and employees. In the self-storage industry, most operators have transitioned to some form of contactless method to rent units, sell product, conduct auctions and more.

Countless legal changes have also occurred during the crisis, from federal and state emergency orders to municipal moratoriums. Keeping up with ever-shifting requirements has been daunting. To avoid putting your self-storage business at risk, it’s important to know how new laws might affect its operation. Here are a few common questions being asked as the pandemic continues.

Can You Stay Open?

It remains challenging to know how to respond to shelter-in-place orders. Throughout the pandemic, state and municipal directives have often been inconsistent, leaving self-storage operators to interpret for themselves whether their facilities were “essential” and could remain open.

Ultimately, many arguments have been made for why self-storage facilities are essential, and most storage companies have powered through. Still, owners and managers recognize the need to ensure customer and employee safety. From closing the main office to implementing technology that allows for remote and contactless transactions, they’ve found solutions that are likely to endure in the industry for years to come.

Can You Charge Late Fees and Conduct Lien Sales?

In the early days of the pandemic, the next big question for self-storage operators was whether their tenants would be excused from making rent payments if they were prevented from leaving their homes to access their stored property or move out of their unit. In some cases, state or municipal orders prevented the imposition of late fees and other charges.

The data suggests that any increase in self-storage delinquencies as a direct result of the pandemic was low. Many operators who did see defaults elected to defer payments, accept late payments or waive late fees. However, with units going unpaid and unvisited for several months, it appeared as though some had been abandoned. Before operators could act, they had to sift through official orders that restricted landlords on the issues of rent enforcement, late fees and evictions.

Guidance was and continues to be lacking. The laws that sought to protect struggling customers were often confusing, and it was unclear how they affected a self-storage operator’s right to enforce a statutory self-help remedy, i.e., foreclose on a lien over tenant goods. The orders that restricted “court evictions” didn’t include any limitation of non-court lien enforcement, which is found in the self-storage lien laws of 49 states and the District of Columbia.

Unfortunately, the only appropriate answer to “Can I charge late fees?” and “Can I sell the goods?” is to thoroughly review and consider any current or pending statewide orders or laws as well as any that may have been issued by the local municipality. As an interim measure, it’s widely recommended that all your late and lien notices be updated to include certain COVID-19 language, which might read something like:

If you’re unable to pay your account in full because you were financially impacted by the COVID-19 pandemic, please contact us to discuss your situation. Please note that in order to assist you, it will be necessary for you to provide us with medical confirmation, if you or a family member had the virus, or employment records if you became unemployed.

Can You Be Made Liable for COVID-19 Infections?

Any business that remains open during the pandemic must make an ongoing effort to protect its customers and employees. Safety and cleanliness should be a top priority. Many companies have taken up measures recommended by the Occupational Safety and Health Administration, such as installing plexiglass at office counters, providing masks and other personal protective equipment to customers and staff, and establishing clear social-distancing rules. Here are some other things self-storage operators have been doing:

  • Limiting the number of customers in the office and even inside the storage areas
  • Disinfecting the office between each customer
  • Sanitizing frequently touched surfaces
  • Providing hand-sanitizer dispensers around the property
  • Posting additional signage and website announcements about steps being taken and new rules implemented

But here’s the question: Should a business be subject to liability for customers or employees who claim to have caught the virus on the premises? Would it even be possible to trace the transmission to one specific location? It’s difficult enough for companies to operate during the pandemic without having to worry about these additional concerns. It’s for this reason that a number of state legislatures have agreed to provide liability protection for businesses against the risk of virus-injury claims.

One example is the Georgia COVID-19 Pandemic Business Safety Act (Senate Bill 359). Under this legislation, business owners who follow certain steps will be immunized from liability if a customer contacts the virus on their property. The only way you would lose this protection is if the person claiming injury could prove “gross negligence, willful or wanton misconduct, or reckless or intentional infliction of harm.” The bill creates further protections if a business posts the following sign at its entrance:

Warning: Under Georgia law, there is no liability for an injury or death of an individual entering these premises if such injury or death results from the inherent risks of contracting COVID-19. You are assuming this risk by entering these premises.

Even if your state hasn’t yet passed such an immunity law, it’s recommended that you post signs at your entrances and around the facility to confirm that the tenant is assuming his own risk when entering and using your self-storage services.

What Are Employer/Employee Rights Regarding Illness?

The pandemic has also led to the passage of laws specifically crafted to protect employees who catch the virus. Two of them expand the protections that were already in place for people who become sick while employed or are required to act as caretakers when family members fall ill. Both are part of the Families First Coronavirus Response Act.

Emergency Paid Sick Leave Act. This applies to employees who are sick, advised to self-quarantine, or subject to a federal, state or local shelter-in-place order. Under the law, full-time employees are entitled to 80 hours of paid sick leave (assumed to be equivalent to two weeks), while part-time employees are entitled to the hours worked on average over a similar two-week period. The employer may not require the employee to use his other sick leave before using these 80 hours.

In addition, the employee is entitled to his regular rate of pay, though there’s a per-employee cap of $511 per day or $5,110 in the aggregate. Rates of pay are reduced to two-thirds if the sick leave is taken to care for others, not the employee himself.

Emergency Family and Medical Leave Expansion Act. This expands the original Family Medical Leave Act, which says employers must provide up to 12 weeks of job-protected leave when an employee is unable to work (or telework) due to the health conditions of his children or other qualified family members. There are two parts to the concept of “protected leave.”

  • The employee must be restored to the position he held when he left or an equivalent one. If not, the employer must make “reasonable efforts,” for up to one year, to return him to an equivalent position. For example, if the job is discontinued during his 12 weeks of leave and re-opened six months later, the employee should be given the opportunity to return to that position if possible.
  • All paid time off can be applied to the first 10 days of the leave. After that, the employer must pay the employee “no less than two-thirds” of his regular rate of pay based on his normal work hours. However, the pay for this family leave is limited to $200 per day and $10,000 in the aggregate per employee. This includes part-time employees.

These laws only apply to employers with fewer than 500 employees, but there’s an exemption for employers with fewer than 50 employees for whom compliance would jeopardize the viability of the business. They only apply to employees who’ve been with the company for at least 30 days. Finally, they provide a tax credit to employers who pay their employees under these laws. The credit is against the employer’s portion of Social Security taxes.

Can You Require Testing and Vaccinations?

Further questions remain as to the rights of an employer regarding staff health and safety. The Equal Employment Opportunity Commission (EEOC) states that it’s legal for a company to ask employees if they have symptoms of COVID-19. It’s even permitted to take an employee’s temperature to determine if he might be infected. You can also ask him to seek medical attention and get tested if his symptoms are the same as those for COVID-19.

In December, the EEOC updated its guidance relating to vaccinations and whether an employer can require them. It has clarified that companies can institute a mandatory vaccination policy for employees, but there are exceptions for people with certain medical disabilities or objections based on religious reasons. Similarly, an employer can bar an unvaccinated employee from the workplace under the basis that the lack of immunization imposes a threat. However, in that case, you must allow the employee to work remotely if the job function can be performed this way. Ultimately, the EEOC would permit employers to require proof of vaccination before allowing employees to enter the workplace.

More Good News Than Bad

The pandemic has taught us a lot about our industry, especially how we run our individual self-storage facilities. Even without certain laws in place, we saw a tremendous amount of generosity from operators toward their tenants and employees. Notably, it appears to have been a year for more positive results than negative ones. That has a lot to do with the owners and managers who’ve worked to help each other and their customers during this unprecedented time.

Scott I. Zucker is a founding partner in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber P.C. Practicing law since 1987, he represents self-storage owners and managers on legal matters including property development, facility construction, lease preparation, employment policies and tenant-claims defense. To reach him, call 404.364.4626, or email [email protected].

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