Storage Facility Agreement Overview
Storage facility rental agreements, which are commonly called leases, are contracts between the owner (or manager) of a storage facility and those who rent units at the facility. It is customary that a lessee obtain permission to enter into a storage facility rental agreement before storing property at the facility.
This post provides an overview of storage facility rental agreements. A storage facility rental agreement is essential because it defines and limits the rights that owners of the storage facilities and those who rent spaces have to the other’s property. The legal relationship of lessor and lessee is governed in part by state laws. These laws vary from state to state , and knowing your rights and obligations under the applicable storage facility lease is useful as one contemplates placing personal property into storage.
Key Policy Terms Governing Rental Agreements
Rental agreements for storage facilities will typically contain key terms such as rent, security deposit, lease term, access to the rental space, rules and regulations, insurance requirements, default, and termination. The terms in a rental agreement will determine the excess and rights of the tenants and owners at any given time.
Rent, or the amount owed to the owner for the right to use the space, commonly varies by space size. Time to pay the rent can also vary depending on the policy of the storage facility – daily, weekly, monthly, or yearly. Storage facility owners commonly require a security deposit. The amount of the security deposit, as well as the timing and conditions for return of the deposit, will commonly depend on the type of rental space and the times involved.
Lease term is another key term in a rental agreement and will typically be dependent on the mode, sizing and duration of rental space. Common lengths of time include short term (less than a year), or long term (one year or longer).
Rental agreements also commonly address the right to access the storage facility. Common questions that arise are: How much notice is required before the access request? When can the access request be made (e.g., night or day?) and other that when can the storage unit be accessed (e.g., daytime only, etc.)? Are there limits on how often a customer can access a storage unit?
The terms of the rental agreement may also require the tenant to comply with rules and regulations. Typically, a violation of a rule and regulation will affect the tenant’s rights to access the space. Commonly these rules and regulations require the tenant to avoid smoking in the space and to not engage in any illegal activities in or around the storage facility. Other rules and regulations may prohibit the tenant from providing or receiving any form of consideration of others for the storage space.
The terms of the rental agreement may also require the tenants to maintain certain insurance requirements with the storage facility. Commonly, storage facility owners may allow for a tenant to maintain insurance for their space, or simply maintain a co-insurance policy with respect to the space. The terms of the rental agreement will usually require the tenant to provide a certificate of insurance to the owner in order to provide proof of compliance with the insurance requirements.
Default refers to the tenants or owners failure to meet one or more terms of the rental agreement. In that instance, the rental agreement will commonly give the owner a right to terminate the rental agreement and retake possession of the space. Key conditions of a default are usually outlined in the rental agreement.
The terms of a rental agreement will also commonly provide the owner with a right to terminate the rental agreement. In certain instances, the rental agreement may provide the owner with a right to terminate or extend the agreement before the end of the term.
Tenant Rights and Responsibilities
Your storage facility rental agreement allocates rights and responsibilities to both you and your storage provider. Following are the primary rights and responsibilities that you have as the renter of the storage unit:
Right to Access Your Unit
You can access your storage unit either during regular office hours or outside of regular office hours if you have obtained permission from the storage facility. In most agreements, you and the storage facility will determine together the access times for your unit. Most often, the storage facility agrees to allow you access during normal business hours on weekdays and during normal hours over the weekend, but the schedule can be agreed upon differently.
Obligations to Pay Your Rent on Time
Just like every rental contract, the storage facility rental agreement obligates you to make your rental payments by the date specified in the agreement. It also specifies rent increases, if applicable. Failure to pay your monthly rent or late payment can result in physical lock-out from your unit or even the sale of your items.
Owner Responsibilities
Section 7 of the Act sets out the restrictions on a storage business in its rental agreement with a customer.
In Ontario, a storage operator:
a) must notify the customer in writing of the proposed term of the agreement and all charges;
b) cannot require the customer to enter into a continuing agreement for a term of more than three months unless it states in bold type that it is not a continuing agreement; and
c) cannot require the customer to select a period of greater than one month in duration for the term of the agreement.
In particular, it should be noted by storage operators that pursuant to Section 9(a) (ii) of the Act, an operator cannot include in its rental agreement:
Provision for the owner to maintain structures other than within a parking space or storage unit, except where the provision requires maintenance to be undertaken only by the customer.
Based on this provision, a customer, can argue that he or she is not responsible to maintain the areas in common, such as elevators, stairwells and hallways.
Common Provisions in Rental Agreements
While an insurance requirement clause may seem benign (and commonly offered), it is worth understanding this requirement and its potential applicability to various circumstances. Some states, such as California, have limitations on the amount of risk that can be shifted by an insurance requirement clause to the customer. The law typically requires that the facility hold liability insurance for its activities, but does not require the customer to hold insurance for activities within the space unless the facility has the ability to obtain alternative insurance. In contrast, states like Illinois allow the facility to require the customer to maintain insurance or risk liability for activities within the space. Several other states do not speak to the issue at all. Keep in mind that facilities also face risk in holding customers liable who have maintained insurance in excess of the contract limit or where the customer’s loss exceeds the contract limit. This may seem contrary to the infrastructure-less nature of the self-storage business. However, the issue should be explained to potential customers so that there is no misunderstanding as to the extent of their risk. Moreover, the facility may have a relationship with an insurer to cover customer’s losses at premiums as low as $10 per month.
Many customer contracts will have liability limitations intended to protect the facility from customer’s losses. Some of these provisions are just unfair, and many of these provisions are void in certain states. However , a facility is entitled to appropriately manage its risk. This is why a facility should understand its business and its risks when drafting a customer agreement. The facility in a traditional, fixed, brick and mortar industry is not going to have the same relationship with the asset as a facility with various spaces within a warehouse style building. The issues are magnified as the facility combines secure recorded access with a lack of staffing and improved security measures to allow for competitive pricing. These facts are an important part of the physical relationship and have a significant influence in drafting, interpreting and enforcing the contract provisions.
The default penalties in a customer agreement may range from a cost-of-collection provision that adds to its rent payable a reasonable amount for collection costs up to a provision that allows for the immediate sale of goods based on the balance due at the end of the sale process. Many states have legislation in place holding that the facilities must provide notice of the sale to the customers and allow for redemption prior to sale of the goods. States also limit the charge a facility can impose for inventory and their typical cost of sale. Removal assistance services at the time of default should also be considered. Will the facility provide this or will it require the customer to remove their property from the facility? This will also affect how the facility can handle a customer’s default.
Disputes Over Rental Agreements
A rental agreement is an important element in determining the relationship between a person using a storage facility and the facility owner. A rental agreement may be in the form of a long term lease or it may be a short term agreement covering a few months or a year. Many rental agreements are based on a form contract which is provided by the storage facility owner.
A well drafted rental agreement will address a number of issues relating to the rights and obligations of the parties. These include a description of the property to be rented, payment terms, default/delinquency charges, early termination or default fees, storage items which are not permitted (i.e., explosives, hazardous materials, etc) and access to the unit. Rental agreements may also cover relocation, default rights, damage and liability issues, limitation of liability and arbitration or mediation of disputes.
Examples of the types of issues which can be addressed in a rental agreement include:
If a rental agreement is properly drafted and the owner or lessor wants to enforce its terms, it will likely be enforced unless there is some valid reason it might not be enforced.
It is important to take time with a rental agreement. It is always wise to circumspectly read the entire rental agreement before signing to make sure that you are fully aware of your rights and obligations under the contract. Once signed, both parties to the agreement are expected to comply with its terms. If there are any questions regarding the terms of a rental agreement or like issues, it is a good idea to consult with an attorney prior to entering into the agreement.
The rental agreement for a storage facility may provide for the resolution of disputes by arbitration or mediation. Most agreements contain language providing that no lawsuit may be filed concerning the storage facility unless the party has first submitted to arbitration. Arbitration is a type of alternative dispute resolution commonly used in labor and other industries to resolve disputes. It may be required under a labor contract in the private and/or public sector or in consumer disputes where it may be a condition of purchase or where the contract calls for it. In an arbitration, a neutral third party such as an arbitrator or panel of arbitrators meets with the parties and/or their attorneys and hears the dispute presented. This presentation may be similar to what would be presented at a trial before a judge. The arbitrator notifies the parties of a decision on the case as determined by the arbitrator. The decision may be communicated in writing and/or verbally.
An arbitration decision is generally not subject to appeal. In many cases, the decision is deemed final and binding upon the parties. A disagreement with the decision does not give the losing party the right to appeal it in a trial court to seek to have a judge decide the issue.
If a rental agreement provides for binding arbitration, a party to the agreement seeking to enforce a contract right such as an arbitration provision should consider seeking the advice of an attorney. The attorney will explain the rights of the person and the manner in which the matter will be addressed. Keep in mind that the position of a storage facility owner may not be consistent with your own view of the dispute with the facility.
Termination and Renewal Provisions
Storage facility rental agreements may be for fixed terms or may be periodic, being renewed by the implication of a continued payment of rent. The laws of certain states, such as Pennsylvania, make it presumptive that a storage agreement is for a periodic term up to one year in length, unless specifically noted otherwise in the rental agreement. It is important that the storage facility owner or operator be aware of the nature of the rental agreement so that proper renewal notices are given to the customer. An improper notice may result in failure to obtain a judgment for possession should litigation over the rental agreement become necessary due to the tenant’s failure to pay rent.
The conditions for termination or renewal of the storage agreement should be clearly set out in the rental agreement itself. Many times the rental agreement provides for a renewal period of month to month until a termination decision is made by either party. In the event of non-payment of rent, most storage facility owners or operators will want to terminate the rental agreement as soon as possible and move forward on a remedy of lien sale as described elsewhere in this paper as well as state law. Termination procedures will vary and should be followed with extreme care. Generally , notice requirements for termination of a rental agreement are different than for termination of a tenancy involving a traditional apartment lease. In Pennsylvania, for example, a notice of termination of a rental agreement under a periodic lease for a term of less than one year must be twenty days from the beginning of a rental period to the end of the rental period. A termination notice for a rental agreement for a term less than three months, however, only requires a period of three days before the beginning of the rental period. Further, should the rental agreement be a fixed term until a notice of renewal or termination is delivered as noted above, the rental agreement ends on the day prior to the commencement of the renewal or termination date.
Should the rental agreement remain in effect for the following month, the owner or operator should provide the tenant with a notice of the terms and conditions of said renewal. In many cases, the increase in rental amount is sufficient consideration to support this new bargain. In the event that the rental agreement does not allow for a renewal of the customer’s rental space, the operator must terminate the rental agreement, dispose of the contents, and remove the customer’s lock in accordance with the security procedures more fully described elsewhere in this paper.