Self-storage fees may be small, but they add up to something big: additional revenue for your business and increased accountability on behalf of tenants. While your facility’s main source of income should be unit rentals, little “extras” can make a real difference, especially in counterbalancing delinquencies and unexpected maintenance needs.
To be clear, I’m not talking about getting greedy and sneaking in hidden fees for the sake of making money. I’m talking about charging fees that protect your storage facility and valued customers. Here’s why and how to charge fees, and which ones to collect.
Why Charge Fees?
If you’ve dealt with a bank, hotel or just about any other business, you’ve likely experienced fees you weren’t happy about. The problem with the way many companies charge fees is how they go about it—they sneak them in. But not all fees are buried. In fact, if your storage facility charges fees the right way, your tenants should never be caught off guard.
Be clear about which fees you charge and why during the leasing, lien and move-out process. It’s important to be transparent, not only because it makes you an honest business owner, but because your facility has the right to collect fees for specific items. You’re doing it to protect your company in the event of a late payment, or an abandoned or damaged unit. Some fees also protect tenants, incentivizing them to stay current on rent or clean their unit when moving out.
Now, let’s look at which fees you should charge and how much they might be. Keep in mind you don’t have to use every one. Also, the actual amount may depend on self-storage laws in your state and what fees are currently being charged by competing facilities in your market.
This is one of the most common types of fees. A late fee is often dictated by state-specific laws, so check your statute when determining the amount. Even if you live in a state without relevant laws, it’s wise to follow the protocol of a nearby state in an effort to be fair and reasonable.
Late fees are typically 20 percent of the monthly rent, and “late” typically refers to a period of 30 days or more. So, if a tenant hasn’t paid his rent of $100 in more than a month, the late fee would be $20. Explain late fees to your new tenants during the lease signing so they know what to expect if they miss a payment.
You might think late fees and lien fees are the same since they’re both associated with the lien process. Lien fees, however, are charged to tenants who don’t pay rent, don’t pay late fees and are, therefore, in possession of a storage unit that’s about to go to auction.
Lien fees are designed to recoup the money your facility spends during the lien process. This might include hiring an auctioneer, placing an ad in the newspaper and printing notices. To determine how much to charge, tally the expenses you’ve incurred. Itemize the total and provide the tenant with the breakdown of costs upon request. Be aware, however, that a tenant who’s already delinquent on a storage unit may not be willing to pay lien fees, so this may be a loss you recoup through the auction itself.
An administration (admin) fee—a nonrefundable fee charged up front when a lease is signed—might be the most controversial of self-storage fees. To tenants, it may look like a random charge tacked on for the simple task of filing a piece of paper.
You can avoid disgruntled tenants by justifying your admin fee. Add in some item like a key fob or lock so they feel like they’re getting something in exchange for this charge. As an added measure, keep this fee low, between $10 and $15. You may also waive this fee if a tenant is willing to sign up for auto-pay.
Unlike an admin fee, a security deposit is refundable. A tenant pays this up front and gets it back upon move-out, assuming the storage unit is in good condition. This incentivizes him to pay rent on time, honor his move-out date and refrain from abandoning items.
Many tenants often forget they even paid a security deposit, so this little bit of cash comes as a nice surprise. They’ll leave your facility smiling and more likely to write a positive review online.
A security deposit should be higher, though not substantially, than an admin fee, maybe between $20 and $40. You might even consider rolling the cost of a the deposit into the admin fee.
Every self-storage operator has been there … You enter newly vacant storage unit only to discover trash, abandoned possessions and a whole lot of grime. This is where the cleaning fee comes in.
If you’ve charged a security deposit, a cleaning fee is often redundant. However, if a tenant has left behind a truly big mess, you may consider charging a cleaning fee on top of any admin fee or deposit. This should typically be about the same amount as a security deposit (around $30), but you can certainly charge more if you’re dealing with a real disaster.
If you had a nickel for every time a tenant locked his storage unit and lost the key, well, you’d probably be set to retire. Earn those nickels for real by charging a lock-cutting fee.
The amount you charge will depend on several factors including the value of the lock, whether you’ll be supplying a new one, the equipment used to cut it and the difficulty involved in removing it. The fee should be in the $10 to $30 range. You may even give the tenant a deal by offering to lump in the cost of a new lock with the fee.
How to Charge Fees
Avoid discrimination by being strict and consistent with your policies. It doesn’t matter how much you like or dislike a tenant. You can’t waive a late fee for a friend or charge a higher admin fee to a difficult customer. Define your rules and stick to them. That said, be kind when administering a fee. A tenant who routinely loses the keys to his lock isn’t trying to make your life harder. Be gracious when charging the lock cutting-fee, and he’ll be much happier to pay it.
Always emphasize why you’re charging each fee, and do your business a favor by mentioning any fees you don’t charge. Are you the only storage facility in town that doesn’t charge an admin fee? Is your security deposit the lowest in the area? Use that information to advertise your facility and retain tenants.
No matter what fees you charge, do it with the mindset of protecting your business and giving customers a better self-storage experience. You may be surprised by how quickly those little fees can add up, and how much good you can do by rolling them back into your operation.
Krista Diamond is a staff writer for StorageFront, which allows customers to custom search and compare thousands of self-storage facilities. She’s a graduate of the University of New Hampshire and lives in Las Vegas. When she isn't writing about storage, she’s climbing mountains in the desert. For more information, visit www.storagefront.com.