Inside Self-Storage

MAY 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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insurance/protection plan in place, his focus shifts to making a claim against that policy rather than the facility. Presuming the insurance policy or plan pays most of the time, the settlement of a claim requires the tenant to sign a release before getting paid. To receive his check, he waives his claims against you, the facility operator. This is the fastest and easiest way for him to be reimbursed. Moreover, once that release is signed (assuming it's done properly), you shouldn't be hearing from your tenant or his attorney about any other claims arising from that loss. Tenants are much happier when they get payouts in this manner, thereby avoiding the potential for unpleasant social media rants against your business. It absolutely stinks to have to look a customer in the eyes, tell him there's been some sort of catastrophe, and it wasn't your fault. He lost everything and, sorry, he didn't have insurance. One of the things that keeps me up at night is operators who still only suggest contents insurance or protection plans rather than requiring proof of insurance and, in lieu of that proof, enrolling tenants in the available plan. The Class-Action Lawsuit The self-storage industry has grown so much over the past decade that it's now on the radar of class-action attorneys. Every few weeks it seems another class-action lawsuit is being filed against a storage business. These suits involve all sorts of things. Generally, the late-fee class actions are gone because of the efforts to get a safe-harbor late fee in many states. However, there are still many lawsuits relating to employee overtime, which can be easily prevented by reviewing your policies for pay and hours worked by your onsite employees. We're seeing many new lawsuits over other issues that are fully predictable and controllable. There's no way I can cover them all in this article, but let me highlight two of them. First is the lump-sum fees (other than late fees) some self-storage operators are charging, especially when a tenant goes into default. One of the most basic tenets of contract law is you can't charge a fee (other than a late fee) unless it's disclosed, charged when the service is rendered and reasonable. Unfortunately, I see too many situations in which operators have combined fees when it isn't only questionable whether services were actually rendered but whether the cost is reasonable. These lump sums are an easy target. Here's an example: On the 30th day a tenant is late, an operator charges a $150 lien fee that covers all related services provided up through the date of the sale, for example sending default notices, cutting the lock, taking unit inventory, advertising in the local newspaper, etc. When you charge a lump sum for all this, you're not charging the fees on the dates when the actual services took place. You make it too easy to challenge the reasonability of these fees and eliminate your ability to rebut because you can't break them apart. The second class-action lawsuit type I want to mention—and the one everyone should pay attention to—relates to disability accessibility. This is about whether your facility, including your management office and storage units, are accessible to people with disabilities. It also includes your facility services. There were several class-action lawsuits last year over website accessibility. For example, can a blind person read or otherwise understand your website? Even a requirement on the rental agreement to provide a driver's license causes exposure. Blind people or those with epilepsy can't have a license; however, they can have a government-issued photo ID. To ask for a "driver's license" exposes you to a claim of discrimination. Fees, Charges and Policies Getting back to fees for a moment … Are you being clear with your tenants, in your rental agreement, about the fees and charges they can incur at your facility for everything from rent default to clean-up and repair after they move out? This could be the topic of a full article. 1. Failure to understand your business insurance coverage 2. Unintentional creation of a bailment 3. Failure to understand the Servicemembers Civil Relief Act 4. Failure to comply with the Americans With Disabilities Act If you're imposing fees and charges, and you think the only place you need to disclose them is in your default or move-out notices, you're wrong. Further, you might not be allowed to enforce those charges because it can easily be alleged that these policies were enacted without tenant consent. The problem is easy to fix by fully disclosing your fees, charges and other rules to the tenant in the rental agreement, so he knows what they are. Keep in mind, however, that if you're going to state a policy, you need to enforce it. It isn't OK to include a clause in your rental agreement and then later say, "Oh, we don't actually do that." As the industry continues to grow and mature, it'll face new problems that were unthinkable five or 10 years ago. More people will look to make their living off suing storage operators, large and small, for big sums of money; or they'll simply file bottom-feeding nuisance claims to get a quick small settlement. Fortunately, we can update our policies, procedures and behaviors to avoid claims we know are coming because they've already arrived at the doorsteps of fellow facility operators. This column is for the purpose of providing general legal insight into the self-storage field and shouldn't be substituted for the advice of your own attorney. Jeffrey J. Greenberger is a partner in the Cincinnati law firm of Greenberger & Brewer LLP. Licensed to practice in Kentucky and Ohio, he focuses primarily on representing the owners and operators of commercial real estate, including self-storage. His website, selfstoragelegal.com, contains legal opinions and insights as well as an article archive. To reach him, call 513.698.9350; e-mail jeff@grbrlaw.com. Source: insideselfstorage.com, "5 Ways You May Be Putting Your Self-Storage Business at Unnecessary Legal Risk," by Jeffrey J. Greenberger More Things Putting You at Legal Risk 4 14 ISS I May 2019 www.insideselfstorage.com

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