The Importance Of Lease Agreements In Avoiding Liability

The relationship between a self-storage business and a tenant is formally established by the lease agreement (or rental contract). Of all the paperwork executed between the tenant and the facility operation, the lease agreement is the most critical when it comes to protecting the operation’s interests.

For independent insurance agents specializing in writing self-storage risks, discussing the importance of the lease agreement with your self-storage clients is an important element in the facility’s risk management efforts. While it’s true that a written document is not going to prevent claims or lawsuits from occurring, a well-written contract vetted by an attorney can mitigate the severity of the outcome of any such action. In fact, MiniCo’s claims adjusters say that one of the most common challenges they encounter is poorly worded lease agreements that leave business owners exposed to a negative outcome from liability claims.

Risk Management Considerations

From a risk management perspective, a self-storage lease agreement should address the following items.

  • Tenant Insurance – Explains that the facility has no responsibility for insuring tenants’ stored items and any proof of insurance requirement.
  • Limitation of Value – The maximum value of items stored in a rented space without approval.
  • Lien Sale/Default and Remedies – Asserts the facility’s right to seize and dispose of a tenant’s stored items in the event of default.
  • Hold Harmless – States that the facility is not responsible for damage caused by the actions of the tenant or other tenants.
  • Storage of Hazardous Materials – Details the types of materials that are prohibited from being stored in a rented space.
  • Limitation of Activities – Outlines specific prohibited activities including smoking in rented spaces, use of heating devices or open flame, performing vehicle repairs on premises, and residing in a rented space.

Laws Vary By State

The importance of including these items in a lease agreement cannot be overstated. It is critical that a self-storage operation’s lease be reviewed by an attorney to avoid creating exposures that could leave the business vulnerable to costly insurance claims and lawsuits. In addition, laws vary by state, and an attorney can ensure that the lease agreement complies with the current legislation in place in that state. Additional information may be available from the state self-storage association, many of which have lease agreement templates available to members that have been reviewed and approved by the association’s legal consultants.

Mike Schofield

President and CEO

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