Inside Self-Storage

SEP 2018

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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Page 53 of 63

Y ou may think I'm joking when I say there are things in the self-storage industry that keep me up at night, but I really do worry about how some of you are running your businesses. A storage operation is worth a lot of money, and failing to pay attention to certain details could put you at unnecessary risk of a lawsuit. Here are five things that keep me from sleeping comfortably when it comes to self-storage. 1. Failure to Understand Insurance Coverage Do you really know what your business insurance covers? From whom did you buy it? If you didn't get your policy from someone who makes it his business to represent the self-storage industry, you may have gaping holes in your coverage. Generally, you discover these holes only after you've been sued. I'm asked at least three to five times per year to defend a lawsuit for loss or damage to a self-storage tenant's personal property because the facility's LEGAL PERSPECTIVES insurance covered only the buildings and included no wrongful-sale or disposal component. It's irresponsible to operate your business without this coverage. You should consider additional coverages as well, including business interruption, employment dishonesty, cyber liability and hazardous-waste remediation. Consider an insurance review by any reputable company that specializes in the storage industry. 2. Unintentional Creation of a Bailment The beauty of self-storage is you rent space to a tenant, who places his own lock on the unit and keeps the keys. If something were to go wrong inside the unit, you aren't going to be held responsible because you'd have no way of knowing that. Where facility operators can get into trouble is when they keep a key to the unit. There are a couple of ways problems can manifest in such a scenario. The first is when a tenant alleges the operator knew, or had the opportunity to know, that something was wrong in the unit— for example, a leak—and should have corrected it. The customer claims that by failing to do so, the business was negligent. The second way you have a problem is when the tenant alleges something has been stolen from his unit, and only you and he have access to the space. When a customer claims you stole something and you hold possession of his key, there's very little you can do to defend yourself. Given that some tenants may experience lapses in memory or sanity, creating an unnecessary bailment like this is foolish. This liability is simple to avoid in self-storage. Incidentally, offering outdoor vehicle storage also creates the same type of bailment. For this reason, make sure you have a separate rental agreement for this service, and inform your insurance agent you offer it to ensure you have the appropriate coverage. 3. Failure to Understand the SCRA The Servicemembers Civil Relief Act (SCRA) has been around since the 1940s (under different names). The act is designed to protect active-duty servicemembers (and several other categories of uniformed federal workers) from consequences that might occur while they're serving the country. The law was originally drafted during World War II to help servicemembers whose homes and cars were taken by repossession or foreclosure while they were off fighting. It exists for the same reason today. Among its protections is a provision that says an active-duty servicemember—and in some instances a spouse or dependent of that person—may not be foreclosed upon without permission from a court. Hint: A self-storage lien sale is a foreclosure. At the time of rental, facility operators are required to ask within the agreement if the person renting the space is active-duty military, including the Reserves or National Guard. To avoid any controversy, also ask if he's a spouse or dependent of an active-duty military member. The language LEARN MORE Learn more from author Jeffrey Greenberger in the video "Cracked Clauses, Broken Business … Lease Verbiage That Can Destroy Self-Storage," available in on-demand and DVD format, exclusively at 5 WAYS YOUR BUSINESS MAY BE AT LEGAL RISK By Jef rey Greenberger 52 ISS I September 2018

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