During this crazy time of uncertainty, between the 1,000-piece puzzles, binge watching 16 seasons of “Grey’s Anatomy” and organizing the garage, self-storage operators should really think about updating their rental agreement. There have been legislative changes in nearly every state in recent years that apply to self-storage leases. If you haven’t modernized yours recently, now is as good a time as any to give it the overhaul it needs.
My Lease Is Fine … Or Is It?
Many of you may have used the same rental agreement since you first opened your self-storage facility, which may have been when Ronald Regan was president. It’s also possible you’re using a lease your nephew wrote years ago as a project for his college business class. However, statutory changes implemented in states like California, Illinois, New York, Texas and many others have forever altered the requirements for self-service storage agreements and rendered older leases outdated.
Does that mean your lease is unenforceable? Likely not, but it could be problematic, depending on the allegations that come your way. For example, if you offered climate-controlled units when you first opened and referenced them in your lease, but you later switched to all traditional units, there may be language in your contract that binds you to provide climate-controlled space. This could be a problem if someone claims your facility caused mold in his stored property.
If your agreement references statutes that have changed, you may be out of compliance with your state’s lien laws and unable to complete a lawful auction. As a rule of thumb, if your lease is more than three years old (and certainly if it’s more than five years old), you should have your attorney review it to ensure it still meets state requirements.
Another common scenario in self-storage is using a form or template agreement from your state self-storage association or similar organization. If so, you’ve likely got a well-thought-out lease that covers all of the basics; but it’s still worth having a second set of eyes review it. Form leases don’t always account for your unique operation.
For example, maybe you allow electrical hookups in some of your units, or you’re offering boat/RV storage that really needs a form unique to your business. It could also be possible that if you don’t have anything unique to your offerings, the lease may be too broad, covering too much. Again, have an attorney well-versed in your state’s self-storage laws review it and ensure the agreement is correct for your situation.
Every rental agreement should gather some basic information include some essential clauses that make important points clear and protect your self-storage operation as much as possible. Here’s a short list of absolute must-haves:
- Full tenant contact information including email, phone, date of birth and driver’s license number
- A requirement that the tenant is responsible for notification if there’s a change to any contact information
- Clear language on rental charges, late fees, lien fees, bad-check fees and any other charges
- Clear language that upon 30 days notice, you have the right to increase the rental rate
- A statement that the rental is month to month
- Clear language on the purpose of the unit, i.e., that it’s for self-storage of personal property—owned by the tenant only—and cannot be used for habitation or other non-storage activities
- A list of what isn’t allowed in the unit (prohibited items)
- What qualifies as a default event, such as nonpayment, late payment, failure to comply with the rental agreement, a felony committed by the tenant, etc.
- Your state’s required lien-statute language and a warning regarding your right to auction the contents of the unit in certain situations
- A statement that storage is at the tenant’s sole risk
- Insurance requirements, with an explanation that insurance is not provided by the landlord company and, therefore, the tenant must purchase his own
- Release of liability!
- Limitation of liability!
- Military-service representation that acknowledges whether the tenant is in the military and provides a warning that the tenant agrees to notify the landlord if his status changes
- A disclaimer of warranties or guarantees of safety or the condition of the unit
- Registration information and vehicle-identification numbers for any stored boats, motors, trailers and RVs
Here are some other items that, while they aren’t mandatory, I highly recommend you include in your lease language:
- Climate control: If your facility is climate-controlled, state that you aren’t promising any particular temperature or humidity range and “climate-controlled” doesn’t mean anything more than an attempt to maintain a temperature of no greater than 80 degrees and no less than 60 degrees (or whatever you believe you can really provide). Make sure it’s clear that “climate control” doesn’t mean you have any control over power outages or other environmental factors that may cause fluctuations in temperature and air quality.
- Account changes: Add a sentence that allows all notices (rate changes, late notices, lien notices, etc.) to be sent to the last property address and/or email address provided by the tenant.
- Oral representations: Every lease should state, “This agreement contains the entire agreement between the parties” and “no oral statements or promises from any employee or agent of XYZ Storage that conflict with this agreement have any binding effect,” or something along those lines.
- Dispute resolution: You may want to require that all disputes must first be mediated and specify that all are to be handled in your county and state.
- Emergencies: Include a clause allowing you the right to enter the unit for purposes of repairs or emergencies.
- Abandonment: Include a definition of the term and the results of such action by the tenant.
- Finally, include any unique rules for your property.
There are many things you can put in your self-storage rental agreement, but at the end of the day, the lease must be easy to understand and read, particularly if a jury ever has to examine it. So, a 20-page document in six-point type is a bad idea. A three- to five-page agreement in a 12- to 14-point type, in easily comprehensible, non-lawyer language is a good idea.
Your specific verbiage may need some work, especially if it was written by a lawyer 20 years ago. For example, take this sentence: “It is hereby agreed by Tenant that payments, whether electronic or in cash, that represent compensation to the Landlord for rent of the unit in question, are due, in whole, and not in part, on the first calendar day of the month in which the unit is being rented.” Instead of that nonsense, wouldn’t it be better to simply state “Rent is due in full on the first day of each month”?
Lawyers are often guilty of writing long, flowery sentences in an attempt to cover every possible issue that may arise; but a self-storage rental agreement should be easy for the average person to digest. More importantly, you want a jury to understand it, so they will hold the tenant to the contract terms.
Pull out your current agreement, whether or not it’s old, and read it. Mark everything that doesn’t make sense to you and have your attorney make it better. The lease is as much a part of the service you give your tenants as the space they rent.
Murphy Klasing is a partner with Weycer, Kaplan, Pulaski & Zuber P.C. He has a wide range of appellate, arbitration and trial experience, successfully handling numerous litigation matters. With more than a decade of experience in the self-storage industry, he serves as counsel for Public Storage Inc. in Oklahoma and Texas, and has defended matters involving allegations of breach of contract, code violations, employment issues, fraud, negligence, personal injury, premises liability and theft. To reach him, call 713.961.9045; e-mail firstname.lastname@example.org; visit www.wkpz.com.