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A LEGAL PERSPECTIVE

Jeffrey J. Greenberger Attorney at Law
Katz, Greenberger & Norton LLP
105 E. Fourth Street, Ste. 400
Cincinnati, Ohio 45202-4056
(513) 721-5151

WHAT TO DO IF YOUR TENANT DIES

A question I am frequently asked when I am at the ISS Trade Shows is AWhat do I have to do if a tenant dies?

Before society became so litigious, I used to recommend that you should have co-tenants, if possible, on each space. As an example, if the person that was renting from you was married, you would name the other spouse so that they could have rights of access to the premises. In the last five or ten years, however, I have changed my position, and I now recommend that you only allow one person to be your tenant. If your tenant wants to let other people into the space, it is up to that tenant to give the code and lock combination or key to let people into their Self-Storage space. However, this does create a problem when that person dies.

The general proposition is that when a person dies, it is not up to the Self-Storage operator to decide who gets the property stored in your facility. On the other hand, the person who paid the rent is no longer around to do so, and if you accept rent from someone else, you may be improperly impacting the decision as to who gets the property.

While every state law is different, there are some general concepts you need to be made aware of. Most importantly, when your tenant dies, and you do not have a wife or other person as a co-tenant, you can not simply turn the contents over to the wife or first relative that comes to collect the decedent's belongings.

The most common mistake I have seen is a relative or a friend of the family comes in to pay the rent on the space for the decedent on their own personal checking account, just to avoid having you dispose of the property. Accepting this payment, at least in the form of a personal check, creates a problem because you may now, in theory, be validating an argument that you have accepted this person as the new tenant of the space. The preferential way you would want to be paid is by a check from a probate estate. The checks would say AEstate of . . .@.
When any person dies, the estate may or may not go through probate. Probate is normally determined based on the type and size of the assets the decedent has left behind. Often, if a person passes away and only has minimal assets, no cars, stocks, bonds, etc., and is married, the estate does not probate because none of the assets need to be transferred via the court to the surviving spouse; they transfer automatically by the way that the assets are titled. Further complicating the process is that not everyone has a Will where they have named an executor (or the female version, executrix), or an administrator (administratrix).

When your tenant dies, several questions should be presented to the person listed as the emergency contact on the lease: (1) did the person who died have a spouse; (2) did the person who died have a Will; and (3) is that Will being probated - that is, will the court handling probate matters in your county, open a probate case and administer the disposition of the assets and the payment of the debts of the decedent. Probate is the best of all possible situations for the Self-Storage operator.

If the estate is probated, that is, there are assets of size or type to merit the probate court opening a case to dispose of those assets and manage the debts, you need only find out from the court the name and address of the administrator or executor of the estate. Most probate courts issue what is called a Acertified letter of authority@ which is an entry of the court, putting the world on notice that this particular person is the authorized executor or administrator to act on behalf of the estate. If someone represents to you that they are the administrator or executor of your tenant=s estate, you need only ask for that type of certified entry; a copy in your file is sufficient to allow that person, Aon behalf of the estate@, to pay the rent, and/or to remove the possessions or enter into a new lease agreement with you, canceling the old lease agreement.

Do not be surprised that in some instances, the probate estate can not pay rent immediately after it is opened. Sometimes it takes time to martial assets, and the probate court needs to approve, depending on where you live, certain expenditures. If you have a certified letter of authority, and the rent can not be paid immediately, you should contact an attorney to help you file a claim against the estate which should be paid some time before the estate is closed. Depending on what state you live in, that could be anywhere from six months or more, but at least you have a reasonable belief that you should be paid.

The next situation is one in which the person had a Will naming an executor or administrator, but the assets are insufficient, or are not the character that would require, under normal circumstances that the estate to be probated, so the family does not file the Will with the court. The best answer for this scenario is to request that the heirs open a probate estate anyway so that you have the protection of the probate court and a letter of authority to know that this transaction is legitimate and that no other relatives are going to appear some time later and make claim to the same property that you have turned over to a different relative. This, however, is unlikely to happen. Your second option is to open a probate estate on behalf of the decedent to get you the same protection. This is even less likely to happen because of the costs to the Self-Storage facility. The best you can do in this type of situation is obtain a copy of the Will and a release with indemnification from the executor/administrator, and from as many of the relatives as you can locate or determine who may have a claim to the property. The best way to do this is to ask the people who have come seeking to get into the space to provide a list of all of the decedent=s relatives. Also, you will have to open the space and see if you can determine if there is any property that appears to belong to anyone other than the family of the decedent, that is, perhaps there=s mail, a car, or some other item that appears to be property of someone else. That person would need to be notified, if at all possible. Please keep in mind, however, that proceeding without actually opening an estate does not offer you any protection from all possible claims, and the only failsafe way to proceed, especially where their assets have value, is to have an estate opened.

Many of you, by this point, are asking yourself, Awhy don=t I just send out the notice or notices required by my State=s self-storage statute and sell the goods?@ You have several problems facing you with this line of thinking; (1) a relative may have come in and tried to tender the rent, which means that the rent is actually not delinquent, but you may not have been able to accept it without the inference that you were entering into a lease agreement with someone other than the named party on your lease; (2) most state statutes require that you send certified mail notice to the tenant. However, if you know that the person is dead, by most statutes, you have not effectuated service such that you can proceed with a lien sale. If you proceeded with a lien sale, it would be at great risk of a lawsuit.

If you are forced to proceed with the route of collecting releases, obtain the release of as many of the relatives and other people who might have lien interests in the property and release the property to whomever the releases say you are going to release the property to, and get a receipt. Be certain you understand the risk of litigation by proceeding with this alternative, and if possible, make sure you have an indemnification provision in your releases. Please make sure you obtain positive identification. Under this alternative, you are always at risk. There can be a claim from other relatives, friends, or creditors that possessions in the facility belonged to them and that you had no right to release them. The best you can do is obtain as many releases as possible and proceed.

The third scenario is very similar to the second scenario, which is, there is no Will and therefore no executor/administrator, and no assets needed to be probated, and the people have just gone on about their lives after the death of the tenant.

Again, the only real options are to force the opening of a probate estate on behalf of this person or to obtain releases with indemnification agreements from as many people as possible to get a consensus of who should get the property. You are still in a position where it would be impossible for you to simply proceed with a lien sale and still at large risk for potential litigation.

The conclusions you should draw from this article are that, as I always say, the better the documentation you have now, the fewer problems you have later. That is, the more emergency contact people you have, the more you know from your contract or an application, who your tenant is, who his or her relatives are, who may have liens on the property, and who may have property stored in this person=s space that may not actually belong to this person, the more likely you are to properly release this property to people in the event of your tenant=s death, and the more likely you are to avoid being sued for doing the best you can.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self-Storage field and should not be substituted for the advice of your own attorney.

Mr. Greenberger=s practice focuses primarily on representing the owners and operators of commercial real estate including self-storage owners and operators.

Mr. Greenberger is the legal counsel for the Ohio Self-Storage Owners Society, Inc., and the Kentucky Self-Storage Association, Inc., as well as a regular presenter at Inside Self-Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.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.