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Inside Self-Storage Magazine: Leases

May 1, 2006

5 Min Read
Inside Self-Storage Magazine: Leases

After reading this column, many readers ask, How can I safely change a provision in my lease with existing tenants? Sometimes operators want to create an entirely new lease and wonder how to switch over customers.

You first need to consider whether the new clause substantially changes the relationship between you and the tenant. If youre just altering office hours or slightly modifying rules and regulations, the process is simple. Major revisions such as amended liability language are more complicated, and you should follow my suggestions for introducing a new lease.

Minor Revisions

Most self-storage leases are month to month, renewing the day rent is due. When introducing small changes, you can send a notice to the tenant at least 30 days before the next rent-due date. In instances where your leases are first-of-the-month, notification should be 30 days before the first of the next month; for renewal dates, a 60-day notice is preferable.

Make sure youre not trying to change the terms for tenants under an extended lease. Your notice should specifically describe the amendments you wish to make. Dont just say, We are changing three rules and regulations.

Print the new clause as follows: 

Please be advised that effective on [date], we are modifying your lease with XYZ self-storage to change or amend the lease in the following manner:

(1) Rent as delineated in provision ___ of the lease will be increased to $___ per month; (2) We are changing office hours as follows: ___. Then add, This change to the terms and conditions of this lease shall be deemed to have been accepted by you when you pay rent on the next due date.

If you are increasing rent, and the tenant begins paying it, you have successfully obtained his approval. Anyone who does not accept, in theory, will vacate the premises before the end of the 30-day period. Those who notify you of their objection should be asked to leave. Of course, sometimes youll make revisions that have nothing to do with rent, and assent will be a little more difficult to ascertain.

You may wonder whether tenants should return your notice letter with their signature. I say no, because it appears youve given them a choice about accepting the terms without having to leave. Plus, many tenants will fail to respond, and what are you going to do about them? Notice with implied assent is more effective.

Big Changes

For a new lease or substantial modifications, the procedure may be more problematic. The first step is easy: The average self-storage stay is about six months. When you start a new lease program and begin signing up new tenants, youll painlessly convert 50 percent to 60 percent by attrition. Unfortunately, the remainder cant simply be notified by mail that the lease has changed. Youll need proof of their acceptance.

How do you get these folks to pay attention to you, and to stop by the office to sign a lease? My recommendation is to start with a contest. Send out a letter saying you are updating records and modifying leases, and youll need everyone to come in and give their signatures; you understand its inconvenient, so those who sign will be entered into a drawing for an attractive prize.

Youll find you have a better response if you dont raise rents at the same time. State in your letter the new lease doesnt include a rent increase. Tenants generally are happy to hear they wont be paying more, and wont be too concerned about the other terms and conditions. Kiosks also can help convert tenants by presenting the new lease before acceptance of the next rent payment.

There will always be holdouts. About nine months after youve started your new lease program, youll be down to the bunch who wont respond in any way. At that point, you have to make a choice: You must either terminate the tenancy of those who wont sign, or live with them until they end their relationship with you.

You made substantial and wholesale changes to your lease for good reason, not just to aggravate your tenants. And you felt it was important enough that you paid a lawyer to write it up. I wouldnt want to continue with a percentage of my tenants leaving me exposed. This is, of course, your choice and a business decision.

To Mail or Not to Mail

Im not in favor of mailing out new leases for signature and return. Its better to have everyone come into the office. First of all, youll witness their signature (or your kiosk will take pictures of tenants and capture their John Hancock digitally). You want that kind of authenticity with any lease renewal. You dont want to be in a situation where a tenant later alleges he wasnt informed and didnt assent.

Second, not every tenant reads your lease. If people actually come in, you have the opportunity to explain the most relevant changes, just like when you reviewed the lease with them originally.

Changing your lease isnt terribly difficult, but its time consuming. It takes planningand a little inducement to convince people to visit with you and sign. Again, natural attrition will take care of the majority of tenants. For those who dont cooperate, you have a simple business decision whether they remain on the old lease or move out. 

Jeffrey Greenberger practices with the Cincinnati-based law firm of Katz, Greenberger & Norton LLP, which primarily represents owners and operators of commercial real estate, including self-storage. This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of an attorney. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151; e-mail [email protected]

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