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Rental Agreement Snafus

March 1, 2007

5 Min Read
Rental Agreement Snafus

Self-storage rental agreements protect both the facility and the tenant from unfair business practices. But operators whose leases arent legally up to snuff stand to lose important rights.
 
Rental agreements must first warn tenants that personal property stored in the unit will be subject to a lien if rent becomes delinquent. Some self-storage acts, such as California's, require the lease to include the name and address of an alternative person to whom the facility may also send legal notices; tenants must be asked in writing to provide the information. Be forewarnedthe word alternative is misleading; delinquency notices must be sent to both the tenant and his alternative.  

To avoid being tripped up by self-storage law, carefully read the regulations in your own state and assure applicable provisions are included in standard rental agreements. Failure to do so can have disastrous consequences, as the following story attests.
 
Anecdote 1

I recently representeda self-storage facility in a civil case brought against a tenant to foreclose the facility's statutory self-storage lien against the contents of the storage unit. The tenant was delinquent and failed to pay even after legal notices were served to him. Because the tenant contested, the case went to trial.

The California Self-Storage Act requires that rental agreements include language expressly requesting tenants furnish an alternative contact. The rental agreement in this case had a space on the lease for an alternatives name and address, but didnt contain wording requesting the information. The result was a disaster for the facility operator, and a big surprise at the trial.

In the judgment, the judge ruled in favor of the facility for $250 on an overdue balance exceeding $4,000, denying any lien rights.
Why? Californias act contains another Draconian provision stating that if the request language isnt included in the rental agreement, no lien can attach to the contents of the storage unit and none of the act applies. Wow!

The purpose of alternative contact information is to ensure that tenants receive legal notices, protecting their rights. The tenant in this example admitted to getting notices. Still, the literal wording of the statute made it possible for the judge to deny the facility its benefits under the act. Unfair? Yes, but a lesson for us all.

The case reflects back on the landmark case, Gonzales v. Personal Storage Inc., which arose several years ago in San Diego and worked its way to the Court of Appeal after the tenant was awarded a judgment of nearly a half-million dollars against the facility for, among other things, allowing a tenant imposter to remove the property stored in a self-service storage unit.

The facility hadnt strictly followed the requirements of the act. The trial court stated that a storage facility must strictly comply with the Self-Storage Act in order to enjoy its benefits. The court of appeal upheld the award to the tenant.
 
Protect Yourself

Ive witnessed firsthand how a state self-storage act can be interpreted to favor the tenant. Here are some tips to making life much easier if faced with the unenviable prospect of tenant litigation:

  • Read your states self-storage act. These arent lengthy but should be followed like a religious ritual. Get the tenants e-mail address and several telephone numbers, i.e., residence, business, voice-mail, pager, fax and cell. This way, if the customer changes one number, you can still contact him.

  • Social Security number: Research has not found any statute or case law making it illegal to require a tenant to include a Social Security number on a rental agreement. In fact, it may be the best means of identification, making it much easier for you to track down the tenant. Some restrictions on the disclosure of the number exist, so protect this number as if your own.

Anecdote 2

While ordinarily the lack of a written agreement will make it time-consuming and expensive for the self-storage company to get rid of a delinquent or non-performing tenant, that is not always the case, particularly when the tenant is really a trespasser. I had a client whod rented three storage spaces to a tenant under three separate, signed rental agreements. The tenant indicated he wanted to rent a fourth space to store an automobile and would come back later to sign a lease.

The facility prepared the fourth agreement and called the tenant to sign it. Surprise: He never did. Instead, hed secretly stored the car in the space without the managers permission. The tenant soon became delinquent on the other three spaces, never making a single payment on the car space.

This is a rare example in which a facility was lucky it didnt have a written agreementbut only because there was a vehicle involved. Heres why: Because there was no agreement for the car space, the tenant was, in effect, a trespasser, meaning the facility didnt have to go through the steps required under the Self-Storage Act. Even better, the facility didnt have to go through an involved and costly lawsuit to evict the tenant from that space before acting to remove the car.

City ordinance stated that as long as property owners maintain the right signage (indicating that any vehicle parked without permission will be towed away at the owners expense, and citing the ordinance number) the facility owner can have the car towed to a city impound lot, which can collect all fees from the cars owner.

This facility owner didnt have a sign, so I advised him to put one up, wait the required time stated in the ordinance (a few days), and then have the vehicle towed off the self-storage lot to a municipal storage yard. The storage space was then returned to active revenue production within a few days.
 
Conclusion

Dont assume your rental agreement will be enforceable if a tenant dispute finds its way to a courtroom. You may be unpleasantly surprised.

Do a review with the assistance of legal counsel. Get it right. You may learn youre using an outdated and unenforceable form inherited from the previous owner.
 
Attorney Vin A. Fichter practices real estate and litigation law in Westlake Village, Calif., and is nationally recognized as an expert in self-storage law. He is a past vice-president of the Western Regional Board of Directors of the Self Storage Association, has lectured on various self-storage at numerous seminars, and conducts private seminars for owners and operators.

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