We all hate paying extra fees, and it seems like we’re hit with them for just about everything these days. Check your electric or phone bill, apartment lease, or car-purchase agreement, and you’ll see some on there. There’ve even been stories of a COVID-19 fee being charged in some industries!
In self-storage, we charge fees for a variety of reasons. More than likely, you’ve heard some of these comments from tenants:
- “Why do we have all these fees? Shouldn’t this be included in the rent?”
- “What’s the deal with an administration fee? Isn’t that your job?”
- “Why is there a charge for using my credit card? You encouraged me to go on autopay!”
All companies have operating costs. In self-storage, you have ongoing business expenses that must be paid. Most of them will be covered by rental income, but some are for specific goods or services that not all customers need. Rather than bundling all costs into the rent and charging them to everyone across the board, it can make sense to charge them individually in the form of a fee. For example, why would you charge a customer for credit card processing if he pays in cash, or a cleaning fee if he leaves his unit immaculate? Instead, charge a “convenience fee” to the tenant who earns it.
The following explores the various kinds of fees you might require as part of your self-storage operation, plus considerations for how much to charge and when.
The fees you charge will vary based on your specific business needs. Here are some of the more common ones used in the self-storage industry. Some are charged at move-in or move-out, or during the course of the rental based on specific tenant needs.
- Admin fee: This generally covers the cost of administering the lease agreement. It might cover things like paper and ink, software licensing, envelopes, and key tags.
- Security deposit: This anticipates the cost for cleaning or repairing damage to the unit. Some businesses use the deposit for unpaid rent or other fees. It’s sometimes refundable upon move-out.
- Transfer fee: This is charged when a tenant wants to transfer from one unit to another, which means more paper and ink, plus time to move from one unit to the next.
- Paper invoicing: This will cover the expenses for mailed invoices if your company still offers them.
- After-hours access: If you allow tenants to access their units outside of standard business hours, you can collect a fee for that. Don’t want tenants roaming around your property at all hours of the night? Charging for this privilege will keep people from “visiting” at 2 a.m.
- Package delivery: This applies if you accept packages on behalf of tenants and hold the delivered items in the office or place them in the tenant’s unit. This is a selling point for your facility but should come at a price, as it’s costing your time and effort.
- Lock cutting: It takes time and equipment to cut locks, plus there’s a physical risk involved. Think about it: How much would a locksmith charge to visit your site and remove a lock?
- Keycard or fob replacement: Access cards and fobs can be expensive to replace. If a tenant loses or fails to return one, they should pay for it.
- Convenience fee: This often refers to credit and debit card processing. Your processor might even charge you for refunds, so check your contract!
- Chargeback: Banks and credit card companies charge you when a payment is declined or disputed. Your tenant should be responsible when their method of payment doesn’t work.
- Cleaning: This covers you if a tenant vacates and leaves his unit dirty or stuff behind. There might even be stains on the concrete floor. Your time and effort have value!
- Early-termination fee: Let’s say the tenant accepts a discount in exchange for agreeing to rent for a certain number of months, but then they move out early. Not only does this affect your revenue, they didn’t hold up their end of the deal. That comes at a cost.
- Damage: A tenant should be charged any damage they or their guests cause on the property, even if caused by their moving company. It might include harm to the unit, building exterior, a bollard or gate.
- Late fee: When an account is past-due, it ties up facility income and creates more work for you as the self-storage operator. Charging a fee for this is reasonable. Some facilities charge a flat rate, while others charge per day. Check your state laws for details.
- Lien fee: Laws vary from state to state, but if your lien process involves sending notices via Certified Mail, this costs you. Consider gas to and from the post office, the postal charge for those types of letters and, of course, your time.
- Auction fee: These are the costs associated with auctioning the contents of a unit. They might include advertising, the cost to hire an auctioneer, or fees from an online auction website. You might also need to hire additional staff for the day of the event.
What to Charge
The other important aspect to charging fees in self-storage is the amount to assign for each. You want to charge enough to cover any costs to you, whether in time or supplies, but you should also be fair to customers. Consider what other places charge for the same or similar service. For example, consider what a locksmith would charge to visit a site and cut a lock. If you require a $100 clean-out fee, does that include just sweeping the unit or also removing old mattresses or other items left behind? Do you need to call a dumpster service, or will your facility be charged by waste management to haul away items?
The best advice is to check with other storage facilities and managers and even local businesses for comparable rates. You don’t want to overcharge yourself out of business, but you need to cover your expenses and time.
When to Charge
It isn’t uncommon for self-storage facilities to charge different fees or have unique names for their various fees. You may not collect all the same fees as your competitors. Perhaps you bundle all your fees into a single “service charge,” or maybe there are times you choose to waive fees. For example, in lieu of offering a rental discount, you might nix the admin fee. Perhaps you’re willing to forgive a late fee for a first-time offender. Just be sure to apply these charges fairly to all customers.
It’s also important to know that each state has its own laws, and each company has its own policies regarding fees, from how much you can charge to whether fees are allowed at all. Always keep up to date on local laws!
Once you know what’s permitted, it’s a matter of putting these items in your lease agreement and explaining them to your tenants clearly during move-in. Some operators even add signage in the office. No one likes to be surprised with extra costs, so it’s good policy to let your customers know up front about any charges they might incur.
In the self-storage industry, we have many more expenses than just the cost of space, labor, maintenance, etc. If we start considering various fees as costs to the business that could impact the bottom line, it’s a little easier to understand why they’re necessary and why they need to trickle down to customers.
Anna Ross is facility manager for Tower Self Storage in Monroe, La. She began her self-storage management career about 10 years ago in Jacksonville, Fla. She’s managed facilities as small as 258 units and large, multi-story locations with 1,260 units. She recently experienced her first property expansion and is always looking to learn new things. For more information, call 318.388.1111, email [email protected].