What Should You Include In A Storage Unit Rental Agreement?
June 12, 2023
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How to Create a Thorough Self-Storage Lease
Have you recently purchased or built a self-storage facility? If so, you’re likely setting up the basic foundations for your (soon to be thriving) self-storage business. One aspect of this preparation is writing and preparing storage unit rental agreements.
Rental agreements are designed to set expectations, establish rules and policies, clarify the payment schedule, and protect everyone’s rights. A self-storage unit needs a lease just like a traditional residential or commercial unit. The good news is that these leases tend to be a lot simpler, but you still need to spend some time developing a written agreement that will minimize risks for your business while staying compliant with the law.
This article will take you through the basic elements you should include in every self-storage lease.
Rental Period and Payment Schedule
Every self-storage lease agreement should include basic information about the rental period and payment schedule. State both the length of the lease period (month-to-month, week-to-week, etc.) and the rental amount due at the beginning of each period as clearly as possible at the top of the document. It’s unlikely that renters will read through the entire self-storage lease agreement before signing, so it’s important to make these key elements of the agreement as obvious and emphasized as possible.
Individual Unit Details
You’ll also want to include the details of the individual storage unit that each customer will be renting. These details might include:
- The unit designation or number
- The size and dimensions of the storage unit
- Any included amenities and their associated costs (such as for self storage units climate controlled or equipped with electricity, etc.)
- Security features like electronic locks or mobile/key fob entry
It’s also a good idea to include a disclosure about security in every lease. Although you’ve implemented security features into your facility to ensure the safety of customers’ belongings, you should still state that self-storage is at the renter’s own risk. Be clear that there is no guarantee that your facility will be 100% secure, and if you have on-site security, be sure to specify that these individuals’ number one responsibility is the overall safety of the facility and its employees, not necessarily the individual belongings of tenants.
Any deposits that you require from renters should be listed as such in the rental agreement. Deposits are funds you store and can use to cover damage to the unit or unpaid bills at the time of termination. If you do require a deposit, be sure to state that it is refundable as long as renters keep the storage unit in good condition and pay all rent and fees at the time of termination.
Late Fee Policy
Every rental agreement needs a late fee policy. Be sure to state:
- the grace period (if any), which is the number of extra days after rent is due that renters have to submit payments,
- the amount of late fees you charge, and whether these fees accumulate the longer the payment is late, and
- when you will initiate the eviction process (states have their own specific laws regarding this policy).
Are renters required to purchase self-storage unit insurance? If so, include this requirement in your rental agreement. You should verify proof of insurance before signing a lease with a storage renter. You should also specify whether coverage already provided by renters’ or homeowners’ policies are sufficient to fulfill your insurance requirement or whether you want renters to purchase separate insurance for their stored belongings.
The liability limit is a vital provision of any self-storage rental agreement. A liability limit specifies the maximum value of items that can be stored in one of your units, and it ensures that your facility isn’t a target for theft while minimizing your own risk of liability should something happen to the stored items. Liability limits vary from facility to facility depending on how comfortable you are accommodating high-value items in your storage units, but a common liability limit is $5,000.
You should also include a release of liability, stating that the owner is not responsible for damage to any stored belongings. Many owners also include an indemnification clause, which states that tenants are ultimately responsible for any personal injury or damage that might happen to their property. Many self-storage leases require the renter, the indemnifying party, to sign a statement agreeing not to hold the self-storage company responsible for anything that might happen.
Including liability and indemnification clauses is an important step you can take to reduce your risk of liability in a lawsuit. However, it’s important to note that having a tenant sign your agreement doesn’t guarantee you won’t get caught up in one—in the case of gross negligence on your part, a judge could still rule in your tenant’s favor.
Despite your most thorough screening process, signing a lease with a bad tenant is still a possibility. You never know when a renter is going to default on rent or violate lease terms, and you should have a way to terminate the lease should either of these worst-case scenarios occur.
Within the lease, be sure to state whether the agreement can be terminated based on the renter’s conduct or behavior, including criminal activity, living in the unit, etc. Also state how much notice you or your renter need to give each other to terminate the month-to-month agreement. It’s possible that this notice period is regulated by your state’s laws, so be sure to consult an attorney if necessary.
The Lien/Auction Process
It’s a common scenario for self-storage owners: A renter forgets or abandons their stored belongings and stops paying rent. At some point, you have to terminate the lease and do something with the stored items. For most self-storage facility owners, this means sending a storage lien notice and auctioning off belongings. If you’ve ever wondered, “When can a storage unit sell your stuff?”, the answer lies in the lease agreement.
A storage lien is a claim you place on a renter’s stored belongings if they have not paid their rent. A storage lien notice, thus, is a notice stating that since the renter has not paid their rent, you will soon begin auctioning/selling their belongings to cover the cost. Sending a lien notice is a standard practice in the self-storage facility, and oftentimes the notice is all it takes for the renter to submit a payment.
However, before you can enforce a lien/auction policy, you must fully describe it in the lease. Clearly explain that you have the right to lien and sell any belongings left or abandoned in a storage unit a certain number of days after the renter defaults on rent or the rental agreement terminates.
General Facility Rules
Lastly, your lease should elaborate on any other storage unit rules you have for your facility or renters. These may include:
- Restrictions on the use of hazardous substances
- Behavior and conduct expectations
- Subleasing/subletting rules
- When you or security personnel can enter a renter’s storage unit
- Maintenance policies and procedures
While you’d hope your tenants will carefully read through all these policies, the truth is that most tenants won’t read the whole lease. For this reason, it’s important to be redundant – for example, you might post a list of rules and reminders in the storage unit, include a summary of the rules in a welcome package, or upload a rules list to the storage unit software you use (like Innago) so tenants can refer to it when they have a question.
In many ways, writing a lease for a self-storage unit is just like any other lease—it must diligently account for the rights and responsibilities of each party in the agreement. However, some terms—like the lien/auction process and liability limits—are specific to the self-storage industry and may require some additional research. No lease can perfectly absolve all the risks of renting out your units, but a careful, well-written one can protect you from the vast majority of them, which is why it’s so important to get yours right.