By Connie N. Heyer

Risk management is one of the most important things an owner can do as far as avoiding liability and protecting the profitability of a self-storage operation. The importance of your self-storage facility lease language, as well as the language of all addenda, rules, and other such documents, is vital in controlling your risk, and for minimizing potential liability.

One Size Does Not Fit All
“Standardized” commercial leases are available from a variety of sources, and some purport to be appropriate for use in any state. However, read the fine print and undoubtedly you’ll find that there are disclaimers asserting that no representations are made with regard to specific state laws and compliance therewith. It is vital to utilize a lease which you know complies with the laws in the particular state in which you are doing business. Self-storage laws, as well as commercial landlord/tenant laws in general, may vary greatly from state to state.

Unique State Statutes
Many states have self-storage statutes and general commercial landlord/tenant statutes unique to the particular state. Additionally, many states have unique requirements as to language that must be included in a lease in order for the lease to be valid, or language that must be included in order for the lessor to have certain rights under the law. For example, in Texas, in order to have valid lien rights and the ability to sell a unit’s contents at an auction if a tenant does not pay his rent, a lease must be in writing and must contain a notice about the contractual landlord’s lien in underlined or conspicuous bold print.

Different states also have different laws as to which types of liability can be waived by contract. For example, in some states a lessor may release itself from liability for its own negligence only if the release from negligence is expressly stated in the contract in “conspicuous” type.

Attempting in a contract to waive liability that may not lawfully be waived under state law is obviously problematic from a legal standpoint. On the flip side, it makes good sense to include the strongest liability protections in your lease that your state law allows. Not to do so would be to subject yourself to unnecessary liability risk. 

Typical Pitfalls With “Standardized” Leases

“Magic language” requirements – As noted above, many states have
requirements that certain language be included in a lease, often in
a certain format or font, on order for the lease to be valid or grant
certain rights. Failure to include this “magic language” subjects the
lessor to significant potential legal liability. 

Re-letting duties – A “standardized” lease form may state that the
lessor has no duty to try and re-let a space from which a tenant
moves out early, and the lease might say that the lessor can keep
any prepaid rent. However, certain state laws impose a duty on
lessors to attempt to re-let a unit to mitigate the tenant’s damages
when a tenant moves out before the end of the lease term.
Attempting to waive that duty via contract might be void at best,
and potentially get you sued at worst. 

Late fees – Many states cap late fees at a certain percentage of the
rent or prohibit more than one late fee a month from being charged.
Some states do not. If you are utilizing a “standardized” lease that
does not cap late fees, and you are in a state that caps late fees by
statute, you obviously have a better chance of running afoul of the
law and inviting lawsuits from tenants’ attorneys. A common statute
of limitations for breach of contract is four years. If you have charged
all of your tenants late fees in excess of the legal cap, an attorney
could sue you on behalf of one or more tenants for four “back”
years of overcharges for each tenant that was overcharged, plus
likely obtain attorney’s fees and potentially other penalties.

Abandonment – Different states have different laws (and some
have no laws) with regard to when a unit may be considered
“abandoned” and the contents thrown away or given to charity
(rather than a foreclosure or eviction action undertaken). If your
“standardized” lease allows you to consider a unit abandoned
after a tenant has remained delinquent for 60 days, but state law
is not consistent with this, you are subjecting yourself to significant
potential liability by following your lease terms.

Non-waiver – But the tenant has agreed to the contract provisions,
right? Doesn’t this “trump” state law? Normally, the answer is an
emphatic “No.” Normally the “non-waiver” provision of the state
statute will automatically (as a matter of law) void any lease
language in conflict with the statute. For example, if state statute
caps late fees at 5% of rent, and your lease provides for a 10% late
fee, and there is a non-waiver provision in state statute, the 10% late
fee is automatically void. This is the case even if the tenant has
agreed to the 10% penalty by signing the lease contract. Depending
on the statutory language, you may be subject to penalties for
attempting to waive the statute, in addition to the other legal
remedies your tenants may have.

Do Your Homework; Join a Local Trade Association
Not all self-storage facility owners are lawyers, and they cannot be expected to know and understand all state and federal laws applicable to self-storage and to commercial landlord/tenant relationships. That is why it is imperative to have state-specific lease forms upon which self-storage owners can rely. In many cases, self-storage trade associations specific to a particular state offer, as a benefit of membership, forms suitable for use in that state. Members can thus have peace of mind that care has been taken to ensure that the lease complies with all applicable law, including state-specific law.

If there is no trade association that promulgates forms for your particular state, at a minimum, owners doing business in that state should seek the counsel of a real estate attorney specializing in commercial landlord/tenant law to draft or review their lease forms to ensure compliance with state law. 

Connie N. Heyer is general counsel for the Texas Self Storage Association. For more information, contact the association at info@txssa.org or visit www.txssa.org.