Self-storage rental units are a unique class of property, presenting both lessors and lessees with issues requiring legal assistance. The industry’s publication “Inside Self-Storage” recently identified three specific areas of possible litigation involving commercial self-storage rental units. These three areas should be high on the list critical issues for both lessors and lessees when negotiating commercial storage leases.
California Business and Professions Code 21700-21716, known as “California Self-Service Storage Facility Act” governs several aspects of the regulations surrounding enforcement of self-storage facility lease provisions. The Act includes provisions making it somewhat easier for storage facility operators to communicate lien notices and advertisements of lien sales. However, these eased restrictions come with some notable requirements. For example, operators using email to send notices should obtain delivery verification. If operators advertise lien sales online they should be able to demonstrate that the sale was commercially reasonable. If operators tow vehicles they must use licensed towing operators.
Another provision that has a large effect on enforcing the lease contract is a statement that the unit lease contract must contain two things: (1) language indicating the property stored within will be subject to a claim of lien and can be sold to satisfy that lien if rental charges remain unpaid for 14 consecutive days; and (2) a designated space for the occupant to provide an alternative address for delivery of lien notices. If the occupant does not supply an alternative address, there is no burden on the lessor, but the space must still be provided. Failure to include language addressing these issues in a storage rental contract creates an unnecessary risk that any future litigation against the operator will be successful.
Class Action Lawsuits
Storage facility operators have faced an increase in class action lawsuits brought for a variety of reasons. Storage facilities typically serve a large number of tenants, all of whom operate under the same contracts, pay the same fees, and have the same lien procedures. This means there is a self-created class for any claim brought against a storage operator, opening the door to class lawsuits for any of a number of issues. These can include wrongful storage content auctions, tenant insurance problems, security issues, injuries on the premises, and any number of other issues.
Premises liability lawsuits are high on the list of problem areas for owners of self-storage rental units. These lawsuits are nearly impossible to completely eliminate from any commercial premises. Still, operators often don’t do enough to protect themselves. If a particular risk appears to present itself more often than others, owners and operators should address such risk. For example, many storage rental units are accessible at night. Is there adequate lighting in all areas accessible to lessees? Owners should also regularly inspect the premises and address any needed repairs. If tenant insurance is offered, it should be thoroughly examined by legal counsel. Operators also need to understand and properly manage compliance with the Americans With Disabilities Act and the Servicemembers Civil Relief Act as they apply to the self-storage industry.
Tenant Privacy Rights and Identity Theft
Privacy also comes into play where law enforcement is at issue. Police can show up at a storage facility looking for information for a variety of reasons. Sometimes they suspect a storage unit may contain drug paraphernalia, such as that required to run a methamphetamine lab. Also, in the years since 9/11 there have been more instances of federal authorities seeking access to storage facilities in the name of homeland security. To adequately protect their tenants (and ultimately themselves!), owners of self-storage rental units should require law enforcement to present valid subpoenas or warrants when seeking private information or access to individual storage units.
These privacy issues are hotbeds for civil lawsuits, and they are not easy to manage. Records should be stored on secured hard drives. Hacking can and does occur to even the most vigilant operator, and even when the successful manager has done everything possible to prevent outside hacking, there is the separate problem of employee malfeasance. Even the most careful operator managing self-storage rental units can run afoul of statutes and legal protections, making it prudent to hire legal counsel who understands the intricacies of these issues.
Contact Stephen Hammers (firstname.lastname@example.org) or issues involving self-storage rental units, lease litigation and other commercial real estate matters.