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Think you’re a self storage legislation expert? If you’ve read our blog post about lien law trends, you probably already know where your state stands when it comes to self storage legislation. Right now, many states are undergoing a major overhaul to modernize outdated lien laws to include online auctions, get rid of newspaper ads for lien notices, simplify sales of tenant insurance and towing of RVs, boats, and vehicles, and protect storage owners from being sued by unhappy tenants. Whether you’re a storage newbie or an old pro, take this short quiz to test your knowledge and learn a little more about the current state of self storage lien laws and legislation. Ready to get started?
When sending legal notices during the lien process, some state laws require self storage businesses to offer to send lien notices to both the tenant and an alternate contact with differing contact information from that of the tenant. In states with this legislation, storage operators are required to offer to list an alternate contact on the tenant’s lease. If the unit subsequently goes into delinquency, lien notices are then sent to both the tenant and the alternate contact. Alternate contacts aim to solve the problem of tenants not receiving their mail - with another address on file, the storage facility is more likely to successfully get in touch with the tenant, even if they’ve moved or lost their residence. In some states, you can legally use a tenant’s secondary address as an alternate contact. The goals of alternate contacts are to make it easier for self storage owners and managers to collect from delinquent tenants, and to quickly inform the tenant in the event of default.
As of October 2018, only five states include the notification of alternate contacts in the self storage lien process:
To find out if alternate contacts are coming to your state (and what rights an alternate contact has to the contents of a renter’s storage unit), check out your state’s lien laws or reach out to your state’s self storage organization to get in touch with a self storage legal expert.
A: A limitation of liability that protects your storage business in the event of a lawsuit.
B: Legal verbiage that is designed to clarify and establish that a tenant’s property is being stored at the sole risk of the tenant.
C: A clause that can “cap” the amount of potential damages storage owners can be exposed to.
D: All of the above.
Answer: D: All of the above.
Contractual value limitation puts a cap on the liability that your self storage facility can legally face in the event of a lawsuit and protects owners of small self storage businesses from having to pay “extreme” damages far more than their business is worth. To further support this, many state lien laws and leases contain verbiage that allow storage owners to place value limits on stored items (for example, saying that a tenant cannot store more than $50,000 worth of items in their unit) and clarify that the property being kept in the unit is stored at the sole risk of the tenant (thus, the storage facility is not liable for any damage incurred).
Click below to enlarge.
Image courtesy of the SSA Globe, August 2018
Check out the image above to see how your state stacks up. To find out where your state caps the liability on your self storage facility and get examples of lease agreement verbiage, contact your state’s self storage association and get in touch with their self storage legal team. They’ll help you assess your current liability, adjust lease verbiage, and understand your state-supported legal obligations as a self storage business owner.
Over the last several years, self storage lobbyists have been very successful in their efforts to modernize state lien laws, and as a result, state legislatures have been making big changes to self storage lien laws across the country - one of the biggest changes being eliminating the requirement of newspaper ads as part of the auction process. Instead of taking out an ad in a print newspaper (which is expensive, ineffective, and time-consuming for storage owners), states with modern lien laws allow facility owners and managers to replace newspaper ads with more affordable online options.
As of October 2018, 20 states have removed the requirement for storage owners to put out a newspaper ad to advertise an upcoming auction. More and more states are working to revise public notice provisions to eliminate notification via newspaper ads entirely. To find out if this legislation is coming to your state soon, check out your state’s lien laws or reach out to your state’s self storage organization to get in touch with a self storage legal expert.
Answer: B: 60
States that have added ‘simplified towing’ verbiage into their lien laws allow RV and boat storage owners to have vehicles, motorcycles, campers, RVs, boats, trailers, and other wheeled-items towed after delinquency exceeds 60 days. In many states without this legislation, it has been difficult to get the title to abandoned vehicles in order to properly sell them or have them towed - making it extremely difficult for storage owners to get the vehicle removed from the property and collect on what’s owed. Information on lien holders on the vehicle is more important than ever, so make sure you collect information from the renter on any outstanding debt against the vehicle, watercraft, or trailer when signing a lease. Then, in the event that the vehicle needs to be towed after 60 days of nonpayment, you’ll have the proper information (the contact information of the title holder and any lien holders on the vehicle) to relay to the towing company. As of October 2018, 36 states had included ‘simplified towing’ verbiage in their lien laws.
What do you know about late fee litigation? It’s easy to get lost in the legalese around late fee litigation, but it’s important to understand it to protect your business from potential lawsuits related to the pre-lien and delinquency process. Essentially, late fee safe harbor legislation is another protection for storage operators that allows self storage businesses to legally charge late fees without fear of being sued. In states without this provision, storage owners who charge late fees are actually subject to class-action lawsuits. There is a precedent of individuals suing service providers who charge late fees and winning settlements - but only when the cost of the late fee is deemed “unreasonably high” as to the cost of the service. In these precedent cases, if a late fee was so large that it could be considered a penalty, it was considered unfair in regards to damages as a result of the late payment and resulted in a large settlement for all who were affected by the company’s late fees.
Public Storage was the first self storage business targeted by late fee litigation, but other large self storage businesses are also vulnerable. If the case results in a large settlement for current and previous tenants, we can surely plan on seeing more class-action lawsuits around late fees filed by tenants in states where late fee safe harbor laws don’t exist.
Late fee safe harbor laws protect self storage owners against late fee litigation by first stating that late fees are in fact lawful. Then, states may determine what a “reasonable” late fee is (as California has done with their late fee schedule) and add supporting verbiage to self storage lien laws that prevent lawsuits around fees. As of October 2018, 27 states currently have late fee safe harbor laws protecting self storage businesses who charge late fees, with Indiana joining the ranks most recently. The most litigious states, or those with lots of large-scale storage operators who face lawsuits frequently, passed late fee legislation laws early on. But as REITs continue to infiltrate every state, we can expect to see heavy lobbying nationwide to improve these laws and close loopholes that allow for class-action lawsuits around late fees.
So what does this mean for storage owners residing in states without late fee legislation? You can keep charging late fees to self storage tenants even without the state’s legal protection. If you’re a small business, you can breathe a little easier - you’re less likely to face a class-action settlement as storage tenants looking to cash in tend to go after the “big fish” who have deeper pockets to pay out. If you are worried about being sued over late fees and want to support late fee safe harbor legislation, contact your state’s self storage association and get in touch with self storage lobbyists who can work with the local government to get laws passed to provide safe harbor to operators.
If you didn’t score a perfect 5/5, don’t be too hard on yourself - it can be tough to keep up with all the changes around delinquency, pre-lien, and lien law legislation. Self storage owners have long recognized the need for legal help, and that’s why many state SSA chapters have built up their legal resources and made it easy for storage businesses small and large to get involved in legislation that helps storage owners. If you haven’t taken advantage of these resources yet, get in touch with your state’s self storage association or attend a state conference or meetup to learn more from other owners and operators and have your voice heard.
More than 70 attendees gathered today at the Montana SSA Annual Meeting in Bozeman. To learn more about upcoming state meetings, including the Maryland and Virginia SSA Annual Meetings, click here: https://t.co/yX1AOKjfXa #selfstorage pic.twitter.com/fMgzRDH6AJ— Self Storage Assoc. (@SelfStorageAssn) October 3, 2018
Thanks for reading! If you liked this blog post, you may also like: New trends hit self storage lien laws, Quiz: Is RV storage right for your facility?, and Quiz: Do you need a blog for your self storage website?