SmartStop Asset Management Settles CA Fine for Selling Self-Storage Tenant Insurance Without a License

SmartStop Asset Management LLC, the Ladera Ranch, Calif.-based real estate company that formerly operated the SmartStop Self Storage brand in Canada and the United States, agreed to pay a $250,000 settlement to the California Department of Insurance for selling more than $2.1 million in insurance-related products without a license. As part of the agreement, SmartStop denied all CDI allegations and agreed to resolve the matter without any admission of liability or wrongdoing, according to a company press release.

CDI issued a cease-and-desist order to SmartStop on July 27, alleging the company lacked a state license when it sold approximately 19,500 tenant-insurance policies to customers between October 2017 and July 2019. SmartStop retained more than $1.8 million in operating fees during that time without disclosing its fees to renters, CDI officials said in a release.

“These allegations dealt with technical rules regarding sales procedures of self-storage insurance and nuances between such insurance and tenant-protection plans,” SmartStop officials said. “During the brief period in question, SmartStop provided contents protection to self-storage renters through a program created by an experienced third-party insurance brokerage and insurance company. SmartStop relied on its broker’s many assurances that no license was needed for the sale of the program.”

After receiving the stop order and clarification from CDI, SmartStop worked with authorities to correct the issue. “Since that time, SmartStop and its affiliates have made changes to address the concerns raised by CDI,” SmartStop officials said. “The full and complete cooperation by SmartStop with CDI shows its commitment to complying with all applicable laws in all jurisdictions in which it operates.”

In June 2019, SmartStop Asset Management entered a series of transactions with SmartStop Self Storage REIT Inc., a self-managed real estate investment trust (REIT), through which the REIT acquired the self-storage advisory, asset-management, property-management and certain joint-venture interests of its affiliate. Though the asset-management company and its subsidiaries have a limited partnership in the REIT, it primarily focuses on senior- and student-housing communities, according to the company website.

Through its indirect subsidiary SmartStop REIT Advisors LLC, SmartStop Self Storage REIT sponsors other self-storage programs, including Strategic Storage Trust IV Inc., a public non-traded REIT. It has approximately $1.6 billion of real estate assets under management, including an owned and managed portfolio of 144 self-storage properties in 19 states and Toronto that comprises 10.9 million rentable square feet.

Sources:
California Department of Insurance, Ladera Ranch Self-Storage Management Company Fined $250,000 for Unlicensed Activity
MyNewsLA, Ladera Ranch Self-Storage Management Company Fined
PR Newswire, SmartStop Asset Management Reaches Settlement, Customers Continue to be Protected
SmartStop Asset Management, Website