In so many ways, self-storage can be seen as a simple business. But layer that simplicity with the facts of life, and things can begin to get complicated quickly.
What happens when a tenant dies and stops paying his rent? What rights does an angry spouse or ex have to property being stored by his or her partner? What can you do when a storage space is destroyed by fire or storm? These types of issues come up often in the self-storage business. How you respond to them can create positive solutions or potential liabilities.
Tenant Death
While some state laws dictate that a self-storage operator must immediately overlock the unit of a deceased tenant, other states allow family members who hold a key to the unit and the tenant’s gate-access code to enter and, if warranted, remove the unit contents. However, it’s important to clarify that this is only allowed when there’s no assistance required from the facility manager. If the family member doesn’t have the code and key, the manager can’t facilitate access. During this time, the family must still continue to pay the deceased tenant’s rent to avoid foreclosure.
To gain unit access, the family member must provide the manager with a copy of the death certificate and the court order stating he’s been appointed as the administrator or executor of the estate. At that point, he can enter the unit and decide if he wants to continue renting in the name of the tenant’s estate or terminate the rental agreement and remove the items. If the tenant had a small estate (valued at $15,000 to $150,000, depending on the state), the family may be able to prepare a Small Estate Affidavit or process the estate through a Summary Administration as an alternative to a court appointment.
Just because a tenant dies doesn’t mean his obligations to creditors disappear. Someone has to pay the rent on the storage unit or it will eventually go into foreclosure. If the manager knows a tenant has passed away, it makes sense to do what he can through phone calls, letters and even a visit to the local probate court to see if anyone has stepped forward to take over the estate, especially before proceeding with a lien sale. If a resolution is being attempted, the manager should delay any enforcement of the facility’s lien rights, since the estate process can sometimes take weeks to complete.
Tenant Divorce
Self-storage seems to be one place where property subject to a divorce commonly ends up. If one spouse rents a unit to store property from the marriage, what rights does the other have to access it?
Typically, a storage operator doesn’t care who has a right to the property in a particular unit. As long as the rent is paid and the party entering has the proper access code and key, the manager won’t inquire about right of access. But divorce can put a manager in the middle when a tenant disputes the right of the non-tenant spouse to gain access. In such a case, it’s always the correct decision to defer judgment on the dispute 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 their assets. This includes property that may be stored at a self-storage facility. Accordingly, the manager 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. You shouldn’t seek to interpret any court decisions. Any questions should be directed to the counsel for the respective spouses or your own attorney. There can be significant liability to a self-storage business for favoring one party over another, even if that party is the paying tenant.
Other Disasters
No matter how cautious you are, there’s always the chance a natural occurrence or unintentional act will result in damage to your facility and tenants’ goods. Every self-storage facility should have a comprehensive business and liability policy to cover assorted weather risks such as hail, hurricanes, tornadoes, wind and other storms. The policy should also cover the property in the case of fire. Where flooding is a possibility, owners should consider specialized flood insurance.
What about tenant claims? In the case of a disaster that couldn’t be controlled by the facility operator, most leases will protect the owner from claims arising from the loss of customers’ property. Self-storage leases should contain specific language that the facility won’t be held responsible for loss or damage to stored property. It should state that tenants store their goods at their own risk. The facility takes neither care, custody nor control of stored property.
That said, self-storage owners should be aware that certain states won’t enforce such exculpatory clauses contained in their leases, based on the position that such clauses are against public policy and unfair to tenants. Due to the dispute over the enforceability of these leases, it’s more important than ever to require that tenants obtain their own insurance to protect their interests as part of the rental process.
This is also where customers’ goods legal liability comes into play. This specialized insurance protects a storage facility from tenant claims arising from property loss or damage. It’ll defend a business against lawsuits that might arise from claims as well as the cover the court costs and payments to the tenant if warranted or awarded by the court.
Self-storage operators face numerous legal challenges every year. Understanding how to respond to these trials according to the law can reduce your potential for liability. When in doubt, seek advice from your attorney before acting.
Scott Zucker is a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta, where he specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He’s a speaker at industry events, author of “Legal Topics in Self Storage: A Sourcebook for Owners and Managers,” and a partner in the Self Storage Legal Network, a subscription-based legal service for storage owners and managers. To reach him, call 404.364.4626; e-mail scott@wzlegal.com; visit www.wzlegal.com.
