Package Acceptance Can Be A Risky Business

Mini- Storage Messenger - Package Acceptance Can Be A Risky Business

As I meet and speak with self-storage facility operators around the country there seems to be one universal truth among all self-storage facility operators, that pharmaceutical representatives are wonderful long-term, good paying occupants and that you must keep a key to their unit and accept packages for them if you wish to keep these pharmaceutical representatives happy occupants of your facility.

While I do not dispute that pharmaceutical representatives are wonderful occupants and generally pay their bills on time, competition in the industry seems to have forced more and more operators to agree to accept packages not only from pharmaceutical representatives but for many other types of occupants. Some of you keep keys to locks of units, turn the key over to the delivery driver, sign the electronic clipboard, and receive the key back from the driver each day. Others of you accept packages in your office or in a package acceptance unit and allow the occupant to pick up the package with or without signing out the received packages; still others have a sign in/out practice.

All in all, agreeing to accept packages for your occupant is risky business. While it might be better to accept packages in the office or package acceptance room, package acceptance in general, or holding property of the occupant’s for any reason takes your business away from being a business of renting real estate and puts you in the bailment business.

Let’s examine this problem. The general model of self-storage is generally defined, in most state statutes, as real property designed and used for the purpose of renting or leasing individual storage space to occupants who are to have access to the space for the purpose of storing and accessing personal property. Thus the business model is a rental of real estate to an occupant to add and remove his property on an as-needed basis. When you accept packages, especially when you hold keys to the unit, but in all situations you have created a bailment similar to the type of bailment that would be created when you drop your clothing off at a dry cleaner, you give your car to a valet parker, or you check your luggage at an airline or a hotel bell desk. You expect the property will be will cared for, watched carefully, and returned to you in at least as good a condition as when you had dropped it off (or cleaner in the case of the dry cleaner). Thus, when you have, as example a key to a unit, instead of the occupant having exclusive rights to enter, add, and remove his property on a self service basis, you also have to the ability to enter. When you have the ability to enter and this means you have accepted additional responsibility or duty for that property. In theory, you have accepted the duty to provide for the ordinary care and well being for the property. This might include entering the unit to inspect the property, to make sure it is not getting moldy, that there are no roof leaks, and etc. Conversely, in the self-storage model, you have no general reason or access to the unit except between occupants unless you are made aware of an emergency or maintenance situation by your occupant. When accepting packages in your office, you have assumed the duty of care over the packages. That is, the occupant expects you to receive his/her packages, hold them in a safe place, care for them, ensure that they do not get wet, damaged, opened, stolen, and etc., while the packages are in your possession and provide them to your occupant on demand in the same condition that they were delivered by UPS or FedEx. Thus, you have taken on a whole new duty and accepted a new type of liability that you did not have when you were operating self-storage.
Many people say to me “Why can I not contract around this bailment and release myself from liability?” The answer to this question is that it depends on the level of conduct that your occupant alleges occurred in the loss or damage to the property. Whereas you may only have a duty not to intentionally or willfully damage tenants property when stored behind a locked door to which you have no access, a court could stretch the definition of what you might be liable for if a package is lost, damaged, stolen, etc. while in your care, custody, and control when you have created this bailment. Thus, while an occupancy agreement might say operator is released from its negligence for loss or damage to a package, you may still find yourself defending a claim that the loss or damage was due to more than negligence, while you may win the claim, the lawsuit may be costly to defend.

The other problem is that you can never contract around your criminal liability. An example and a true story that happened, my client kept a key to a pharmaceutical representative’s unit. Every day or so a UPS driver would show up and my client would sign the clipboard, the driver would take the key, deliver packages to the unit, return the key and leave. One day the pharmaceutical representative reported a package that our client had signed for was missing and unfortunately, it contained 200 samples of a prescription medication. While I never believed that my client had any reason to steal or remove the property, either the driver from the delivery service, the drug representative, or my client was dishonest. Unfortunately, in the chain of custody, the last person to have care, custody, and control over the package was our client who “signed” for it as received and in their possession by signing the electronic clipboard, although our client never saw the box and certainly never monitored the delivery to the unit. The DEA came in and opened what became a two year criminal investigation against my client, while eventually the DEA was convinced that our client did not steal the drugs and no criminal charges were filed, it took a lot of years off my client’s life and made for a very miserable and expensive lesson on bailment’s and responsibility for the custody of property. You do not even need a drug representative occupant to run into the same trouble. If you control a key to a unit, and your tenant claims property is stolen, not only can they make a monetary claim against you, but if they believe that you were the only other person who had access to the unit, that some property is missing, and there is no forced access, the occupant could file criminal charges against you. Whether those charges stick or not you will be forced to hire a lawyer and defend these charges vigorously. Even if there is no criminal liability you can find yourself facing a large claim for a lost package. Since you do not know what you are accepting you may sign for a package, keep it in your office. If you cannot prove the occupant received the package from you, the occupant can claim that the package contained $100,000.00 worth of loose diamonds and file a civil lawsuit against you and you could be facing a $100,000.00 lawsuit you never expected.

In summary, holding the key to a unit for any reason is a terrible idea. It takes your multi-million dollar investment and exposes it not only to civil liability for package loss, damage, or any other failure to properly honor your bailment, but also subjects you as the owner/operator and your employees to potential criminal liability. This is not how you want to lose your facility. Even keeping packages in the office, if strictly regulated, is still a risky idea, but not nearly as bad as keeping a key to a unit. With a key to the unit, you have a bailment over the entire unit and no idea what is going in and out of that unit. At least with the package acceptance in your office you can have the occupant sign and acknowledge that the package has been received by the occupant and taken out of your office in good shape, unopened, undamaged, etc. Still, you run the risk if the wrong package disappears and your occupant smells money (and you will never know what was actually in that package) that you will be sued or criminally prosecuted. There is automatic automated locker system which alleviates all of this liability. While it is expensive, if you are going to consider accepting packages for your occupants, you may want to look at such a system as a way to thoroughly insulate you from any bailment liability.

Finally, this same scenario is true any time you keep possession and control of property for your occupant. This includes if you are operating a shipping business, like a mailbox store, or if you are holding property to sell on eBay or some other auction type business. Let’s face it, if your occupants knows that you know what is stored in their unit for sale or that they may bring to you, it does not take much for them to then allege that property is “missing”, and that you were the only other person who knew that property was in the unit. Since there is no sign of forced entry and only you and the tenant have access to the unit, he is going to allege you stole this property and trump up the value and make a nasty insurance claim, assuming you even have insurance for this type of loss.

You should also speak to your insurance carrier to make sure you have any type of coverage that you can to cover you in the event of a bailment and that your insurance company knows that you are creating bailments. Most importantly, strongly consider not being in the business of package acceptance, holding those packages, or allowing those packages to be delivered to the units in your facility.

You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at info@selfstoragelegal.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721-5151, or visit his website at www.selfstoragelegal.com.