2024 Rental-Agreement Review: Make Sure Your Self-Storage Lease Addresses These 5 Topics

If you haven’t reviewed your self-storage rental agreement in at least six months, it’s time to take a fresh look. Part of this process is ensuring compliance with new or updated state laws and confirming that the big provisions are clear such as insurance, release of liability, owner’s lien, etc. But there’s more to it. These legal contracts also need to be current with industry best practices. Below are five critical topics that must be addressed in your lease this year.

Limitation of Value

At this point, most of you know to include a limitation-of-value provision in your self-storage rental agreement. This sets parameters on the total aggregate value of the property allowed to be stored in a unit and, thereby, limits the value of any claim that can be asserted by a tenant. If your lease does not address this, go add it … Right now.

While it’s imperative that your rental agreement includes such a provision, it’s also important to understand how it works. Generally, a limitation of liability or value is frowned upon by the law. However, self-storage is an exception. Most states now expressly allow the lease to limit the value of stored property, which is significant since the enforcement of the provision in those states is backed by law.

If a tenant files a lawsuit against your business related to their stored property, your first line of defense against the claim is the limitation of value. You can file a motion with the court to essentially cap the tenant’s possible award in the case at the amount set forth in the rental agreement.

That said, you may need to relay this valuable information to your attorney or have your insurance company consult with a self-storage legal expert to ensure the issue is appropriately addressed. I’ve recently seen cases in which the attorneys and even the judge involved weren’t aware that the state self-storage laws expressly permitted the limitation of value. One judge even tried to strike the provision from the rental agreement!

Electronic Communication

Most people communicate through some sort of electronic means today, and most state self-storage laws now permit lien notices to be sent to tenants via email. Some even allow them to be delivered by text. Still, your rental agreement must specifically authorize you to communicate with tenants via these means.

Some states require specific language in the lease regarding the ability to email lien notices to tenants. Otherwise, it suffices to include a simple provision stating that by providing an email address to the self-storage business, the tenant consents to receiving correspondence and notices from the operator this way.

Consent to send text messages is a little different, as it falls under the Telephone Consumer Protection Act, a federal law that regulates telemarketing spam. The act sets several requirements for a business to be able to text customer, including but not limited to obtaining written consent, disclosing the full scope of the SMS (short message service) communications, and providing a method for customers to opt out. It’s strongly recommended that you consult with an attorney if you wish to text your customers for any reason.

Finally, Florida recently enacted a new law that targets after-hours interaction with customers. Section 559.72(17) of the Florida Consumer Collection Practices Act prohibits communication with a debtor between the hours of 9 p.m. and 8 a.m. without prior consent. Recently, I’ve seen lawsuits against self-storage operators for alleged violations after sending rent invoices via email or text. I strongly recommend that you include a provision in the rental agreement allowing for after-hours communication with tenants, even if you don’t operate in Florida.

Fees

The charging of fees is always a popular topic with self-storage operators. It’s important to know what you can charge and when.

Most state laws provide put cap on late fees. If your state doesn’t, I recommend limiting it to the greater of $20 or 20% of the monthly rent. This has become an industry standard. Remember, too, that any fee charged in the first 30 days of default is generally considered a late fee, so you must be careful not to fall out of compliance by charging excessively. Additionally, nearly all states have laws that limit the amount that can be charged to a tenant whose payment is returned due to non-sufficient funds.

All other fees are contractual. Thus, any that you want to assess must be explicitly stated in the rental agreement, including the amount and when it’s charged. The fee should be a reasonable estimation of the costs incurred by the business for that action. In other words, it shouldn’t be a penalty to the tenant; it should instead be a reimbursement for expenses incurred. For example, if it costs you $10 to send lien notices, a fee of more than $10 could be viewed as punitive.

With regard to timing, no fee should be charged before the event that triggers it actually occurs. For example, if you’re charging a tenant for a lien-sale advertisement, it shouldn’t be levied until after the ad is placed.

Door Locks

As the self-storage industry makes way for new technology, it’s important to address it in the rental agreement. One of the more recent trends is the implementation of Bluetooth smart locks. If your rental agreement calls for the unit door lock to be provided by the tenant, but smart locks are now in use at your facility, it’s time for a revision. The updated language should state that no bailment is created by the locking system and the operator isn’t liable for any loss or damage to property resulting from tampering, failure, defect or malfunction of the electronic-locking device.

If your facility doesn’t have electronic locks but does require a specific type of door lock, the lease should address this as well. Be specific in your wording so tenants clearly understand what kind of device is acceptable at your property.

Tenant Conduct

Over the last few years, tenant conduct has become a major issue at self-storage facilities. Your rental agreement should state that the customers and their guests must conduct themselves and communicate with the operator, employees and other tenants in a professional, businesslike manner while on site. In addition, it should be noted that the operator has contract termination rights if the tenant or their guests fail to adhere to this requirement. This addition serves as both a warning and a legal path to terminating a rental if necessary.

Your self-storage rental agreement is a powerful document. It outlines your responsibilities as a facility operator and those of your tenant during their stay. Review your lease regularly, keep apprised of changing state laws that could affect your operation, and make changes as needed to thoroughly safeguard your business.

Ashley Oblinger is a senior attorney with the Atlanta law firm of Weissman Zucker Euster + Katz P.C., where he specializes in business and self-storage law, advising operators nationwide on all legal matters, including lease preparation, lien enforcement, tenant issues, tenant-claims defense, and employment policies. To reach them, call 404.760.7434 or email [email protected].