IMPORTANT PROVISIONS IN SELF-STORAGE LEASES
Posted on Apr 20, 2021 |Publications
By Scott I. Zucker, Esq. | April 2021
All self-storage leases must contain certain essential elements including, but not limited to, non-bailment language (no care, custody or control), the obligation for the tenant to have insurance (albeit not simply the facility's insurance program), a limitation of value of goods stored (with a capped amount) and, of course, the required state statutory language addressing the facility's lien rights over the stored goods and the right to sell the goods if the tenant is in default.
But there are two additional provisions that seem to be particularly useful when defending against tenant loss claims, ones in which the tenant is claiming that either the manager made promises that were broken or the tenant had certain expectations concerning the condition of the facility when they rented their unit.
The first is the “Entire Agreement” provision. This section is also known as a “merger” clause and clarifies that ALL terms and conditions of the landlord's agreement to provide space to the tenant for storage are contained in the four corners of the written agreement. Or, in other words, all agreements that were or could have been made concerning the rental of the storage space have been merged into the written document. This provision clarifies that no other agreements, outside of the written contract, are permitted or approved by the landlord (including alleged verbal promises by the site manager). Common language for an “Entire Agreement” lease provision is as follows:
This Agreement contains the entire agreement of the parties and no representation or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect (except for written addendums agreed to between the parties). The agents and employees of the Owner are not authorized or permitted to make any warranties about the Space, the Property, or any facilities referred to in this Agreement. The Owner's agents' and employees' ORAL STATEMENTS DO NOT CONSTITUTE WARRANTIES and shall not be relied upon by the Occupant. The entire agreement and understanding of the parties hereto are embodied in this writing and NO OTHER WARRANTIES are given.
This provision clearly explains that the written lease constitutes the “entire agreement” and moreover that any oral statements cannot be considered part of the agreement between the parties. This type of language, as one can imagine, is very helpful in responding to tenant claims that additional verbal agreements were reached outside of the written agreement, such as rent discounts, promises as to safety or security, or waiver of other charges.
The second important provision is called the “AS IS” section of the lease. Especially important in real estate leasing situations, this provision clarifies that the tenant acknowledges their approval of the condition of the space as rented and that the rented space does not otherwise come with any express or implied warranties. Such exclusions are permitted in real estate transactions like a self-storage lease and are generally enforced. With such a provision in place a tenant cannot assert a claim for certain “implied” warranties such as a non-leaking space or one that prevents mold or mildew, which are common complaints in self-storage. Standard language for an “AS IS” provision in a self-storage lease is as follows:
The parties hereto agree that the IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE and all other warranties, express or implied, ARE EXCLUDED from this transaction and shall not apply to the leased Space, premises, and facility referred to herein. It is further understood and agreed that Occupant assumes responsibility for having examined the premises and hereby accepts such leased Space, premises, and facility AS IS and WITH ALL FAULTS.
This language, a type of “buyer beware” provision, is especially enforceable in non-residential lease transactions like self-storage rentals and can be very helpful when responding to a tenant complaint that the space was not adequately built or installed to prevent water, rodent or insect intrusions.
Of course, not all contracts are impenetrable. Even with strong and clear language in self-storage leases the courts may still look at certain facts to circumvent these provisions, such as written representations made by the landlord in its advertising and marketing that could be considered implied offers. Similarly, a landlord's refusal to allow a tenant to inspect the space before renting may outweigh a standard AS IS provision. At the same time, a lease without these sections offers no protections to the landlord.
This article was originally published in Scott Zucker's “Legal Monthly Minute” Newsletter in December 2019
Scott Zucker, Esq. is a certified Mediator and Arbitrator.
About NAM's self-storage practice
Self-Storage facilities are popping up wherever you go. It is estimated that there are between 45,000 to 60,000 such facilities across the United States. In order to rent a storage unit, tenants/unit occupants and landlords/owners of these facilities enter into rental agreements. Issues that may arise include disagreements concerning payment amounts and terms, property damage, and wrongful sale of contents. Often, the self-storage lease/rental agreement will contain an arbitration clause requiring the parties to resolve disputes through private arbitration. Arbitration is an expeditious and cost-effective alternative to litigation.
NAM (National Arbitration and Mediation) has created a customized program to resolve self-storage industry disputes. NAM's program includes a distinct set of arbitration rules specific to the resolution of the self-storage disputes, a nationwide panel of independent arbitrators who are skilled at resolving these types of cases and experienced case managers to assist with the administration of these matters.