I have given up on predicting what will happen as we continue to navigate the COVID-19 pandemic. The unexpected seems to lurk around every corner. But one thing that didn’t surprise me is how the self-storage industry has managed to survive and even thrive over the past couple of years. The facilities benefit from high occupancies and rents.
But things don’t always go so well. That’s why now is the time for operators to get their legal house in order. Make sure all your documents are solid and that your tenants follow company policies. If they aren’t, you have to get them there. Here are some things to consider.
If your self-storage space is full and you have no space to rent, you probably have time to pull out your tenant records (literally or digitally) and make sure they are complete and up to date. day. Make sure you have good information for each tenant – or at least what looks like good information – including a mailing and email address and alternate contacts. If you don’t, reach out and get it. Remember that your ability to use email for various defect-related tasks depends on your valid address.
Also confirm that you know the military status of each renter. A federal law called the Servicemembers Civil Relief Act (SCRA) requires you to know this. You need your files to be accurate in the event of a dispute or tenant default. Your attorney or self-storage association can offer more guidance if you are unfamiliar with SCRA requirements.
Many self-storage laws have changed over the past four years to allow for various priorities, such as emailing notices of default, avoiding or changing advertising requirements on selling liens, allowing vehicle towing, and even clarifying owners’ ability to sell insurance under a limited lines license. However, with these changes come new requirements for what should be in your rental agreement and how it should be written.
Review your self-storage lease, even if there has been no change in status in your state, every three years to keep pace with industry trends. It’s critical to make sure your rental agreement meets the basic requirements of your state’s law so that your lien rights remain enforceable.
Vehicle Storage Folders
Vehicle storage is a different activity from traditional self-storage and requires more information from the tenant. Whether you are renting space in an open lot or covered building, or individual units, you should request details of the property being stored when signing the lease. Accurate data collection gives you a better chance of locating the vehicle owner in the event of an emergency or fault. Anyone storing a boat, RV, car or other vehicle must provide:
- Year, color, make and model
- License plate number and state
- The vehicle identification number or other serial number
- A copy of the vehicle registration document
- Insurance, if you need it
- Name of owner and lien holder
Collecting this information will help you protect your storage business and properly manage faults. This will also ensure that you are covered in the event of loss.
Unit door locks
Most self-storage operators have a policy that requires tenants to use a “strong” lock with a solid mechanism, such as a disc, limited hasp, or cylinder lock. Some even use electronic locks. If you have a policy requiring a particular type of lock and some of your tenants are still using padlocks or luggage locks, now is a good time to help prevent future break-ins by insisting they fix the situation.
Proof of insurance
Many self-storage operations now require each tenant to provide proof of contents insurance or registration, or to sign up for a company-offered protection plan. Last year, my office assisted nine facilities that had experienced fires between Labor Day and December 1. It was the highest number we had ever seen in three months. Disasters happen, so it’s imperative that you help your tenants protect their belongings.
Following a claim, most customers who have insurance will receive a payment, sign a release, and walk away quietly without hassle or hassle on social media. However, those who are not covered will also expect you to pay them, even if they have signed a rental agreement stating that you are not responsible for their belongings. In some of the fire cases mentioned above, tenants refuse to collect what is left of their belongings and leave their homes, which delays the demolition of damaged buildings because the operator will not pay. Even if you are not legally responsible for these losses, tenants can still create a miserable situation and hamper your ability to restore the business.
Take the time to review your tenants’ insurance compliance. Do you have papers for all your tenants? If you don’t offer a renter’s insurance or protection plan, institute one and start encouraging your customers to purchase or provide proof of their own coverage. Remember that leopards do not change their spots. If you have tenants who don’t want to cooperate with you now, imagine how they will act after a real disaster like a fire. Now is the time to clean up your documents.
Time to cut the bait?
Did you know that a major mobile phone company fires its “100 worst customers” every year? He realized that those who were the most demanding and caused the most problems for his service reps would never be good long-term buyers. They are now cutting the bait with these people before there is a serious problem.
I’m not advocating firing 100 of your self storage tenants, but if you have a few who don’t want to comply with your company policies, then you have a waiting list of prospects eager to come in in empty units – this is a good time to enforce obedience or wish them good luck. A few small steps taken now is a great investment. If you are doing as well as most operators these days, you now have the time and the financial comfort to enforce your rules. By doing so, you will be prepared for future problems.
This column is intended to provide a general legal overview of the field of self-storage and should not substitute for the advice of your own attorney.
Jeffrey Greenberger is a partner at the Cincinnati law firm Greenberger & Brewer LLP. Licensed to practice in Kentucky and Ohio, he primarily focuses on representing owners and operators of commercial real estate, including self-storage. Its website, selfstoragelegal.com, contains legal opinions and ideas as well as an archive of articles. To reach him, dial 513.698.9350; E-mail [email protected].