Inside Self-Storage

FEB 2019

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 39 of 47

LEGAL PERSPECTIVES It may sometimes feel as though managing a self-storage facility is like watching a daytime soap opera. Every customer has a story that's led him to your property. Storage needs are often born from life-changing events, and tenant drama can spill into your business once the lease is signed. The three customer-related plot twists you most often have to deal with are tenant death, divorce and disappearance. Each scenario poses challenges and legal consequences if incorrectly handled. Let's examine all three to understand what you should do in instances like these. Tenant Death Unfortunately, it's not uncommon for a self-storage operator to learn a tenant has passed away. Often, this is discovered when the rent hasn't been paid and late or lien notices are sent to the tenant's last-known address. When a death occurs, relatives and friends may come forward to retrieve property from the deceased's unit. There are a few scenarios that can play out under these circumstances. Depending on the facts, you have options for how to respond. If you've learned of the tenant's death by some means other than a family member, try to reach the emergency contacts listed on the rental agreement. I also recommend you contact the local probate court to see if the tenant's estate has been probated and an executor named. If there's an executor, you can contact him to determine what to do with the unit. If you're unsuccessful in reaching those listed on the rental agreement or any relatives or friends willing to resolve the tenant's default, you may then send a Certified letter to the tenant's last-known address and proceed with the foreclosure process. Depending on where your facility is located, there may be a waiting period to allow the estate to be probated before the lien sale can occur. By Scott Zucker Avoiding Tenant Soap Operas and Legal Drama If a family member appears onsite with the access code and keys to the unit (meaning no action is needed from you for him to enter the space), he can access the unit and remove contents. This is analogous to any rental property. A family member or friend with access rights doesn't immediately lose them when the tenant dies. However, it's important to clarify that this permitted access only applies when the manager isn't involved in providing gate-code access or cutting the lock. If a person doesn't have authorized access, you can't allow him to enter. During this time, a family member must continue to pay rent on the deceased tenant's unit to avoid foreclosure. To gain access, he'll have to provide you with a copy of the death certificate and a court order stating he's been appointed administrator or executor of the estate. This process can be quick or sometimes take up to 60 days. Once the family member provides you with these documents, he can access the unit. Then he can decide whether to continue renting in the name of the tenant's estate or terminate the rental agreement and removing the contents. If the deceased tenant had a small estate value ($15,000 to $150,000, depending on the state), the family may be able to obtain and prepare a small estate affidavit or process the estate through a summary administration. A small estate affidavit is a sworn document signed by the family member that states the amount of the deceased's estate is so low it isn't going to be probated through the court. Once you have this document, you can give the person access to the unit. You need to keep in mind a few basic issues. Most important, just because a tenant dies doesn't mean his obligations to creditors cease. Someone must pay rent on the storage unit or it'll eventually go into foreclosure. But, once you learn a tenant has died, it makes sense to do whatever you can through phone calls, letters and even personal visits to the local probate court to see if anyone has stepped forward to take over the estate. This is especially true before proceeding with a sale. Lastly, if a resolution is being attempted, you should delay any enforcement of your lien rights since the estate process can sometimes take weeks to complete. Tenant Divorce Self-storage seems to be a place where property subject to a divorce commonly ends up. If one spouse rents a unit to store property from the marriage, does the other spouse have a right to access it? Typically, a storage operator doesn't care who has the right to the property in a unit, so long as the rent is current and the party entering has the proper access code and key to the lock. However, divorce often puts managers in the middle, especially when the tenant disputes the non-tenant spouse's right to gain access. In these cases, it's always best to defer judgment to the courts. When two parties divorce, they automatically subject themselves to the jurisdiction of the court to handle the dissolution of the marriage and the separation of assets. This includes property that may be stored at a self-storage facility. Accordingly, you must follow all instructions issued by a court concerning the turnover of property from one spouse to another. However, not all court orders are written with clear instructions. Therefore, you shouldn't seek to interpret any court decisions that may or may not apply to your facility. Any questions should be directed to the counsel representing the respective spouses or the storage business. In other words, don't get involved in the dispute. One way to avoid this risk is to ensure you have only one designated tenant on the lease, not co-tenants. If you allow co-tenants, you won't be able to avoid being caught between the two since each has tenancy rights and rights of access. 38 ISS I February 2019

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