Even if you have a solid rental agreement for your self-storage operation, the verbiage can become outdated and require minor adjustments. Fortunately, you can make small changes to your agreement without making substantial modification to the landlord/tenant relationship.
This article doesn’t focus on large rental-agreement changes; nor does it explore small changes to the rules and regulations section of your agreement, because you likely already have a clause that addresses your ability to make those. Instead, I’ll discuss how operators can make minor lease changes that do not significantly alter their relationship with tenants.
For example, let’s say you’d like to clearly define what a “written notice” of change of address is. While you’d like all new customers to be bound by this change, you also want to address the issue with current tenants. This isn’t an item that would change the landlord/tenant relationship; it’s merely a clarification.
On the other hand, here’s an example of a change that would alter the owner/tenant relationship: In light of the recent verdict in the Dubey vs. Public Storage case, a wrongful-sale lawsuit in which the plaintiff was awarded a large settlement, some facility operators might consider adding tiered value limits to their rental agreement based on unit size. This is a larger change that would require a tenant’s written consent through an addendum or even a new agreement.
Any self-storage operator who’s executed a rent increase already knows how to make a small change to a rental agreement. You can use the same format to notify tenants of other small amendments: Send tenants a letter that proposes the change and sets forth the language that will appear in the agreement.
You need to give the tenant at least one periodic rental term to accept or decline the new stipulation. If rent is due on the first of the month, send your notice before the first, reminding tenants of when their lease renews and explaining that the proposed change will go into effect. They have 30 days from the first of the month to accept or decline.
For tenants whose contract renews on the date they signed the lease, allow 60 days notice from the anniversary date. This ensures they have at least one periodic rental term to accept or reject the change. Note: Check your rental agreement for any language that may lengthen the amount of time you’re required to give tenants when you make a change.
In your written notice, state the change as if you were doing an addendum. For example:
Effective X date, Provision Y of the rental agreement will be modified to provide that “In order for Occupant to give Owner written notice of an address change or intent to terminate, said notice must be given in hand to the Owner at the office or via Certified Mail and may not be sent by fax or e-mail to be accepted.
You may need to include a sentence that reads, “Your payment of rent for the next month or term indicates your acceptance to this change or changes to the rental agreement.” You should also state, “If you do not agree to these changes, please vacate the premises and consider the lease terminated by [the date stated in your notice].”
You don’t want to chase away business by telling tenants their rental agreements will be terminated if they don’t agree to a change. However, if you feel the change is important enough to make—and be retroactive—it must be significant enough to ask all tenants to agree.
Conversely, if the change isn’t that important to you, consider adding it only to future rental agreements, leaving established agreements untouched. This allows attrition to rid your facility of pre-existing rental agreements while filling it up under agreements with the new term.
Later, you can address the small group of tenants who remain with old agreements that need to be changed. Eventually, this subset becomes a small and manageable number, affording you more individual communication and explanation with customers as to why the change is being made.
Addendums and New Agreements
If you’re making a substantial change to the rental agreement (such as the tiered value limits mentioned earlier), create an addendum or new rental agreement and ask all tenants to sign it. This will prove you have their acceptance of the change.
Do not send the kind of letter discussed above to tenants if, for example, you’re going to completely rewrite your negligence liability and add six new provisions to your rental agreement. This will require a signed addendum or completely new contract. You should get as many of those signed in person or notarized to prove tenants acknowledged and accepted an important and substantial change to the agreement.
Don’t let any of this scare you from changing and updating your rental agreement. Contracts can become stale and outdated. With case law being produced all the time, we all have to react; and with statutes in various states changing, it’s important that you keep your agreement up-to-date.
Jeffrey J. Greenberger is a partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati and is licensed to practice in Kentucky and Ohio. Mr. Greenberger primarily represents the owners and operators of commercial real estate, including self-storage owners and operators. To reach him, call 513.721.5151; visit www.selfstoragelegal.com.