Legal Regulations for Self-Storage Unit Facilities
June 12, 2023
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A Guide To Self-Storage Laws
As the owner of a self-storage facility, you are responsible for complying with regulatory laws. These laws are primarily state and local statutes, and while many help protect your rights and reduce liabilities of your self-storage business, others are less friendly toward investors.
Self storage law is also frequently subject to change. In fact, Inside Self-Storage reports that at least 13 states modified parts of their self-storage statutes in 2021 alone.
For these reasons, facility owners need a strong, working understanding of all laws that may affect storage leases, facilities, and rental operations. In this article, we discuss some of the most common legal regulations for self-storage unit facilities and what you can expect from a legal standpoint when it comes to your self-storage business.
Lien rights allow a storage facility owner to place a legal claim on a defaulting tenant’s property. The owner can eventually sell the property at a public auction to cover the unpaid rent. Forty-six states have laws governing lien rights. These self storage lien laws often regulate:
- The number of days you must wait before auctioning property
- The type of notice you’re required to send the tenant (e.g., can it be sent by email? Does the tenant have to agree to legally receive notices this way before you can send it electronically?)
- How the public sale should be conducted
- Other regulations concerning the sales and lien process
For example, self-storage facility owners in Texas must wait 14 days after sending written notice before they can enforce a lien by seizing and selling a tenant’s property (Tex. Prop. Code § 59.042). Likewise, facility owners in Missouri must wait at least 45 days for a tenant to pay their rent before enforcing a lien (MRS § 415.415(2)).
While it’s important to have your own lien and auction process detailed in every lease agreement, it may not hold up in court if it does not comply with local and state standards.
Late Fees and Bad Checks
When a tenant does not pay their rent on time, they are often charged late fees. The specific terms of late fee policies vary, but many offer tenants a few days to pay the overdue rent (i.e., a grace period) before extra charges are incurred on the tenant’s account.
Late fees for residential properties are regulated by state laws, and they are also regulated for self-storage units in several states. Arizona, California, Maine, Missouri, Maryland, Ohio, North Carolina, and West Virginia all have laws that dictate the amount of late fees self-storage owners can charge. Fortunately, many of these laws are favorable to self-storage owners and allow reasonable fees to cover the damages of unpaid rent. In Missouri, for instance, owners can charge the greater of $20 or 20% of monthly rent, while in California, reasonable late fees range between $10 and $20 depending on the rental rate.
Additionally, many states may have laws governing the fees owners can charge when their tenants submit a “bad” check, or one that cannot be fulfilled because the tenant does not have sufficient funds in their account. Check your state’s commercial statutes to find out whether service fees for bounced checks are regulated.
Some states impose sales tax on the revenue from self-storage rent. In Michigan, for example, self-storage businesses are required by law to charge tenants sales tax on their rent as well as pay tax themselves on some outsourced services. Ohio law also requires owners to charge sales tax. Several self-storage associations have lobbied against these laws, including the Self Storage Association of Michigan (SSAM) in Lansing.
Zoning laws dictate how land can be used for various purposes. Zoning laws require self-storage facilities to be zoned properly before being used for their intended purposes.
Many owners find that certain laws make it difficult to get self storage zoning approval for their planned facilities. This is because most cities categorize self-storage under “conditional use,” which means the projects are subject to government or municipal interference to mitigate potential impacts to the community or the environment. Sometimes these laws are concerned with the appearance and development of land to ensure that unattractive storage facilities won’t deter new residents from the area, while other times the laws are influenced by HOAs and local political groups who lobby against construction projects for various reasons.
Navigating these zoning policies can be tricky, but it’s worth acknowledging that owners and investors can also influence the legislation too. When applying to rezone property for self-storage, an owner can emphasize the ways it will positively contribute the community, namely by generating low traffic, increasing security, and buffering noise from nearby highways.
Value limits set a cap on the total value of property a tenant can keep in their storage unit. In general, value or liability limits are up to the owner – for example, you can decide to only store property of a total value of up to $5,000 per unit and include a clause in your lease specifying the rule as such. However, state and local laws sometimes designate minimums or maximums for value limits. Stricter laws are often responses to the negative portrayal of storage facilities in the media as businesses that attract crime, burglary, or misuse. Researching these laws and choosing a safe place for your facility can help you navigate these concerns.
Self-storage facility owners also enforce liens on abandoned vehicles, but the processes for claiming and towing them are highly regulated in many states. For instance, if a renter in California defaults on rent for more than 60 days, the owner may tow their vehicle only after sending 10 days’ notice and forwarding information about the towing company’s name, address, and phone number (Cal. CCP § 21702.5).
Laws surrounding liens on large assets like vehicles tend to differ from liens on other property, so be sure to review your state’s regulations for these procedures.
All states prohibit the use of storage units as residential housing. There are many reasons why it’s unsafe to live in a storage unit, and eviction is typically the best option even if a tenant never stops making rent payments.
Common Sources of Litigation Against Self-Storage Owners
Even if you follow state and local self-storage regulations to the T, it’s still possible that a tenant will attempt to sue you. Here are a few of the most common reasons why this could happen:
Size of Units
In the past, renters have sued self-storage facilities over the size of their units. While units are normally labeled and classified by their length and width dimensions, it might happen that a unit is actually smaller than it was advertised. This is a problem because tenants can make a strong claim that they aren’t being given the full value based on their rental payment (unit prices largely correspond with size). To avoid lawsuits related to the size of units, facility owners can either report careful exact measurements of all units, or state that unit size is “approximate” in rental agreements. Some owners have even resorted to classifying units in terms of the number of rooms it could reasonably accommodate to avoid litigation (e.g., “two-room unit”).
Security and Liability
If a tenant’s personal property is damaged in severe weather or a break-in, their first instinct will be to argue for you to cover the cost. They were, after all, trusting your facility to store their belongings safely. Why shouldn’t you have to reimburse them?
Many tenants will use this logic, which is the main reason to have a solid liability clause in your rental agreements. Most of the time, tenants will have already signed a release stating that they cannot hold the storage facility responsible for damage to their property. Another recommendation to avoid litigation is to require tenant insurance for all renters. This way, when disaster strikes, your renter’s priority will be to file a claim with their insurance company rather than pursuing litigation against you.
Is your storage unit facility accessible for all renters? What about your policies and procedures? Is the leasing process accessible and available in a variety of modes? If not, you may be vulnerable to an accessibility lawsuit. Keep in mind that you may need to make reasonable accommodations or modifications to your facility in order to fairly provide service to renters with disabilities. Otherwise, they could sue you for failing to do so.
Advertisements and Guarantees
Be careful how you advertise your units in listings and what kind of guarantees you promise. Although you can certainly advertise your cutting-edge smart security system, you shouldn’t “guarantee” security of your renters’ belongings. And although you should market the fact that your units are climate-controlled, never state anywhere that your units will always preserve property from mold or mildew. It’s a fine line to walk on, but the idea is to advertise your features and let tenants do the calculation of risk on their own. Accidents happen, and you don’t want to be held liable when they do.
Self-storage legislation changes every year, but for a smart investor, keeping up to date with the law is nonnegotiable. The best way to protect yourself and your business from litigation is to update your self-storage policies and procedures accordingly.