For those of you who have either worked with me before or heard me speak at an ISS Expo, you know that I believe that you should not try to explain your entire Rental Agreement to each occupant before or after they sign it, that it is the occupant’s responsibility to read and understand the Rental Agreement. It is your duty to present to them a well-written document (however long) that is readable and so that the occupant can understand the terms if the occupant choose to read it. But I do not believe rental agreements should be explained provision by provision and, unless your state requires it, I do not believe the “important to you” provisions should be initialed. That is actually one of the reasons I like kiosks, because there is no chance that anyone could ever accuse a kiosk of explaining things differently or pointing out different rental agreement provisions for one occupant over another.
I acknowledge there are things that you feel you should point out to the occupant about the rental agreement, such as the rate of rent, when rent is due, how to pay rent, i.e. rent payment issues. Further, many states have required written disclosures that must appear in your rental agreement which you may feel are necessary to discuss with the occupant. I am not going to stop you from your desire to repeat that which your state statute already requires you to put in writing. However, there are six (6) things I believe that you should actually discuss with your occupant about your rental agreement before you let him/her walk out of the office.
1. State required or not, you need to explain to the occupant (presuming that you do not provide insurance) that you are not providing insurance to cover the occupant’s goods stored and strongly recommend, if not require, that your occupant’s have insurance on his/her contents. For some reason at the end of the day, we see a lot of lawsuits in our office where the occupant thought for certain that the operator maintained some amount of insurance on the stored goods. I recommend strongly against making any reference to homeowners insurance covering the stored property, because homeowners insurance may or may not cover the stored property, you may need a separate rider for property stored out of the house and, generally homeowners insurance has higher deductibles and more stringent exclusions in the homeowners policy than does a traditionally written self-storage contents policy. While in fact your state law may not permit you to force insurance on the occupant, you should spend a few minutes, as a good business person, and tell the occupant the number one thing you need to know, is buy self storage insurance, do not skimp, do not hedge your bets, and do not rely on the owner to do it for you.
2. Tell the occupant why giving the owner of a self-storage facility his/her credit card is critical. Many of you have the ability to accept a credit card, and obviously those of you who do not, this item is not applicable. Many of you fail to make the proper kind of “ask” for a credit card. You may have an addendum and sheepishly hand it over to the occupant only if asked, or you hand it over and say you have the “option” to give us a credit card number if you want. Wrong, I say. Credit cards, even if not required, should look like a requirement of the rental agreement and let the occupant know why it is so important that the occupant at least back up his/her timely rent payment with a credit card. First, I would prefer everyone be on some sort of auto-debit so that you can avoid the risk of charging late fees, other charges and all of the contentiousness and potential risk of litigation that comes along with doing those sorts of things. However, to me the most important reason to push credit card information is to look the occupant in the eye and say “Suppose you have to run out of town and you forget to pay your rent and you are gone longer than you expect… suddenly your $75.00 a month bill, because of a late charge and maybe an overlock or other type charge, has gone up another $20.00).” Do not be afraid to advise/make the “ask” for a credit card. If for no other reason than as a back up to avoid a late fee if someone forgets to pay you. From a protection of your stream of income, avoidance of liability, and customer satisfaction perspective, getting the auto-debit or credit card backup payment before you impose a late fee, is one of the best things you can tell your occupant to do to make the self storage relationship go smoothly and uneventfully.
3. How to terminate when the time comes. You know the old adage of “if it is in writing it must be true?” Your rental agreement, more often than not, discusses how you want your occupant to terminate, i.e. you want them to give you a certain number of days notice, you would like them to clear out the unit, leave it “broom clean” and, surprise, remove their lock. You also probably want the occupant to stop by the office to “check out” and provide a forwarding address. Whatever your requirements are, create from the beginning, expectations of how to terminate. While the requirements to terminate may be writing in your rental agreement, posted at the front gate or at your office, or even on stickers on your doors, put it into their heads right from the beginning. If you do not discuss termination from the beginning, when you have problems at the end, occupants are going to feign complete ignorance. You can bang you head against the wall and say “didn’t you see the sign at the gate? Didn’t you read the sticker on your unit? Didn’t you see that I put move out notice forms on every building and a mailbox at the gate to make it easy for you?” Tell people what you want from the beginning, show them how to do it. I do not believe you are encouraging early termination. I believe you are building proper expectation of giving proper notice and, avoiding a dispute at the end of the term when the occupant fails to vacate or give proper notice.
4. Let the occupant know it is his/her duty to check on his/her property once in a while. Many of you put in your rental agreements the “legal language” that says occupant has inspected the unit and find it to be suitable for the occupant’s particular purpose. What you need to tell the occupant is something along the lines of “Hey, despite anything else we do, you should want to come out once in a while and check on your property, just to make sure it is okay.” I do not believe in giving the occupant a laundry list of all the things that can go wrong in self-storage, such as roof leaks, infestations, mold, leakage from other units, and etc., but these are the kind of issues I am talking about. Later on you do not want to hear that the occupant could not possibly identify even a range time of when his/her unit may have been (you pick it… broken into, leaked on, etc.). Hopefully, a pleasant byproduct of this policy is that the occupant will continue to bring more property out to the self-storage unit and eventually need a larger space or another space. Occupants that are off over-seas in the military or are leaving town and storing their property in the unit represent a different problem. All I can say is, tell the occupant to find a friend or family member to do it for you and give them a key and your gate code.
5. Disclose to your occupant how the gate works. I cannot tell you how many times we get a claim that our client is in default because the occupant tried to use the gate or the entry door and it did not work. Almost always, the failure of the gate or door to open is the result of user error. However, it is not necessary intuitive to people that they should push “*” then their unit number, then their secret access code, then “#” to make the gate open. You can put it on the sign to remind people, but tell them up front how to use the gate. Also, I see gate systems that trigger door alarms if you do not code in at the facility. If there is going to be a false alarm charge, let people know, even if you disclose it in your rental agreement. Further, I see gate systems where, once one person is in, until he/she codes out the gate code does not work again. This does not work well with a husband and a wife who are both driving out to the self storage facility in two separate cars, one car gets in and then the gate will not let the second car in. Help people understand what the exit procedures are. If you have a simple drive-up gate and the gate opens, that is fine. If you have to code out, let people know this. Finally, make sure people understand whether or not they can get stuck in your facility at night after gate hours expire. I see a lot of unhappy occupants who fail to understand that after 9:00 p.m. they are going to spend the night unless they want to pay a manager “response fee” to open up the gate manually after hours.
6. Disclose the fallibility of security systems and especially if any of the systems that appear to be present on the property are fake. More and more people are relying on a sense of security, particularly because apparently 70% of all self-storage decisions are made by women who value security over price. If your facility is full of fake cameras, if you have only one gate code and anyone who has ever used a facility knows the gate code, disclose these things. People rely, and make their self storage decision, based on how secure they feel they are going to be. Security systems are fallible. If your system is not backed up with an electric generator when the electricity goes off, or if your camera system always goes out in a thunderstorm, you do not want people relying on the implied existence of these items to imply a false sense of security. This is something you may generically disclose in your rental agreement. I would highlight this provision when discussing the rental agreement. You do not want to hear later that people relied on the existence of all these high tech security items that did not really exist, in thinking that their property was safer than it would be at a facility down the street that did not have so many cameras. That “reliance” could come back and be grounds for a lawsuit.
The most important thing in demonstrating your rental agreement to the occupant is consistency. You want to say the same thing to everyone, or at lease close as you can be to the same thing. Trying to explain the entire rental agreement to an occupant is the worst thing you can do because these items you choose to highlight will be one of the things that you did not highlight to the occupant that will be one of the things that goes wrong. The six (6) items above are not so much rental agreement disclosures as much as they are good, sound advice that every self storage occupant should have upon entering into a business relationship with your facility. Let the occupants know and let them read the rental agreement themselves.
Jeffrey J. 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. Mr. Greenberger’s practice focuses primarily on representing the owners and operators of commercial real estate, including self-storage owners and operators.
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.
Jeffrey’s website, www.selfstoragelegal.com, contains Jeffrey’s legal opinions and insights into the self-storage industry, as well as an article archive.
Jeffrey is the legal counsel for several State Self-Storage Associations, 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 J. Greenberger at jjg@kgnlaw.com, or mail them to Jeffrey J. 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.