Jeffrey J. Greenberger, Attorney at Law is a Partner in the law firm of Katz, Greenberger & Norton LLP in Cincinnati, Ohio where he concentrates his practice in the areas of Commercial Real Estate and General Business, with a particular concentration on the representation of owners and operators of self-storage facilities, either through legal representation or consulting with owners and operators of self-storage facilities to design and implement legal procedures, policies and other operational issues in most states with a focus on litigation and liability reduction and/or avoidance. Jeffrey is a graduate of Miami University in Oxford, Ohio, and received his law degree from the University of Dayton. Jeffrey's niche originated in Greater Cincinnati, his hometown, where he began helping developers, managers and operators of apartment buildings fourteen years ago. Over the last decade or so, his professional expertise developed in tandem with the rise of the self-storage industry across the United States.

Jeffrey is the legal advisor to the Ohio Self-Storage Association, the Kentucky Self-Storage Association, and advises other state associations. He is a featured speaker at many national self-storage trade shows, state association trade shows, and online learning initiatives. Jeffrey's contributions to Inside Self-Storage magazine appear every other month in a by-line known as "The Legal Perspective". Jeffrey also writes a monthly "Question & Answer" column for The Mini-Storage Messenger, and his articles often appear in other industry-related trade journals. Jeffrey is also a featured presenter for the Self-Storage Education Network, Jim Chiswell and Mel Holsinger's new online learning imitative (www.selfstorageeducation.net). Jeffrey also delivers a monthly webinar on the second Tuesday of every month through Inside Self Storage Magazine and sponsored by your State's Storage Association, (www.insideselfstorage.com/webinars). Jeffrey believes that the more he can spread legal knowledge to the owners, operators, and managers of self-storage facilities, the better the industry will grow as a whole.

Jeffrey's desire to educate the industry has driven him to also launch his own website, www.selfstoragelegal.com, through which you can view some of Jeff's recent articles in trade journals, learn about new hot topics in the industry, and communicate directly with Jeffrey and his staff.

Jeffrey can be reached at Katz, Greenberger & Norton, LLP, 105 East Fourth Street, Suite 400, Cincinnati, Ohio 45202, phone (513) 721-5151, e-mail jjg@kgnlaw.com, or Info@selfstoragelegal.com

What Other Fees Can I Charge
by Jeffrey Greenberger, Attorney at Law

A late fee is, by definition, a liquidated damages clause to a contract. Liquidated damage clauses are acceptable in contracts when three (3) conditions exist, specifically: (a) damages are uncertain as to the amount of difficulty to prove;

(b) the contract, as a whole, is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the true intentions of the parties; and

(c) the contract is consistent with the conclusion that it was the intention of the parties that the damages and the amount stated in the contract should follow a breach of such contract.

If these three (3) factors do not exist the liquidated damage clause is most likely to be construed by a court as a penalty. I have previously written on the issue of late fees in self storage in ISS Magazine, if you wish to go back and review that article (April 2001 issue). The point we were making in the Webinar was that unless you are in one of the states that had a statute which fixed a reasonable late fee (Arizona, California, Kansas, Maine, Missouri, Ohio, North Carolina, West Virginia, Wisconsin, and maybe Maryland) and/or you were charging late fees multiple times per month, or that as a percentage of rent were very high, you, as a self-storage operator, may be exposed to risk of a lawsuit from the tenant who will claim that the late fees you have charged are a penalty and file a class action lawsuit.

To my readers and attendees of the Webinar, this is nothing new to you. The question that seems to be bothering most of you, however, is "What about other charges that I impose as a result of a late payment?" Several examples I received, in the form of questions, were:

1. I impose a late fee on the 5th of the month and I impose an overlock fee when I overlock the unit on the 15th of the month;

2. I charge for a pre-lien letter on the 20th of the month;

I charge a $25 NSF fee when a check bounces.

Other charges you mentioned were for sending certified mail, advertising, and the costs of sale. Further, you questioned what happens if your tenant comes in and makes a payment and then becomes delinquent again the next month; can you charge these same types of fees again and again each month? There are some definitive answers and some of the questions are darn good questions without a definite answer.

The first thing you need to understand is that a late fee (a liquidated damage clause) occurs without your providing a service. You have your leases set up so that on a certain date if a tenant has not paid their rent by that date, you are going to automatically assess the charge without doing anything further to "earn" that charge. The questions above involve providing a service in exchange for imposing a fee. That is, if you are imposing an overlock charge, I hope it is because you are actually going out and putting an overlock on the unit, checking the unit to make sure it is not empty if it is unlocked, entering the information into your computer, logging all of your activities. You actually have to take time out of your day to prepare the overlock list, to go out to inspect, to overlock, you probably also send out an overlock letter, and you have a lot of information to log back into the computer. This is actually real time you spend. You are providing a service in exchange for the fee, as opposed to simply sitting on your hands, and collecting a late fee. The same is true when sending out a pre-lien notice, inventorying the unit, advertising, etc. You are often incurring not only the costs in postage, certified mail fees, advertising fees, etc., but you are also providing a service (required or not) for that fee.

I haven't answered the question yet, have I? Can you charge these fees and, if so, how much? The answer to that question depends on different factors:

1. Did you list and clearly disclose that the tenant might have to pay these fees in the event of late payment in your rental agreement?

2. Are your fees reasonably related to your actual costs for performing these services or adding these?

3. What does your state statute say that you are allowed to pass through to your tenant, if you have a state self storage-statute? And

4. Are there any legal opinions to the contrary in your state?

Let's look at two different state statutes to demonstrate what the issue might be. First, Florida, Section 83.805 provides that "the owner of a self-service storage facility "¦ has a lien upon all personal property, whether or not owned by the tenant, located at the self-service storage facility "¦ for rent, labor charges, or other charges, present or future, in relation to the personal property and for the expenses necessary for its preservation or expenses reasonably incurred in its sale or other disposition "¦" This statute is broad and appears to give broad discretion to charge for the types of services that operators provide for preservation of property and expenses reasonably incurred in the sale or other disposition. While I am not a Florida licensed attorney, it would seem that this includes the costs of overlocking, relocating, sending late notices, and certainly includes the costs of advertising and sale so long all of those expenses are "reasonably" incurred. How to define "reasonable" is not the subject of this article today and you are naturally encouraged to discuss this type of language with your state licensed attorney. However, I hear from so many operators charging high fees for sending out an ordinary mail, pre-lien letter. This is where I think the industry will hurt itself. If it costs you a few dollars in time and materials to send out an ordinary mail letter and you are charging $25.00 for it, I am afraid that will eventually come back to haunt you and the rest of the industry. Certainly, people have freedom to make contract and if you have listed that item in your contract as a fee that the tenant agrees to pay in the event that you have to get that far in the default process, you certainly have an argument that there was a meeting of minds for that fee. Unfortunately, a judge always can rule the fee unconscionable. Thus, we have discussed that the fee needs to be clearly delineated in the contract, it should be reasonably related to your costs, and your state statute needs to say it is okay.

Now, look at the West Virginia statute, Section 38-14-11(a) provides "the Owner has a self-service storage lien on all personal property stored within each leased space for agreed rent, labor, or other charges and for expenses reasonably incurred in the sale or destruction pursuant to this Article." Does not sound that much different, does it? However, the State Attorney General in West Virginia has interpreted that section to inform a large self storage operator in the state that this section is limited. In the interpretation of the Attorney General's office this section means you are only allowed to charge the costs that you pay for the actual storage rent and labor and for those expenses reasonably incurred in the sale, such as the hiring of an auctioneer, maybe the advertising. The State Attorney General has said agree that you cannot include pre-lien letter charges, certified mail charges, overlock charges, etc., because the State Attorney General has taken the position that these are not "expenses of the sale or other destruction." Thus, even though this West Virginia operator had disclosed a pre-lien fee, overlock fee, etc., on his lease and the tenant had agreed to it, and the state statute was just slightly different in language than Florida's, the difference in the language appears to be monumental.

We do not have state attorney general or case law interpretations in many states expressing opinions whether these types of "other fees" that you may charge are enforceable, but it would not surprise me to see other attorney generals following West Virginia in their own states against operators who charge other fees that are not well disclosed, not rationally related to the expense you incurred in providing the service, and, of course, if you are in a state with a state statute and your state statute is more narrow Florida statute I provided above, then you may not be entitled to collect these sorts of fees.

The second question was "Can I impose these fees every month?" If you are in fact in a situation where a tenant ends up in default and you charge a pre-lien fee, if the tenant then comes in, pays the rent, and then if he becomes delinquent again the next month, if your fees are otherwise permissible, it would seem to be permissible to charge them each time there is a default. Please notice the number of "ifs" in that sentence. What I think is very clear is that you should not be charging these types of default fees more than once per event of default. It may seem obvious that you are only going to impose one overlock fee per default, though it does seem that some operators may operate differently. I think I can say safely that is not well advised.

As always, this is a technical legal issue, one that is really well-worth sitting down with your local licensed attorney who understands self-storage law to help you. Make sure that you are acting, to the best of everyone's knowledge, within the parameters of your lease and your state statute, if you have one. A little money spent at this time, on this issue, could result in a remarkable savings against future litigation over these types of fees.

Jeffrey J. Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. Mr. Greenberger's practice focuses primarily on representing the owners and operators of commercial real estate, including self storage owners and operators. This column is for the purpose of providing general legal insight into the Self-Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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Tenant Screening and Privacy Rights
by Jeffrey Greenberger, Attorney at Law

In this day and age in the Self-Storage industry it is almost impossible to imagine effectively running your business without certain equipment like a telephone, a computer, specially designed accounting software, and maybe even a gate access control system. All of these items are important, but what actually prevents you from renting to a tenant who will use his unit to: a) break into other occupied units; b) brew methamphetamines and accidentally burn the entire facility down to the ground; or c) stalk your tenants for the purpose of rape, robbery or the like? Is it really the best business plan to let people move into your multi-million dollar investment without really knowing who they are? Probably not, that is why the next "must have" in your office is online screening.

Screening means a lot of different things to different people. What I would like to focus on in this article is the screening of perspective tenants for bad criminal histories. However, do not loose sight to the fact that if you are going to screen you should also be screening your employees who will immediately have access to everyone else's social security numbers, credit card numbers, driver's license numbers, your money, and other information. There is also credit screening which is not discussed in this article.

Criminal screening involves checking certain databases (discussed below) against the applicant for the Self-Storage space. The report (which is, generally, instantly generated over the internet) will tell you whether your proposed tenant has been convicted of certain crimes. Screening should also prevent you from renting to someone who is on any government "watch list", mostly terrorism lists. Generally, the way screening works is that you have pre-defined a list of crimes for which if the proposed tenant has been convicted (or if charges are pending) you would refuse to offer the proposed tenant a lease. The reports on crimes are pulled from whatever counties or states you desire. Some screening companies can merge your list with their report so that all you do is get an "accept", "review", or "reject" screen. Other screening services require you to manually apply your list of crimes against their report to determine whether someone should be accepted, rejected, or whether further inquiry is necessary. Why should criminal screening be important to you? First, from a national security standpoint you would not want to be renting a unit to someone who may be on a terrorist watch list or wanted by the Federal Government. If your facility is located near a "target" for terrorism you need to do everything you can to avoid renting to a terrorist. In addition to state and local convictions, all the screening services will automatically check your tenant against these "watch" lists. The most important of these lists is The Office of Foreign Asset Control ("OFAC") list. It is actually illegal under a Presidential Executive Order to do business with a person who is on one of the government interest lists, particularly the OFAC list. This is one reason screening is important to you. Should you happen to rent to someone without screening and he was on the OFAC list, you would have actually committed a crime.

More pragmatically however, if you knew that for a small sum of money you could know, virtually instantly, whether someone who proposes to move into one or more of your storage units has been convicted of a crime, that may lead you to believe the actual motive of the rental is not for storage but for some ulterior motive, and that with this knowledge you could help protect your investment and your other tenants, then screening should make good sense to you.

Your lawyer has spent a lot of time drafting a lease to protect your interests. These leases often include certain releases of liability, if permissible in your state, for injury and loss of property, damage, and etc. We are seeing some attorneys trying to get around those leases by saying "the loss occurred because someone you rented to is a career drug dealer, and you knew or should have known that the person you rented to you was not simply leasing space for storage but was leasing space to make or sell methamphetamine because tenant had ten prior convictions of brewing methamphetamine, we do not think you should be released from liability for our client's loss as a result of the recent fire at the facility." This is an argument based on "reliance" and while these types of cases have not taken hold, I predict it is only a matter of time before someone makes a case like this really stick. The result could be that a court holds that it would have been reasonable, similar to apartments or other real estate rental transactions, to screen. Essentially, that you should have known more about the tenant than whether or not he has the first month's rent in his pocket. If this happens to you, you are going to wish you had screened.

Specifically, our clients who screen for criminal backgrounds are generally refusing to rent to people who have been convicted of certain types of crimes. The specific names of these crimes may differ by state but they are generally crimes of violence, any crime involving sexual menacing, assault, or molestation offenses. Also, any sexually-oriented offense involving minors, any tenant considered as a sexual predator, habitual sexual offender, or sexual offender, certain theft, embezzlement, larcenies, as well as any felony offense involving use, cultivation, trafficking, deception to obtain, possession, distribution, or manufacture of an illegal drug are excluded for renting.

There is one important caveat about screening similar to any other records that you create or maintain as a result of the tenancy, these documents may have personally identifiable information about the tenant in them. These documents, given the substantial rise in the crime of identity theft, must be adequately protected. This means your accounting and screening software should encrypt any data that contains this type of personally identifiable information and your hard files must be properly stored, locked, and protected from any one who would not have a business need to see these records. Your tenant files should remain in a locked file cabinet or scanned to a hard drive and the originals should be off site. The cabinet should be locked unless the manager is in the office or needs to be in the files. There is no reason a weekend or break employee really needs to be in tenant files if you have an adequate computer system. When the tenancy has been completed the file should be properly removed, properly stored for the period of time determined by your company, and then the file must be properly destroyed. This does not mean thrown out into the dumpster, this means shredded or otherwise made illegible and unrecognizable. The number one thing stolen from Self-Storage facilities these days are computer hard drives. There is more value on your hard drive, particularly if your data is not encrypted, than anyone could steal from every unit in the facility. The same is true of your tenant files. A prying employee, tenant, or thief with access to your records, particularly the screening reports you may run could have a field day stealing identities and ruining credit. If you suffer a breach such as this you are more likely than not going to be required to make disclosure to all the people affected or potentially affected. What a public relations nightmare for your facility. Do you really want the evening news with a mini-cam in front of your sign discussing how thousands of people's identities may have been compromised because you did not lock your file cabinet or protect your records? This is also why you must destroy records when no longer needed. Recently a local TV news station had a field day diving through pharmacy dumpsters fishing discarded prescription labels, discarded prescriptions, and discarded health insurance information that was not properly shredded or destroyed. The news station even went so far as to order someone else's refill of Oxycontin from the information that they were able to obtain from the dumpster. Again, that is not the news story you want told about your Self-Storage facility.

In summary, screening has become a necessary component of the world of Self-Storage and more and more facilities will have begun complying with the federal law, that they are not renting to someone of interest to the United States Government and you can use these same tools to protect your assets by making sure that you are not renting to professional thieves, drug manufacturers, rapists, etc. Regardless of whether or not you are going to implement screening, now it is appropriate to immediately begin a review of your documents handling procedures. Is your software up to date, does it encrypt credit card numbers, driver's license numbers, social security numbers, and etc.? Are your tenant files which contain the same sort of information properly locked and under control of only the most trustworthy of employees? Are your employees properly screened to know they do not have a criminal history? What is your policy for what happens to a file once the tenancy has ended? How long do you hold the file, and is it in a secure place while it is being held after the tenancy? What are you doing to make sure that when you are done with the file that you are not making this information available to a thief by simply throwing it in a dumpster?

Jeffrey J. Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. Mr. Greenberger's practice focuses primarily on representing the owners and operators of commercial real estate, including self storage owners and operators. This column is for the purpose of providing general legal insight into the Self-Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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Cell Tower Leases and Your Self Storage Facility
by Jeffrey Greenberger, Attorney at Law

Many self storage owners and operators have fallen in love with an unexpected source of revenue at their self storage facilities. Namely a cell tower and once a cell tower is up and running on your property it is a lot like found money. Assuming you can get a cell tower company to be interested in your property you must be extremely careful to properly negotiate the terms and conditions of the agreement before you simply sign on to a long term agreement. While this is certainly one place where you should not skimp on professional advice, this article serves as a list of some of the considerations our clients have looked at over the years and often need to be better addressed before an agreement can be signed.

Lease vs. Option to Lease. Make certain you understand what is being presented to you for signature. It is almost always an option for a lease, not a lease. This means that for a small fee the cell phone company has the right to enter into a lease agreement with you, should they exercise that option. The option agreement does describe the terms and conditions of the lease so the option becomes the lease, if and only if, the cell company decides to exercise the option. Should the cell company drag its feet and decide not to build for a period of time all you are entitled to is the option fee. While an option fee sounds like simple free money even if the cell phone company does not build, the land is encumbered for the life of the option. An encumbrance may affect your ability to sell, lease other parts of the property, refinance, etc., so you should be careful.

Options and Automatic Renewals. Watch the length of the option and any automatic renewals of the option which could hold the land "hostage" for a long period of time. There is a reason that these agreements are options exercisable at the cell company's discretion, there are many things that must be tested and determined as to whether or not the cell lease is actually feasible before the cell company would want to enter into a full fledged lease. Some of these determinations are innocuous, such as a clear RF signal to the area they need service, utility easements, zoning, and etc. Some of the issues that need to be tested are more contentious, such as an environmental survey. This is a bigger issue because the cell tower company finds an environmental problem, you have agreed in the option agreement to remove the environmental hazard in order to allow the cell company to build should they exercise their option. Thus, you will get a notice of an exercise of the option and a notice to remediate the hazardous condition. This can be expensive. However, with the right rate of rent you should eventually get your money back. The bigger problem is that if the cell company notifies you of the hazardous condition but never builds, because you now have knowledge of the hazardous condition and must remediate it before you can sell or refinance because of the warranties you would make in any sale or refinancing of the property.

Cooperation. Many of these options/leases provide that you will "cooperate" on a wide variety of issues surrounding installation of the tower. Please make sure you are comfortable with what the term "cooperation" means. Going to one zoning meeting may not be a large burden; going through an entire zoning lawsuit with your company as one of the named parties may be expensive and time consuming. You may want to more clearly define what cooperation means in the option.

Amount of Land Leased. If an option ever turns into a lease, understand the amount of land you are really leasing. For example, a lease may be for 2,500 square feet of land, but the lease may actually consume a lot more space. If you look closely at the option/lease the square footage amount stated may be for the fenced area around the footprint of the tower and a control building, if applicable. However you may also be granting an easement that will allow for unimpeded access to the gate of the tower 24 hours a day, 7 days a week and for turn around space for service trucks. Thus, while you may be leasing 2500 square feet, the actual amount of space or land you have to leave open and available for the cell tower may be much more. Remember that certain easements can reduce the property's value, that is if you or someone else ever wanted to do something else with the property, you/they may not be able to do what is planned because of the various easements you have allowed for the cell tower on your property. This can diminish the sale price potential for a self storage facility.

The Parties. Make sure the names of the parties to the contract are correct. First make sure that you, if you are the owner are properly named as the entity that owns the self storage facility. You do not want a situation where a dispute between the cell tower company and your facility becomes personal against you. If you have an entity, make sure the option/lease is with the entity. If you are managing for someone, make sure the ownership is the actual named lessor.

Also notice the name of the company you are doing business with. Often the cell companies have their real estate leases in a separate, for lack of a better term, "shell" entities, which are not the actual cell phone providers. Do not assume there are gigantic deep pockets to pay in the event you have to enforce the lease. Even if you are dealing directly with a cell phone company that you know, remember that these companies merge and divest themselves of assets all the time and change names. Further, you will note that in many of these lease/options the right to transfer this lease to another entity is always available to the cell company. This means that if the cell company really wants to avoid responsibility for the lease they will assign or transfer this lease to an entity where the cell tower can be "dumped" and you may be left holding the bag.

Term of Rental. Should your option turn into a lease, these contracts are generally for three 10 year terms or a 5 year term with four 5 year renewals, with a stepped up increases in rent each renewal. These renewals, because of the expense of the cell tower to build, locate, and etc., always automatically renew at the cell phone company's sole discretion. So you are not able to simply terminate the cell phone tower lease at the end of the first 5 year term. The cell phone company will have the right to be there, if they want to, for 30 years. Often at the end of the entire term we see inconclusive language about what happens to the lease, for example the lease goes month to month, but they do not define an amount of rent. Make sure, if you are entering into one of these agreements, that you have an idea of what is going to happen, even if you do not plan to be around in 30 years, so that anyone looking to buy or refinance the property will have an idea of what happens with the cell tower at the end of the lease term, including an appropriate rate of rent based on the last rent paid for the last renewal term.

Interference with the Tenant's Use of the Property. There are two sections, generally, about interference in every cell phone tower lease. One promises that the cell tower will not interfere with any of your current tenant's businesses. Cell tower interference is not normally a large issue with your existing storage tenants, unless you have other cell towers. If you have other cell towers you must make certain that this language deals swiftly and appropriately with any interference that may be caused because you will have a penalty clause in your other cell tower lease if you allow someone on the property that interferes with the existing cell tower. This segues perfectly into the second interference clause.

The bigger interference clause is the one that says you as the operator/owner will not allow anyone on or in the property that will interfere with the cell tower once it is built. This mostly deals with the interference of signal. Since you may not be an engineer it may be difficult to figure out where interference is coming from. Often these provisions start out in a very draconian manner, that is if there is interference you have "x" hours to fix the interference or a per day penalty starts or the lease may be terminated solely at the cell tower owner's discretion. You need to build in to your agreement a reasonable amount of time to detect what is causing the interference and correct the interference before any penalty or the right to terminate the lease comes into play. Quite simply, you are self storage operators and may not be able to determine the source of interference with 2 hours notice, like a cell phone company might be able to. You may also want to negotiate a cooperation clause with the cell phone company to have them assist in determining the source of the interference provision so that you can move as quickly as possible.

Easements for Utilities and Where the Utilities Actually End Up. Most of the options/leases say that the cell phone company will try to get individual utilities to the tower, but if not that you will agree that you will allow them to use your utilities and bill the cell phone company for those utilities. There are many concerns with this provision, not the least of which is how you allocate a singular utility bill into cell phone tower use and your use; a formula should be included so that you are not guessing an amount. There are often also provisions that require that you bill the cell phone company promptly for utilities or waive your claim to billing so you must follow these requirements carefully. However, often the cell phone company then takes 90 days to pay you and you become the bank for the cell phone company on its utility bill. Since this is problematic, you may want to negotiate a shorter pay time or some sort of finance charges if not paid within a certain period of time.

Also, you need to understand if there are separate utilities, where these utilities are going to run? Keep in mind that just because a cell company tells you where they think the utilities are going to run does not mean that the utility company is going to show up and put the utility where expected. Since you, in the option agreement, will grant the cell phone company an easement to run the utility (you may also have to grant the utility company and easement separately before they will come out and work on the property), you need to have some sort of provision in the option/lease that allows you to back out should the utilities not run where expected such that it will cause damage or diminishment to your business. For example, one client of mine thought the utilities would run underground along the south edge of their property line. Instead the utility company determined that the best way to run the utility line was to install about 6 utility poles in 6 RV parking spots to run the power to the south edge of the property. Once the 6 utility poles were in, that made the 6 RV spaces less usable because of the loss of space. The owner got rent from the cell tower, but lost almost the equivalent amount of rent in the RV spaces because the spaces became useless for large boats or vehicles for storage.

You also want to understand where any trenching may occur. You may think trenching will occur on the outside of your fence, but if the utility company decides to trench on the inside of your fence and you have 100 RVs in the way, this could pose a serious short and long term problem for this easement.

Speaking of the long term consequences of the easement, make sure everyone is in agreement that if the easement is going to run through your property, that you are allowed to continue to conduct the business over the easement. Many of the option/lease/easements call for 24 hour, 7 day a week access to both the tower and any power lines or underground lines that service the tower within the easement area. If you are going to run an easement through 50 RV parking spots back to the cell tower, it needs to be clear in your agreement that you are allowed to continue to park RV's over the easement area and include a formula in the contract and get a plan in your mind about what you are going to do if the cell tower company needs to get to the underground wires under the 50 RV's in a hurry. Obviously, your rental agreement must also be written to deal with this possibility as well.

Expansion. Many option agreements state that they have the right to expand their antenna facilities. Generally these agreements state that if the antenna facilities on the ground expand, rent will proportionally increase. This can be a problem because the cell tower may take an additional $40.00 per month for their space, but knock out 2 $100.00 per month RV parking spots. This is obviously not a good result and should be contemplated early in the negotiation process. Further, the cell tower company generally will not pay extra when they increase the height, unless you negotiate such an arrangement into your agreement. Normally an increase of height is done to allow other cell companies to use the tower. This puts you in an odd position because the new cell company may only need space on the tower and not any space on the ground. The new cell tower company moves in, paying rent to your cell tower company without you receiving any additional benefit, but you have all of the additional burdens of additional companies coming on to your property. This should be anticipated and negotiated into the option/lease agreement that any new tower user also results in a rent increase to you.

Equipment Removal. Probably one of the most important things you can negotiate in this agreement is clear requirements on the equipment removal. In all circumstances a right to remove the antenna should become the obligation to remove the antenna and equipment and return the land to its original condition, after any termination, even if it is termination is caused by your breach, you cannot collect enough rent to cover the cost of dismantling the 100 foot cell tower and disposing of all of the assorted ground based equipment. While you can negotiate any clause you want, it may still happen that you end up paying to get rid of the tower if the cell phone company really wants to, as discussed above.

Fencing. Many of these option agreement/leases say that the cell phone company has the right to fence the area around the cell tower. You want fencing to be an obligation.

Repairs to the Antenna. Watch the provisions that discuss what happens if the antenna is damaged or destroyed. Some of these clauses say that if the antenna is damaged or destroyed, the lease simply terminates. You want to try to negotiate a requirement to repair or replace, rather than a right to walk away, and again, you want to make certain that, if nothing else, the tower and equipment is properly and completely removed at the end of the term.

Access by the Cell Company. As discussed earlier, most of these options/leases require that you provide 24/7 access with substantial penalties if access is impeded or denied to the cell phone company. Some of these penalties can run up to $500.00 per day. However, what happens if you can not program your gate to give individual 24/7 access to a cell company and your tower is behind the unit or gate confines. Or what happens if the gate is out of order, malfunctioning because of electrical or power outage, these items must be negotiated into the agreement?

Further, you want to make sure you reach an agreement with the cell company that you are allowed to use the space up to the fence line for parking or for building. This has to be done in conjunction with the negotiation of turn around space as discussed earlier. Turn around space can mean a pickup truck or it could mean for a 30 or 40 foot long cherry-picker, since you lose a lot of useful storage space if you allow the turn around access 24/7 for a cherry picker, some kind of agreement must be negotiated about how to handle that situation or you will find yourself leaving a lot of wasted land.

Service. Many of these option agreements/leases provide that if the antenna is "disturbed, destroyed, or damaged" the lease terminates. Disturbed is an interesting word but I am not certain how cell phone companies interpret it. Does this mean that if one of your existing tenants climbs over the fence and messes with the antenna that you are going to lose a lucrative 30 plus year agreement? The term "disturbed" needs to be defined and the right to terminate should be reduced down substantially in the event of a disturbance. Also, you want to require the cell company to remove the cell tower and all equipment in the event the tower is determined "disturbed" and want they want to terminate the lease.

Real Estate Taxes. Because you will be increasing the income to your property, it is almost certain that your real estate taxes will increase. Many of the options/leases call for you to pass through to them any increases in your real estate taxes, but rarely do these agreements contain a formula. It is pretty easy to determine if you normally pay $10,000.00 per half in real estate taxes, and your real estate taxes go up to $12,250.00 per half with no other tax increases, after your tower is built. However, if there are also tax increases, levies, etc., it will be difficult to back out the increase in the assessment. Make sure you include an appropriate formula that will allow you to interpret this assessment and pass it through, including how to pass it through as your taxes increase since it may be hard to break out what portion of the taxes are on the higher value versus the higher tax rate. Also, be careful because these clauses often contain a requirement that you pass through certain tax bills within a certain period of short time after receiving them or you waive your right to collect.

Covenants and Warranties. As with any contract you are going to be asked to make certain covenants and warranties, including the above examples of hazardous waste, your ownership of the property, your right to sign a lease, that this will not violate certain zoning requirements, or terms of your mortgage, and etc. If you are not positive about the answers to these questions, you may want to change these warranties from "warrant" to wording like "to the best of my knowledge and belief." Warranties are strictly construed and please be certain you can actually warrant something that you are going to be asked to warrant.

Right to Assign. As discussed earlier in this article, the right to assign a cell tower is risky because the cell tower company can transfer the lease to a different company that may or may not have assets sufficient to remove the tower should the cell tower company decide they do not want to do business with you anymore. There is not much you can do about this about this except be aware of the right. However, most of these cell agreements do not originally allow you to assign the lease someone. That makes it almost impossible to sell your property for the next 30 plus years. You will want to negotiate in a right to sell the property and assign the lease as long as the buyer of the property accepts the lease.

How do You Get a Cell Tower Company to Look at Your Property? There are 3 websites that purport to register cell towers with cell tower providers and hope to make a match. Some that appear to be particularly reputable is www.steelintheair.com, www.unisonsite.com ; and for information about cell towers try www.wirelessestimater.com . I have never worked with any of these websites and do not know for certain that they are productive and I urge your caution before working with one of these companies. Further, you should have an expert in cell tower leases working with you to help you understand appropriate rates of rent, fees that you may need to charge with the addition of the cell tower lease based on what market conditions will bear. If you wander into this alone, you will be sorry that you entered into a much lower lease than the cell tower down the road. You also must have an attorney involved to assist you in all of the negotiation points of the options discussed in this article, as well as many other options and/or issues that may come up during the entire process.

Jeffrey J. Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. Mr. Greenberger's practice focuses primarily on representing the owners and operators of commercial real estate, including self storage owners and operators. This column is for the purpose of providing general legal insight into the Self-Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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VEHICLE, BOAT & RV STORAGE - THIS IS ONE TO THINK ABOUT
by Jeffrey Greenberger, Attorney at Law

Boat, RV or Vehicle (collectively "vehicle") storage is a different kind of business compared to the traditional self-storage, particularly when the vehicle will be stored anywhere except in a separate, enclosed storage unit, the business model is quite different. Whether you are renting storage in a lot, a covered building or individual storage units, vehicle storage presents several unique issues.

Creation of a Bailment

The first issue to consider is, with the exception of individually enclosed storage units, any vehicle storage you may permit arguably creates some sort of bailment.

Generally, in the non-vehicle self-storage model, if you are not keeping a key to the unit and the occupant has the ability "store and lock" their own personal property, you do not have the risk of creating a bailment. However, when you store vehicles in a common area, even if you do not keep keys to the vehicle, it is arguable that a bailment created. What is a bailment? A bailment is "The transfer of possession, but not ownership, of personal property for a limited time and for a specified purpose such as the individual or business entity taking possession is liable to some extent for the loss or damage to the property" (Webster Dictionary of Law). Contrast this statement to typical self-storage where you do not take possession of the personal property, but lease space. When vehicles are not behind the walls and a door, if a bailment relationship is created, you have more of a duty to care for the vehicle. Please understand I am not saying you have the responsibility to care of the vehicle, such as washing it or changing the oil, but you do have additional responsibilities (duty of care) to protect the vehicle from damage, notice that it is leaking, report damage as it occurs to the owner, etc. This makes vehicle storage a different business relationship with your occupant if the vehicle is "visible" to you when stored. Just because you have created a bailment does not necessarily mean you want to avoid being in vehicle storage as a business. However, you do need to understand that you have a higher duty of care towards that property. It is not a bad problem to have, just a different one than you are used to. You need to amend or create operating procedures to recognize that you protect the stored vehicles as opposed to not watching property stored in units.

Defining The Space

It is often difficult to define the specific vehicle space that you are leasing to an occupant, if you do not have a paved, striped, and numbered area for vehicle storage. Sometimes a person believes they have leased a certain "spot" at the facility, yet when he returns with his vehicle, somebody else is in that spot. The occupant then claims you defaulted because the facility did not make available that specific space. Even if you have a striped and numbered lot, it is unlikely that all of your RV occupants can actually park "between the lines." Hence, it is important to have language in your rental agreement that describes the space rented but does not define the space so closely that you will be in violation or default of the lease if another occupant "accidentally" parks his vehicle in that space or part of that space. You should have some type of "exculpatory" type language in your lease that disclaims a default in the event the specific rented space is occupied when the vehicle owner/occupant returns.

In order to coordinate with this type of exculpatory language you may want to consider having one or more spaces marked "overflow parking." You can then put a provision in your lease which provides that in the event the occupant finds the premises unusable or filled at the time he returns, he is required to park in the overflow spot, and by providing an overflow spot this does not represent a default by the Operator under the Rental Agreement. Additionally, you should include a fine or penalty in the Rental Agreement for parking in the wrong space, in two spaces, or blocking a portion of another space.

Size Matters

Also, don't forget, there have been a lot of lawsuits recently about the actual size of the space being different than the size represented to the occupant in the Rental Agreement. This type of claim is much more likely to happen with an outdoor storage space, such as in a lot. Make sure you include language that indicates that the sizes are approximate and that you are renting by the vehicle storage space and not by the square foot.

Valet Services

Some of you go even further in the bailment and are providing "valet" service, such as parking the occupant's vehicles in the vehicle storage building retaining keys so that you can move vehicles in and out of the way of other vehicles that come in or out, or offering services for the stored vehicles such as RV cleaning, dump out, and stocking of the vehicle, boat cleaning, boat storage on racks, warm up and pull out service, placement of boats in the water near your facility at a boat slip or dock. When you undertake to provide these types of services, you are no longer providing vehicle "self-storage." Once you provide these types of valet services there is no doubt that you are in a bailment situation, such as we discussed above. Do not forget to address these types of services with a properly written Rental Agreement. For example, if you are going to actually move the boat out to the water from your facility you may want to consider having a separate entity operate the transportation of the business and have a separate contract for vehicle transportation of that entity. Certainly in all circumstances, you need either addendums to your lease or a properly written lease for storage and bailment agreement with appropriate releases and disclosures for any of these types of services. You should have your lease and other documents reviewed often by an attorney familiar with this area of the law and also review the entire business plan to see if it would be in your best interest to set up some separate entities to hold various "risky" parts of your operation. Accurate Information

Obtaining the right information on your rental agreement gives you a better chance of locating the owner in the event of an emergency or default. It also gives you a better defense in the event a claim is brought against you for wrongful disposal or termination of the vehicle under the rental agreement. Consider requiring the following additional information to your lease for vehicle storage:

the year, color, make, model of the vehicle or boat
license plate, state of license plate
VIN or other identification number checked in at least two places on the vehicle.
Copy of the vehicle registration
f the name on the registration is not the same as the person executing the rental agreement, the person executing the rental agreement must have a statement notarized by the owner, which clearly states that it is acceptable to store the vehicle at the facility.

Just as in self storage do not to allow more than one person to sign a lease for vehicle storage. In addition, require your Lessee to be the actual owner of the vehicle. If you store a vehicle not owned by your occupant, make sure that you have all of the relevant information on the owner of the vehicle. By doing this you will help prevent the possibility of storing something that is stolen. Moreover, you can run into difficulties, if at some point in the future, ownership between the titled owner of the vehicle and your renter becomes disputed. Vehicle storage can be particularly complicated because there are titles and liens involved. If you ever find yourself in a controversy you want to make certain you know who the owner of the vehicle is and hopefully the owner of the vehicle is your occupant.

Make sure as you gather the information for the Lease which we have suggested in this section of the article that you gather information on every vehicle that could potentially be stored in the space. As an example, someone may be storing in one space a trailer and 2 jet skis. This rules as 3 titled vehicles stored. Do not forget to obtain the information on each of the jet skis and the trailer. Further, many occupants come to the self-storage facility to pick up a vehicle, such as an RV and leave the vehicle that they have driven to the facility in his storage space. This creates a problem if you have not previously approved of this other vehicle being stored in the facility. You need information on ownership of the vehicle too. All of the sudden you come in one day the RV is gone and an SUV is in its place, does it belong to your occupant? Is it insured? Is it subject to the terms and conditions of the Rental Agreement which may set things like value limitations, releases of liability for damage, and etc.? As you can see, if there is a chance that another vehicle is going to be left in the vehicle storage space for any length of time, it needs to be an additional listed vehicle on your Rental Agreement. If it is not, all the trouble you have gone through to protect yourself by a Rental Agreement on the main vehicle could be for naught if something happens when a different vehicle is stored by the same occupant in that same space.

Do not forget to check your state's self storage statute. Some states do have provisions in their statute dealing with from, at a minimum, the superiority of your lien to a filed or recorded vehicle lien, to a maximum of procedures specifying exactly what to do to allow you to obtain a title to a vehicle if the vehicle is in default so that you can properly sell it. Do not assume you can simply go down to your local title agency and obtain a salvage title anytime a vehicle is in default and simply sell it at your next lien sale. This is often not the case.

Hazardous Materials

Vehicle storage presents a special problem because vehicles contain hazardous materials just waiting to spill, leak or explode on the property in the form of gasoline, lubricants, acid in batteries, tires, sanitary toilet chemicals, etc. This problem is exacerbated by the fact that these vehicles are parked on soil, gravel or asphalt, which allows the chemical or spill to quickly enter the soil. Given the volume of liquids and lubricants stored in a RV, as an example, a leak or spill could create a serious environmental hazard on your property. Further, some occupants even try to store extra gas, chemicals, tires, etc. in or around their stored vehicles. Some insurance companies now offer hazardous spill clean up coverage, so far it is limited coverage and reasonably expensive. You should include certain limiting language in your rental agreement specifically targeted to the outdoor storage of vehicles to provide how much liquid (i.e. gas) may be stored in the vehicle as well as preventing additional liquid being stored in the vehicle.

Also do not forget that you could actually be creating an event of default under your mortgage by failing to prevent hazardous waste from being brought in to and used on your property. Make sure you have checked with your insurance agent that your insurance company is aware of the this type of storage at your property and if not buy whatever additional coverage or rider as you may need to allow this sort of function to occur. You may also need to check your mortgage to make sure that vehicle storage which involves allowing this type of gases and hazardous waste onto the property does not violate a term or condition of your mortgage. This is one you would not want to find out about the hard way. In order to determine whether or not you have these risks in your policy, your legal counsel should review these issues. If you are allowing or plan to allow vehicle storage and your insurance policy does not cover these kinds of spills or leaks, find a self-storage insurance policy which permits this use or buy a rider to your existing policy. One spill can cost years of profits.

Drip Pans

You should require a drip pan or absorbent pad under the parts of the vehicle that might leak. I know a drip pan sounds like a funny idea, however, many of my clients now use them and swear by them. A drip pan provides several different benefits to the operator: 1) The obvious is that, if properly placed, the drip pan may catch dripping or leaking fluids which would protect you from the environmental contamination discussed in this article; 2) Since very few people carry their own drip pans with them you can stock them and sell them as a source of ancillary revenue. We recommend a plastic liner similar to that used to build a koi pond. It holds about 55 gallons of liquid with solid sides, almost like a small wading pool, anchored by a cinder block. Both of which can easily be stocked behind your store or in your store and sold because it is a requirement of storage for vehicle storage; 3) There is a customer service aspect that is as you conduct your lock checks and property walks, should you see a drip pan containing some sort of unknown green type fluid you would have the opportunity to call the occupant and advise him that his vehicle is leaking. You noticed a problem so that the customer did not get out on the road and have a break down and you asked your customer to get the vehicle off the property before it causes environmental hazard or damage to your property.

Towing Liabilities

Towing a vehicle off of the property assists you in minimizing your damages, even if you are not able to sell the vehicle once it is towed. (In most states selling a vehicle is complicated, expensive and often does not result in any money for the self-storage owner because of prior liens on the stored vehicle.) If you are allowed to tow the vehicle off the premises and you provide for that remedy in your lease, and if you do it early on after default, you will minimize your damages.

Assuming that you have a default clause in your lease, make certain that one of the remedies in your default clause permits you to terminate the gate access of the stored vehicle in the event there is a default by the Lessee. Thus, in the event a occupant removes his/her stored vehicle from the facility and has not paid his/her rent, you can prohibit him, by lease, from returning the vehicle until rent is paid.

If your state permits removal of the vehicle by a lien right, eviction statute, or by towing the vehicle to an impound lot as a remedy in the event of a default, be sure to give yourself these rights in your lease. Additionally, post whatever signage is necessary or required in your state. In some states, you can consider a occupant who is in default and who you have removed from the premises to be a trespasser if he tries to re-enter the facility.

Rules and Regulations

Not only do you need a lease and/or addendums that covers the aspects of vehicle storage discussed above but you will probably need additional rules and regulations for example, a vehicle stored in the vehicle storage area may be subject to an appearance requirement. You may not want the vehicle to be rusty or have deflated tires, broken windows, pieces of the vehicle stored elsewhere in the vehicle, perhaps you wish to require the vehicles to be operational, currently licensed and accurately registered and/or subject to annual state inspection. If you wish to enforce these rules so that your vehicle storage area does not look like a junk yard these rules need to be incorporated into your vehicle storage lease. Do not forget to make certain that if your rules are on a separate sheet of paper that the rules are incorporated into the lease and subject to the default provisions so that you have grounds to terminate someone's lease agreement should they not wish to comply with the facilities rules and regulations regarding the storage of vehicles. Your rules and regulations may also include items we discussed above such as back in or front in parking and charges for occupying too many spaces or the wrong space.

Addendums

If you are running vehicle storage you may need to have some additional lease addendums that may or not apply to the various types of vehicle being stored. For example, the Texas Self Storage Association Vehicle Storage Lease contains approximately 20 different addendums simply to supplement the operations of different types of vehicle storage operations. These addendums include a dump station, a wash station, or a potable water supply. These are matters that must be addressed either in your vehicle storage lease or in addendums to ensure liability and responsibility are properly allocated between the Operator and the occupant. For example, if you provide a dump station and the occupant uses the dump station improperly and this is not covered in your lease or addendum, it is going to be very difficult to charge the occupant for the damage that he has caused to your dump station. Further, should you expect a charge for any of these types of services that may be available at your facility make sure those charges are clearly delineated in a lease or addendum and always reserve the right to close or withdraw a service currently provided. Right From The Start

It is important to work with your attorney to incorporate these provisions into your lease. And the best time to address these issues is when a occupant is ready to sign a lease and store the vehicle at your facility, before you give them the access code. If you wait until after the rental, when the vehicle is already on your property, it is too late"”there is no reason for the renter to give you additional information or to agree to change the terms of the lease. Remember: While outdoor/vehicle storage may be profitable, an unexpected problem not covered in your lease can quickly make it unprofitable.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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THE OCCUPANTS CHANGE OF ADDRESS
by Jeffrey Greenberger, Attorney at Law

I was recently asked a terrific series of questions by an area manager of self-storage facilities in Minnesota. Specifically, an occupant was sold for non-payment and after the property was sold the occupant claimed that he had not received the proper notices as required by statute to the last known address of the occupant since the Occupant claimed he sent notice of a change of address via e-mail to the facility. In this case, the lease required a change of address to be "signed". The occupant alleges that because of recent cases, the sending of an e-mail constituted a digital signature and that the facility should have accepted the e-mail. The facility denied receiving the e-mail and claimed even if there was an e-mail that it did not meet the requirement of the rental agreement that the notice be signed to change and address. The question, surprisingly, centered on whether or not it is bad customer service to refuse a change of address by e-mail.

The notice from an occupant of a change of address is common in this industry. Many times your occupants are renting a self-storage unit because they are moving, they are between addresses due to the loss of a job, an eviction, a transfer, and/or they are your occupants because of a local or long distance move. This makes receiving and acknowledging a change of address one of the most critical operations you may have at your self-storage facility.

Let's discuss the "sure" things first.

Most self-storage statutes make some reference both in the definition section and in the lien sale section to a "last known address." Some statutes set out how addresses may be changed, such as in Michigan or Florida, the Act in these states requires that a change of address occur "by hand delivery or first class mail." While this is not the certified mail that I suggested above, at lease these statutes tell you what you may and may not require when it comes to a change of address. Several states, such as California, require you to request a secondary address where you can send notices, although I do not know of a state that requires that you get a second address if an occupant refuses to give you one. Thus, it is absolutely critical that changes of address be treated, practically with reverence, and that the process of obtaining a change of address be highly controlled. The best way of controlling this process is by having a clause in your rental agreement that sets forth how and when a change of address may be given to the operator.

Particularly in states that do not have self-storage statutes and/or states where the statute does specify the methods for turning in a change of address, as an example, Florida which provides only the last known address is the address provided by the occupant in the latest rental agreement or the address provided by the occupant in a "subsequent written notice of change of address." You need to define how that written change of address can be given to you. Otherwise, you are left open to claims of faxes, e-mails and who knows what else. For everyone's security and best interest in states where there is doubt about a change of address, draft your lease to require that change of addresses be given via certified mail or in person at the office. We ask our managers to explain this concept to occupants in great detail, particularly that a changed check address or a changed return address on a check payment envelope might be missed and thus it is critical to notify us the "right way" of a change of address.

Some ideas that I have seen that work well to encourage proper notification of a change of address are to provide a change of address form or card in a folder with the initial lease documents given to your occupant at move in. For example, "here is a folder with a copy of your lease, a copy of the rules and regulations for the facility, one get out of late fee card, and a form to change your address. It is so important that we be able to contact you at all times that put that we created a separate form." Several of our clients also leave a box of change of address forms outside the office to drop in the night deposit slot or payment slot, although this is certainly not as secure since there could be "pranks." Still I would rather get the notice of that change of address "in person" than by e-mail or phone message and hopefully your video system records the change of address being deposited in your drop slot. I even have a few clients who leave a change of address form taped to the inside of the self-storage unit when they rent the unit. All of these ideas together generally work. However, the person in Minnesota who asked the question is right, occupants want the easiest possible experience as they consider having written form to the office or worse, send a certified letter to the office, as something they should "not be required" to do.

If you accept e-mails, faxes, phone calls, change of addresses on the outside of payment envelopes, etc., you are going to miss a change of address through you or your employee's own carelessness or because the e-mail is blocked by a spam filter, or the fax will be lost in cyber space. It is just going to happen. It is Murphy's law that the person who changes their address allegedly by e-mail or fax or telephone call, is going to be the occupant who goes delinquent, who is not going to give you a secondary contact address, who has no cell phone or whose cell phone is disconnected, and you are going to sell that person and then wonder for the next several years if that person is going to come out of the woodwork and claim you did not send them the necessary service.

Let me address one thought that is probably going through some of your minds right now. Many state statutes say that the service of the default notice is "presumed delivered "˜X' number of days after depositing it postage pre-paid in the U.S. Mail". I caution you for two reasons:

(1) the requirement of some of these statutes are technical. You may have to obtain a certificate of mailing from a post office or, if certified mail is required with return receipt, the only way that this is a valid method of service is if you actually take the letter to the post office and get it stamped at the post office. While, you may think you are in the clear by serving and presuming delivery and that the statute will protect you, unfortunately you may find out that you did not actually follow the statute as required. Also, can you presume delivery of mail that is actually returned to you?

(2) Judges reserve the right to not agree with you on presumption of service if the occupant comes in and provides some evidence that they provided you a change of address which you allegedly did not use or ignored. In the example from the question above, the occupant claims to have sent it via e-mail and claims the facility must have deleted the e-mail. This occupant even claimed that he could reprint the e-mail that he allegedly sent to the facility. Regardless of whether you have a presumption of delivery in your state or not, this type of situation exposes you to unnecessary risk.

The biggest problem with e-mail and faxes is that they can be faked. It is easy to create a forwarded e-mail that looks likes it was from an original that was simply another mailbox of the occupant. Further, occupants can send an e-mail notice of change of address and mistype the address or send from the type of e-mail that is blocked by your spam filter. I have inquired of several technically savvy people to ask whether or not your internet service provider can trace receiving an e-mail. The answer is yes that an e-mail can be traced for a period of time. No one could tell me exactly how long. The millions of e-mails sent every day make it virtually time and cost prohibitive to actually try to run a trace backwards through your internet service provider to determine whether or not you actually received an e-mail from your occupant. Even if your trace showed an e-mail was even sent by your occupant, it would be impossible to prove that this e-mail contained the change of address. Thus, while the occupant can say I e-mailed you, they could have e-mailed you anything and claimed it was a change of address later. For these and many other reasons accepting change of address by this method, by answering machine, by phone, etc. is simply too risky and exposes you to unnecessary liability.

Let me make some suggestions for you:

The clause that we suggested above requiring notice of a change of address in person or by certified mail. That is still the best way to ensure that everyone knows a change of address has been made and that occupant has a real receipt to prove it was received.

If you have a kiosk that has thumbprint recognition and a camera, any change at the kiosk would certainly be notice as if in person because a digital record would be maintained that this person particularly came with a recognizable thumb print and changed the address. Compare this, by contrast, to a prank e-mail you may receive allegedly from an occupant but actually from a disgruntled boyfriend/girlfriend/spouse changing the address. How are you going to know for sure the e-mail received is actually from your occupant?

If you want to accept notice by computer, refuse e-mail and instead set up a dedicated, secure web-site where each occupant can use their name and password they create to log in, provide these types of changes of address and receive a "confirmation number" of the change to their profile. Thus the change of address is secure. The password is known, hopefully, only to the occupant and this is the type of "digital signature" that so many courts recognize as valid and binding.

Add to your voicemail greeting on your telephone system, if you do not use an after hours call center to field calls, that Occupant may not leave a change of address on the voicemail system and expect it to be binding. We see that in the insurance, financial, and security industries, you cannot change or bind coverage via phone, you cannot buy or sell stock with a phone message, and somehow insurance agencies and stock brokerages still survive being so "consumer unfriendly".

Finally, if you really are going to, at some point, accept changes of address via phone, take a page from the banking industry. If someone provides a bank or credit card company with a change of address or other activity on the account, a notice is sent to both the new and old address advising the customer that a change has occurred to the account. You can do the same thing, notify the occupant that we believe the occupant called to change the address and that if the new address is returned to you undeliverable, unclaimed, etc., then you can start working on contacting the occupant right away as opposed to, if and when occupant ever becomes delinquent and difficult to find.

Please understand accepting changes of address via phone, fax, payment envelope, is at best, risky business. Instead of being customer unfriendly about it, explain to the occupant how, for their protection and the protection of their goods, there are strict rules, like the banking, insurance, or stock brokerage industry, that a significant change to the account requires a document in person or sent in a secure manner like certified mail or by secure website, signed by the occupant. To emphasize this point, you can always turn the tables on the occupant and say "you would not want me to change any significant terms and conditions of your occupancy agreement (I know you have to be careful about changing rent amount when you make this type of statement) without getting a copy into your hand and/or obtaining your signature on a revised document. I would hope you would understand why we would want the same thing."

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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CAN I ALLOW THE SPOUSE OF A TENANT INTO A UNIT?
by Jeffrey Greenberger, Attorney at Law

Question: This month's question is from a manager in North Carolina: "I have a customer who is now two months delinquent and may have to start the lien process. The problem I have is that the customer is going through a divorce and the husband is not on the contract. The wife took some of her stuff and left town. We told him since he is not on the lease we could not let him in, but what happens if she does not pay and I have to go through the lien process? Am I then allowed to let him in and sell the goods back to him?"

Rob, in response to your questions, so far you have acted appropriately. I always advocate that a self-storage facility only have one named occupant thus, there is only one, for lack of a better term master, which you as the landlord must serve, rather than have multiple parties on the lease and thus having to answer for every action to multiple parties who may have different interests. Particularly in the case you have stated these interests are now in conflict with each other and that could have created a large problem. When one person is your occupant, you only have the duty to respond to that one occupant. All others must gain access either by being authorized by the existing occupant (and when I say authorized, I mean that occupant has given that person the key and/or gate code, I do not mean they are a listed as an "authorized access party" on your paperwork), or that person must get a court order to get into the unit, often done through the divorce court. Thus, as you have not stated that this person is an authorized access party (which I believe is a good thing, I do not believe in gathering authorized access parties in your paperwork), you are not letting husband into the space unless you can reach one of these three options:

1. Get a written release from your occupant to allow this person into the unit. This written release should include a release to you that once this person has gone through the unit, then you are completely released from any damages the occupant may suffer by what this person may take out of the unit. If you reach this sort of release with your occupant you should also have written releases with the person entering the unit which includes a release of any liability for any property that is not there, for release of any liability for any injuries that he may suffer as a result of being on the property, and with the agreement that when the husband leaves, the unit will be broom clean and anything left behind is deemed abandoned. Please note this is different than getting the lease assigned, which I think is a riskier proposition once the lease is in default, and which I will discuss next

. 2. Get an assignment of the lease, by which your occupant signs over the lease and all rights to access the space and any right they have to the property in the space to, in this case, the husband. This would require that any default be cured which I am guessing the husband would be willing to do, proper paperwork should be drafted by your legal counsel. An assignment is riskier because your state statute may allow for redemption by the tenant but not anyone else (except a secured lien holder). In this case your occupant is not redeeming thus there is some risk.

3. Allow the unit to go to sale and simply notify the husband of the date and time of the sale. The husband can then come and most likely purchase for less than what is owed on the lien on the property in the unit and clean it out. This option is cleaner and requires no involvement of the "ex"-spouse, but does increase your costs. However, it is the recommended method because it is going to be hard to be certain that any document you have "signed" by wife is really going to be signed by her. You may end up having accepted a forged document and be at risk of liability to your tenant.

The one thing you should not do is you should not let husband in the unit to remove property unless or until you have some sort of release or assignment of lease signed by the actual occupant or allow the husband to purchase at the sale. There is no other time that letting husband in the unit to remove the property, although it may save you money, would be the right answer. To allow someone to remove property without a release, (permission), without assignment of the lease, or tenant's sale, is what is called a constructive eviction and it could set you up for liability to the wife should she reemerge before the sale to pay her indebtedness and you have cleared the unit out. You would be liable for ultimately denying her the property and/or wrongfully selling the property and could expose yourself to a long litany of damages that could or could not have actually existed because of property now gone from the unit.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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HOW CAN I PROTECT MYSELF AGAINST LIABILITY WHILE HAVING DOORS INSTALLED?
by Jeffrey Greenberger, Attorney at Law

This month's question is: I have an older storage facility and have to replace approximately fifty (50) roll up doors. I am fortunate that I am 100% full, but I have been told that when I replace the doors the installers will need to be in the units and have approximately three feet of clearance inside the unit. This means, I will have to open the tenant's units and potentially move some of their stored property out. Is there anything I can do to protect myself against liability?

The answer is that I do not have a "magic" answer for you. If you need to enter tenant's units and touch or move their property, you have entered the world of bailments. You have the liability of a bailment (which we have discussed in this column before) and you face exposure for claims of damage or missing stored property.

In a perfect world you would want to have the tenant come down to the facility at a scheduled appointment time, remove their lock, watch you move their property out (or even more ideally have them move their own property out), stay during the entire door replacement, once the door is replaced, put their property back in the unit, and have the tenants lock the door with their own lock. That is not just a perfect world, that is a fantasy world, given that your tenants may not be able to take three or more hours out of their life to sit at your facility and watch a door being replaced, if your tenants were even located in or around where the facility is, as opposed to where tenants are from out of town.

There are some precautions you can take to help minimize your liability to the tenant:

Notify your tenant that this will be happening and ask if your tenant will agree to come and then remove the lock and then replace the lock when you are done. Even if your tenant will not wait through the three or more hour replacement time, and even if the tenant will not help you move the property, at least your exposure is minimized by having your tenant there at the beginning and end of the transaction to inspect that their property is there at the beginning and back in the unit at the end.

Short of that, if you are going to have to cut a lock you should do so while videotaping the process so you can get an accurate videotape picture of the condition of the unit, videotape the removal of the property to show that it is not done in a careless manner, then videotape the property in its existing position at the end of the door replacement, and the property being replaced back into the unit. Once you have locked with a new lock, we recommend mailing the keys to the tenant, rather than holding on to the keys until the next time your tenant comes down to the facility to minimize the amount of time that you are "in control" of the contents of the unit.

You want to make certain that you have as many good supervisory controls in place as possible, that is your manager or other trusted site employees supervises or conducts the lock cut, conducts the move out of the property, watches the property while the roll up door replacement people are in the unit, and replaces the property. It probably is not necessary to post a "security guard" or someone who is bonded. I do not believe that has any additional or real credibility. Bonding only means that if the person who will be watching the move steals property, you may be able to recover damages as opposed to the people installing the doors or any other tenant on your facility as they walk by and find something to their "liking."

Nevertheless, when you open a tenant's unit and they are not in default, but they are not there for you, you have created a bailment and when you create a bailment you will have responsibility for care of the property. And when you have a duty to care for the property you raise the stakes in a possible claim for loss or damage to the property. Particularly since you have notified the tenant that you will be entering the property by cutting their lock, moving their property, you will likely increase the number of claims tenants will make for alleged or missing property. It is thus important to make sure you have checked with your insurance agent to see if there is any additional or standard coverage you may want to purchase before embarking on this process.

After the replacement you should send a letter to the tenant stating that the replacement has been completed, how the replacement occurred, i.e. you personally supervised the removal, stood by the property while the replacement roll up doors were being installed, and replaced the property personally, put a new lock on the door and enclosed are the keys. You would want to include in that letter to a request to please check the door and the satisfaction with the status of the property in the unit within thirty days or waive any claims if you are not notified in thirty days. This will help reduce the possibility of future claims when a tenant becomes disgruntled. While you may be increasing the number of claims within the thirty days, at least you will know what claims are out there and you can deal with them appropriately versus waiting for them for the next two to five years to find out what those claims may be. You should also consult with an attorney to help you formulate that exact strategy to reduce and avoid, as much as possible, any claims that could be made.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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THE SALE OF THE STORED GOODS
by Jeffrey Greenberger, Attorney at Law

One of the most interesting things about the Self-Storage industry is that in almost every state there is a statute that gives you, as the operator, a lien on your tenant's property and, the right to sell the stored goods to satisfy the Self-Storage bill (your lien). I have said on these pages before that a sale of tenant's property is your last and worst option because the sale process is technical and it is easy to make a mistake; some operators are not patient enough to properly sell goods; and there is still nothing in this industry that gives rise to more claims against insurance and litigation than wrongful sale cases. I have further expressed on these pages that there are options other than a sale for example, agreed terminations or eviction. However, for the purposes of this article let us assume you need to go ahead with a sale. If you are going to sell, like an airplane as it descends under 10,000 feet, there are a series of checks and cross-checks you must perform before and during the sale. I call this the gut check and, if you get through the list and something is not right, or still burns in your gut, then heed my advice to not put the unit up for sale, start the process over where the failure occurred and continue forward as needed. Never force the sale.

You may have heard a story about a client of mine who sold a unit a few years ago. The client performed a software conversion and there were two Mrs. Smiths in the system. For some reason one Mrs. Smith ended up credited with the other Mrs. Smith's payments such that one Mrs. Smith was about six months ahead prepaid, and the other Mrs. Smith was six months delinquent. Our client sent all the necessary notices, ran the advertisements as required by the statute and sold Mrs. Smith's unit. Mrs. Smith, who was about 80 years old, came in one day looking for her property. The manager bristled at her and said "Mrs. Smith we sold your property to satisfy our self-storage lien because you were over six months delinquent to us. Here is the proof that we certified mailed, advertised, etc., you unfortunately lost your property because of your unwillingness to pay." Mrs. Smith then laid down six cancelled checks for the period of time in question. That is when the manager started to feel sick. When I asked Mrs. Smith later why she did not respond to any of the client's communication attempts, she said I just presumed it was a mistake, I had my cancelled checks and I knew you would figure out your mistake. Our client was able to settle with Mrs. Smith but the moral of the story is if you cannot believe that little old Mrs. Smith would let her worldly possessions be sold, then perhaps you should give pause before the unit is sold.

While every state is different in its sale requirements there must be a "check list" which a manager ought to start filling in as any tenant starts to go delinquent. This document will become the final "balance sheet" to decide whether or not a unit should go to sale. By the way, timing is omitted in this article, formulate timing based on your state statute and your operations. Some of the early obvious steps are calling the tenant, writing down the number called, who you spoke to, what was said, was a message left and who made the called. Everyone working at the facility should be quizzed about if they have heard anything about or recently seen the delinquent tenant. Check obituaries too. If you have a gate or alarm log, it should also be checked to determine when the last time somebody went into that unit. All of this should be written down for comparison and balancing when you get closer to the sale date. Although you may start this process with many tenants, a lot of the tenants will pay at some point during the process. You will only get a few down to the final sale process in a month or quarter but it is the time of default when you start thinking about whether or not you have seen any change of address, whether anyone has mentioned anything about a move and think about what conditions were at move in. Did the tenant mention that he was between houses or anything else like that that may help you think about another place to locate the tenant? You should check for the "Smith" effect, double check the occupied units versus unpaid rents making sure that the rent payment has not been credited to an unoccupied unit and make sure that no-one is listed as prepaid that would be a surprise or in an amount that might be the missing rent payment.

Check with the usual suspects such as alternate contacts and emergency contacts but also do not forget that you should have been given an address where the tenants resided at the time they entered the lease. With the internet it is easy to figure out the owner of that address. If it is rental property call the landlord to see if the tenant is also behind in their rent at the apartment or even if they are still there. If you have a vehicle stored you should have some sort of insurance information. Do not forget to call the insurance agent to see if he knows the whereabouts of your tenant.

. If you are in a state where you cut the lock to perform an inventory, make sure you have a detailed procedure for documenting the lock cut. Once you have cut the lock you are potentially more liable for alleged missing property to the tenant should he later come in and pay. You want to make sure you have a policy in place for how the lock cut is documented, who is present during the lock and preferably that the whole lock cut procedure is videotaped for proof of the condition of the items and the unit. Again, these are not things you want to go back and recreate later. Everyone should be filing and signing off on these steps as they are performed. Do not forget the "clues" in the unit, while you should not riffle through the unit, if a whole house of possessions is in the unit your tenant is more likely on the move, as opposed to finding clothes and sports equipment.

Make sure any delinquency notice has "Forwarding And Address Correction Requested" on the outside of the envelope, if you do not order envelopes printed this way start doing so. If the tenant has moved and put in a forwarding address with the post office, you will get one of those yellow stickers back. Yes it will cost you a dollar and yes, it is not necessarily required that you dig up the tenant's address like this, but it may save you a lawsuit.

Do not forget the requirements of your statute. They are technical. Some statues require mail of a notice via certified mail some require certified mail return receipt requested. Some statutes provide the number of days from mailing to start the countdown towards sale, some count from the date of delivery, which is a different date. Also, make sure the actual notice you are sending via certified mail complies with your state statute.

Make sure you have set up for your employees the proper way to calculate the number of days between the notice and the sale for the notice. Many statutes require that you make a demand for payment within 10 or 14 days of mailing or delivery but that you also put in a fixed sale date which may not be less than "x" number of days from the advertising date it is easy to make mistakes counting backwards. Make sure your format includes an appropriate calculation or number of days in order to meet or exceed those requirements.

As you get within a few weeks of sale it is time to substantially audit the file. Double check that everything has been mailed to the best last known address, look for changes of address in the file and computer, check for any alternate persons who you can contact. By this time, you should have sent notices to the tenant, alternate persons and emergency contacts. Are these notices coming back undeliverable or have they been received? If they have been received has there been a response from anyone? This should all be documented for your final review before you authorize a sale. If the emergency contact has called and said I think this guy is over in Iraq you will want to know about that before you think about authorizing a sale.

If your statute requires notice in a newspaper you should be making sure the ad runs on the dates it is supposed to run to meet the statutory requirements. If you are saving money by running your ad in an "auto trader" type newspaper rather than a newspaper of general circulation you have probably violated your statute and set yourself up for a lawsuit. The ad should be cut out, placed in the file and a copy should be mailed to the tenant. If there are any problems with insertion, if the ad is cut off, or if it does not meet your statutory requirements you should stop, re-serve the notice and start this process again.

Several days before the sale you or the highest ranking person available, should really be getting intimately involved with the file. You and your employee, if any, should be rechecking for any legal notices or other letters received from the customer or any other person or entity regarding the unit; You should be doing a last check for any notice of a legal proceeding that would prohibit the auction such as a bankruptcy or a restraining order; You should be re-reviewing the call log, has anyone a tenant or otherwise called about this unit; Have there been e-mails about the unit; As a gut check, does the tenant have other units that are not delinquent at your facility, if so, why; Have you misapplied a payment; Is this "Mrs. Smith" who thinks you will figure out your mistake before you sell the unit; Have all addresses been crossed check against any information in the computer or any other data; Have you checked for all methods of possible payment on the account; If you have a lock box or a P.O. Box or a drop slot, check to make sure the payment or a partial payment was not made last minute in the drop box; Further, if you accept payment by auto deposit from a bank or over the internet, you must monitor the account(s) that to the last second before the auction. Make sure that you are complying with your statute regarding the use of an auctioneer if it is required.

The day of the sale re-review to make sure you have not missed a deadline, a partial payment or anything else that may put your right to sell this unit in any question whatsoever. Do not be afraid to pull the unit for address problems, pending legal action, unresolved damage to the unit or contents; if the value of the contents of the unit are much greater than what you are owed; concerns over your inability to contact the customer; a partial payment; a voluntary agreement to vacate; a subsidized payment from a religious or other interest group; any question regarding the validity of the service of your certified mail; or any other question. Review the check list that you have prepared from the beginning of default until the day of sale.

This is only a partial list and it is not set up on a calendar because every state is different, but I hope that you get the idea. If you are going to sell, do not be quick to ignore a sign that the sale should not proceed. If you are reviewing the computer file, the hard file and your in-house check list that I recommend and something does not add up or something has not been completed properly and you feel like there could be a problem, there probably will be.

I am not saying do not sell the property, I am simply saying back up to the point where the problem occurred and start again from that point. Most of your state's statutes offer you some sort of protection from liability should you properly sell the goods in the event of a default. However, we see so many cases where people claim that you "should have known" of their address change because it was on the outside of a payment envelope one time or they claim that they dropped written notice of a change of address down your payment drop slot, you of course never received it to the best of your knowledge, but this breeds litigation. You are selling someone's personal property whether it has value to you or not. Make sure you will be able to back yourself up in the event the tenant comes back and says you did not have the legal right to sell it.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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TENANT SCREENING AND PRIVACY RIGHTS
by Jeffrey Greenberger, Attorney at Law

In this day and age in the Self-Storage industry it is almost impossible to imagine effectively running your business without certain equipment like a telephone, a computer, specially designed accounting software, and maybe even a gate access control system. All of these items are important, but what actually prevents you from renting to a tenant who will use his unit to: a) break into other occupied units; b) brew methamphetamines and accidentally burn the entire facility down to the ground; or c) stalk your tenants for the purpose of rape, robbery or the like? Is it really the best business plan to let people move into your multi-million dollar investment without really knowing who they are? Probably not, that is why the next "must have" in your office is online screening.

Screening means a lot of different things to different people. What I would like to focus on in this article is the screening of perspective tenants for bad criminal histories. However, do not loose sight to the fact that if you are going to screen you should also be screening your employees who will immediately have access to everyone else's social security numbers, credit card numbers, driver's license numbers, your money, and other information. There is also credit screening which is not discussed in this article.

Criminal screening involves checking certain databases (discussed below) against the applicant for the Self-Storage space. The report (which is, generally, instantly generated over the internet) will tell you whether your proposed tenant has been convicted of certain crimes. Screening should also prevent you from renting to someone who is on any government "watch list", mostly terrorism lists. Generally, the way screening works is that you have pre-defined a list of crimes for which if the proposed tenant has been convicted (or if charges are pending) you would refuse to offer the proposed tenant a lease. The reports on crimes are pulled from whatever counties or states you desire. Some screening companies can merge your list with their report so that all you do is get an "accept", "review", or "reject" screen. Other screening services require you to manually apply your list of crimes against their report to determine whether someone should be accepted, rejected, or whether further inquiry is necessary. Why should criminal screening be important to you? First, from a national security standpoint you would not want to be renting a unit to someone who may be on a terrorist watch list or wanted by the Federal Government. If your facility is located near a "target" for terrorism you need to do everything you can to avoid renting to a terrorist. In addition to state and local convictions, all the screening services will automatically check your tenant against these "watch" lists. The most important of these lists is The Office of Foreign Asset Control ("OFAC") list. It is actually illegal under a Presidential Executive Order to do business with a person who is on one of the government interest lists, particularly the OFAC list. This is one reason screening is important to you. Should you happen to rent to someone without screening and he was on the OFAC list, you would have actually committed a crime.

More pragmatically however, if you knew that for a small sum of money you could know, virtually instantly, whether someone who proposes to move into one or more of your storage units has been convicted of a crime, that may lead you to believe the actual motive of the rental is not for storage but for some ulterior motive, and that with this knowledge you could help protect your investment and your other tenants, then screening should make good sense to you.

Your lawyer has spent a lot of time drafting a lease to protect your interests. These leases often include certain releases of liability, if permissible in your state, for injury and loss of property, damage, and etc. We are seeing some attorneys trying to get around those leases by saying "the loss occurred because someone you rented to is a career drug dealer, and you knew or should have known that the person you rented to you was not simply leasing space for storage but was leasing space to make or sell methamphetamine because tenant had ten prior convictions of brewing methamphetamine, we do not think you should be released from liability for our client's loss as a result of the recent fire at the facility." This is an argument based on "reliance" and while these types of cases have not taken hold, I predict it is only a matter of time before someone makes a case like this really stick. The result could be that a court holds that it would have been reasonable, similar to apartments or other real estate rental transactions, to screen. Essentially, that you should have known more about the tenant than whether or not he has the first month's rent in his pocket. If this happens to you, you are going to wish you had screened.

Specifically, our clients who screen for criminal backgrounds are generally refusing to rent to people who have been convicted of certain types of crimes. The specific names of these crimes may differ by state but they are generally crimes of violence, any crime involving sexual menacing, assault, or molestation offenses. Also, any sexually-oriented offense involving minors, any tenant considered as a sexual predator, habitual sexual offender, or sexual offender, certain theft, embezzlement, larcenies, as well as any felony offense involving use, cultivation, trafficking, deception to obtain, possession, distribution, or manufacture of an illegal drug are excluded for renting.

There is one important caveat about screening similar to any other records that you create or maintain as a result of the tenancy, these documents may have personally identifiable information about the tenant in them. These documents, given the substantial rise in the crime of identity theft, must be adequately protected. This means your accounting and screening software should encrypt any data that contains this type of personally identifiable information and your hard files must be properly stored, locked, and protected from any one who would not have a business need to see these records. Your tenant files should remain in a locked file cabinet or scanned to a hard drive and the originals should be off site. The cabinet should be locked unless the manager is in the office or needs to be in the files. There is no reason a weekend or break employee really needs to be in tenant files if you have an adequate computer system. When the tenancy has been completed the file should be properly removed, properly stored for the period of time determined by your company, and then the file must be properly destroyed. This does not mean thrown out into the dumpster, this means shredded or otherwise made illegible and unrecognizable. The number one thing stolen from Self-Storage facilities these days are computer hard drives. There is more value on your hard drive, particularly if your data is not encrypted, than anyone could steal from every unit in the facility. The same is true of your tenant files. A prying employee, tenant, or thief with access to your records, particularly the screening reports you may run could have a field day stealing identities and ruining credit. If you suffer a breach such as this you are more likely than not going to be required to make disclosure to all the people affected or potentially affected. What a public relations nightmare for your facility. Do you really want the evening news with a mini-cam in front of your sign discussing how thousands of people's identities may have been compromised because you did not lock your file cabinet or protect your records? This is also why you must destroy records when no longer needed. Recently a local TV news station had a field day diving through pharmacy dumpsters fishing discarded prescription labels, discarded prescriptions, and discarded health insurance information that was not properly shredded or destroyed. The news station even went so far as to order someone else's refill of Oxycontin from the information that they were able to obtain from the dumpster. Again, that is not the news story you want told about your Self-Storage facility.

In summary, screening has become a necessary component of the world of Self-Storage and more and more facilities will have begun complying with the federal law, that they are not renting to someone of interest to the United States Government and you can use these same tools to protect your assets by making sure that you are not renting to professional thieves, drug manufacturers, rapists, etc. Regardless of whether or not you are going to implement screening, now it is appropriate to immediately begin a review of your documents handling procedures. Is your software up to date, does it encrypt credit card numbers, driver's license numbers, social security numbers, and etc.? Are your tenant files which contain the same sort of information properly locked and under control of only the most trustworthy of employees? Are your employees properly screened to know they do not have a criminal history? What is your policy for what happens to a file once the tenancy has ended? How long do you hold the file, and is it in a secure place while it is being held after the tenancy? What are you doing to make sure that when you are done with the file that you are not making this information available to a thief by simply throwing it in a dumpster?

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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DEALING WITH LAWSUITS
by Jeffrey Greenberger, Attorney at Law

It is no secret to the Self-Storage operator that lawsuits are a reality in today's society and, whether you are wrong or right anyone with a couple hundred dollar filing fee can sue you. Even worse, most Better Business Bureaus, should you belong to one, have instituted mandatory binding arbitration (mandatory meaning you must participate in a binding arbitration to resolve any claim of any consumer may bring. I recently discussed with a restaurant owner a Better Business Bureau binding arbitration that they had to attend because a customer was unhappy that he did not get bacon on his sandwich.) No matter how you get involved with a lawsuit or arbitration you are going to incur time, energy, aggravation and often attorney's fees in dealing with what I will collectively refer to in this article as a lawsuit, which can include a full fledged lawsuit, a small claims action which may be referred to a mediator or arbitrator before going to court, and/or even the Better Business Bureau mandatory arbitration that you probably do not even know that you agreed to participate in, yet. Unless you are the sandwich vendor there are some basic steps that you simply must take in real time, no matter how frivolous you believe the lawsuit to be. Your employees should be briefed on these steps and there should never be an exception, no matter what the circumstance, to following these steps if you, your manager, or an employee gets a notice of a lawsuit.

1. Lawsuits are time sensitive.

Every state and even the Better Business Bureau system have a maximum amount of time that you are allowed to have before some reply is filed or you will automatically lose by default. Thus, any lawsuit served anywhere within the company must be dealt with the day it is received. There is no putting away a lawsuit on a desk until next week. Whatever your business structure is make sure someone is defined as the "go to" person for a lawsuit and make certain that person in your organization knows about the lawsuit the day it is received. Lawsuits do not always come directly from the court. If you are a corporation, an LLC or the like, your statutory agent may be served with a lawsuit thus, you may get the lawsuit from your attorney or a statutory agent rather than from the court. Do not be fooled or mislead. Your statutory agent being served begins the time countdown by which you must answer. Many states have other systems for notifying you of a lawsuit, do not worry so much about how a lawsuit is served, that is for your attorney to deal with, get the lawsuit to the right person that day.

2. Make sure your legal counsel is brought in as early as possible.

People who sue and are not represented by attorneys often make mistakes in their lawsuits. Sometimes, identifying a simple mistake may result in a lawsuit being dismissed and, hopefully allow you to resolve the claim before it is refiled or perhaps discourage the tenant from refiling the claim against you.

3. The highest ranking person who needs to be involved in this situation, based on your structure, should immediately gather the entire tenant file.

When I say gather I really mean seize. Assuming you are this person, you should print off all computer records regarding the tenant including any computer generated correspondence, ledgers, communication logs, and gate access logs. You should also seize the hard file. It never ceases to amaze me how many times a document that is important to the case may accidentally "disappear" from the file right before it is determined that that document may be relevant. Often, the only way you find out about critical missing documents that may have been issued by your staff is when it is produced by the other side. You do not want to be surprised, but you also need to make sure you understand all of the facts of the case. Do not rely on staff representations, see the information yourself. You may find that you have made a mistake and that it might be in your best interest to settle the case before it grows or becomes a class-action lawsuit. The only way you are going to know the legitimacy of the claim is for you and preferably your legal counsel, to have the whole accurate picture of the situation and approach it with an open mind. Remember, while you may be sure you are in the right, somebody else just spent $200.00 to sue you because he believes he is right. Sometimes, the truth can lie in the middle if you keep an open mind about what happened that led to the lawsuit it will be easy to determine which cases are appropriate to fight and which ones need to be resolved quickly.

4. Determine whether it is appropriate to notify your insurance carrier, it is almost always appropriate to do so.

All insurance policies have a requirement that you notify the insurance carrier within a certain number of days or weeks of when you are notified of a claim. If you do not notify your insurance company within that time period you waive coverage by your insurance company of the claim. It may not seem like a big deal when you first receive a couple thousand dollar lawsuit (and you do not want to invoke your insurance coverage.) But, at least notify your insurance company because if you do not and coverage is waived, then coverage is waived when the lawsuit is amended to take it up to many thousands of dollars and then you will wish your insurance company was involved in providing you a defense and coverage.

5. Do not lose sight of the date by which an answer or other responsive pleading must be filed.

Often these dates can be extended but, if you fail to file the required responsive pleading in time you have waived your right to defend the lawsuit and you may lose by a default judgment. Default means the court will presume you are admitting the allegations of the complaint and will grant judgment as requested in the lawsuit. You certainly do not want a default judgment taken against you, in any circumstances.

6. Lawsuits then normally enter a period of time called discovery.

For certain small claims cases and arbitrations this period may not happen. However, in all states the parties are entitled to ask each other certain questions in writing or in person and request certain documents and the right to inspect physical items. All together this is called Discovery. You may hear terms when talking about discovery such as Interrogatories which are written questions to the other side, a Request for Production of Documents which is rather self-explanatory, or you may also want to take a face to face statement of certain witnesses or other parties, this is known as a Deposition. The idea of discovery is to a) avoid surprises at trial (that is right Perry Mason type cases should not exist anymore); and b) to hopefully help both parties understand the other side's case and narrow down the issues which may need to be litigated.

7. After discovery, one or both of you may find out that your cases are stronger or weaker than you first thought.

Often the court will recommend that there be some sort of settlement negotiations. An attorney will sometimes recommend a settlement once he or she understands the full nature of the case if it appears that the case may be able to be settled for substantially less money than it would cost to defend or prosecute the case. Some of you do not care, you would rather pay the attorney than pay the other side of the lawsuit and that is fine too however, do not lose sight of the fact that in any good settlement neither side is happy. What this means is you may be able to settle the case for a lot less than the plaintiff ever thought he was entitled to, but there is a risk that the court could award the plaintiff the full judgment. You paid more than you wanted to and a lot less than you may have actually been exposed to pay should the court have awarded a judgment in favor of the plaintiff and the plaintiff eliminated the risk of a defense verdict. Finally, settlements are appropriate because there is a lot of mental anguish involved in litigation it is trying and nerve racking as well as distracting for the operator, managers, other employees and other witnesses of the case.

8. The court may order you into a type of settlement negotiation called mediation.

Many of you have mediation clauses in your lease. The clauses may help avoid your being in this lawsuit situation in the first place. If not, the court may order you to use a mutual "go between" to try sort out the issues and see if there are common ground for a settlement. Your attorney can often not stop a court from sending a case to mediation or even arbitration which is more like a trial, but not in front of a judge. Many court systems have a requirement that a case be mediated or arbitrated before it can be heard by the judge. Do not be upset with your attorney if you are sent to mediation or arbitration as a precursor to trial.

9. The realty of the situation is that there are a certain percentage of cases that simply cannot be settled and that is what makes America great.

We have a justice system that will give each party their day in court. Both sides get their opportunity to fully present their case to a judge or a jury (the trier of fact) and the trier of fact decides whether or not one or more parties are liable for damages and if so how much damages the other party(s) are entitled to. In Self-Storage cases we often see lawsuits over damage or loss to property. If the case goes to trial the trial would be over whether or not the owner/operator was actually liable for the tenant's loss. For example: is the operator liable if the roof leaked and ruined the tenant's property. Should the court find the operator to be liable for the loss or damage then the case would turn on how much was the property worth and what percentage of liability the owner had vs. the tenant based on that value.

10. Eventually the trial results in a judgment for or against the party which may or may not be appealed but at some point the case is fully and finally resolved generally, with a result no one is completely happy with.

Nevertheless there is either a judgment in your favor or in their favor. Unfortunately in our legal system, generally your attorney's fees and other expenses in defending the claim, even if you win are not recoverable from the other side. That is, there is no "loser pays" like England.

11. There are many things you can do in advance to avoid getting to the point of a lawsuit.

That topic is for another day and another long article but there are some simple things you can do everyday:

A) Make sure you have a well written lease that is reviewed annually by your legal counsel for changes that need to be made based on trends or case law or statutory changes;

B) Make sure your lease includes a value limitation on the stored property. The lower the value limitation, perhaps the better, to make it unattractive to litigate. Even if the value limit is not a low number, at least with an enforceable valuation provision you know the ceiling that you may have to pay if you were held 100 percent liable;

C) Include mediation or arbitration clauses in your lease. In most states you can require the tenant to mediate or arbitrate with you before they are able to file a lawsuit and often, these claims can be resolved through those processes without nearly the expense, frustration, aggravation, and etc. of a full fledged lawsuit;

D) Make sure you are not accepting or creating a bailment over the property. You are in the business of storage when you keep keys, accept deliveries for tenants, and hold property you are increasing your exposure to liability;

E) Watch your employment issues. Make sure you have a good employment manual and follow the terms and conditions in your employment manual; and

F) Finally, and perhaps the most common sense thing is listen to your tenants. Often tenants may come to you with a small complaint. Sometimes simply being compassionate to the complaint, sometimes the simplest amounts of empathy, without giving up anything keeps the tenant from snowballing the small problem into a full fledged lawsuit.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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EVICTIONS ARE AN OPTION TOO! A LEGAL PERSPECTIVE
by Jeffrey Greenberger, Attorney at Law

Almost all states have a Self-Storage statute that gives an operator the right to claim a lien against the stored property and, if the operator follows all of the steps, eventually get the space back and sell the stored property to help defray the outstanding rent and expenses of selling. However, sometimes a lien sale on a delinquent tenant is not your best option.

No matter which state you are in, you have some type of eviction (sometimes called a forcible entry and detainer) statute that permits landlords to evict their tenants for various reasons, including non-payment of rent. Sometimes, Self-Storage operators lose sight of the fact that, no matter how many times we remind you, that you are a landlord. Operators do not provide the service of storage-- operators rent space to be used for storage. At the end of the day, whether or not you have a Self-Storage statute, in every state an eviction is an option available to you in a non-payment of rent or other lease default-type situation.

Why would you want to consider an eviction over a lien sale? There are five scenarios when I recommend to my clients that they consider an eviction over a lien sale: 1) If you believe your tenant is particularly cantankerous or litigious and will sue you for selling their property, even if you were in the right to do so. This is particularly true if you are renting to, as an example, a lawyer or politician, as your tenant; 2) If you have concerns about, or have had past failures of, service of other notices to the last known address for the tenant and you have been unsuccessful in finding a new address for the tenant. This is less of an issue in states where the Self-Storage statute requires you to only serve at the last known address, implying that even if it is a bad address, the effort of serving notice is all that is required; however, other state statutes are not as clear; 3) If you have a tenant in default for a reason other than non-payment of rent, especially if your state statute is not clear about whether or not you have lien rights for any type of default or only for non-payment of rent; 4) If you find yourself storing a vehicle, particularly if the vehicle has a lien or liens on the title, especially in states that do not provide a remedy to a Self-Storage operator for disposal of a vehicle; and 5) If your state statute requires that the tenant be in default for a long, continuous period of time. For example, Indiana requires ninety days continuous default before you can exercise your lien rights.

While every state has a different eviction procedure, there are certain general principles that hold true in every eviction action. There is generally some sort of preliminary notice to commence an eviction. Second, the court or clerk of courts handles service of the eviction complaint on your tenant. We will discuss why this can be advantageous below. Third, there is actually some sort of trial or adjudication on your right to remove the tenant from the premises, thus giving some legitimacy to the eventual removal of the property from your Self-Storage facility. Fourth, the court often supervises or has some sort of procedure whereby court-appointed persons supervise the removal of the property. Fifth, in many states, you can file either as a supplement to the eviction complaint, or immediately after the eviction is granted, a complaint for money damages. Therefore, if you find something of real value in the Self-Storage unit, you can often lay claim to that asset, even though you have evicted instead of exercising the lien rights and conducting a sale.

Let me try to put my list of reasons to consider an eviction from above into context for you. First, if you have a tenant likely to sue you even if he/she defaulted ten different ways, rather than conducting a lien sale and worrying about whether you have dotted every "i" and crossed every "t," you can avoid most or all of this problem because the eviction route will cause a court to conduct a hearing to determine your right to remove the property. It is then difficult, if not barred by statute (depending on your state), for the tenant to come back later and sue the operator over the action taken to evict the tenant from the space. Thus, the eviction eliminates a potential claim that you did not follow every requirement in the Self-Storage statute in your state (if you have one), and potentially bars any claim for wrongful dispossession of the space and wrongful disposal of the property, because the tenant will, by the time the hearing occurs, have been properly served with a summons (by the court, not an operator), a court will have held a hearing to determine your right to remove the property, and the court will give the operator an order allowing you to remove the tenant's property from your rented space, and thus the tenant is barred from claiming wrongful disposal. Over the years, I have seen too many cases where a tenant has sued an operator after the lien sale, and the operator has made one small mistake. This mistake gives the court some reason to look at awarding damages to the tenant. However, with an eviction, the court has heard the case and granted the order to give you the space back. Instead of performing a lien sale, the court will send out a bailiff, constable, or other court official to supervise your removal of the property from the Self-Storage unit. In some states, this is accomplished by a prepaid, approved moving and storage company, and in some cases, the property is simply removed to the street or removed to another place for storage. However, at the end of the day, you are greatly reducing the risk of the tenant claiming that you mishandled the property or improperly disposed of the property, because the court has a procedure for disposal of the property, and as long as you follow it, you are working under court authority and supervision, and the tenant will find him/herself in a position where it is difficult to make those type of allegations because you have disposed of the property in accordance with court procedures.

The second reason is if the tenant is difficult to serve, or you know you do not have a good address. Many of the Self-Storage statutes are ambiguous about what to do if the certified mail is returned as undeliverable. The advantage in filing an eviction is that every state has what are called Civil Rules, or Rules of Civil Procedure, or something like that, which set forth legal methods of obtaining service against a party in litigation which are often much more broad than the service of the notice via certified mail contained in many states' Self-Storage statutes. In an eviction action, depending on your state, a tenant can be served by certified mail, ordinary mail, posting, bailiff, a process server, or even by such legal fictions such as publication in a newspaper of general circulation, by what is called a warning order attorney in some states, or other methods by which the court attempts to warn the tenant of a pending lawsuit. Even if these efforts fail, in many states, the rules are written to say that by trying these methods of service, the service of the complaint is deemed to have occurred, and the court will proceed with the eviction action. This is much different than your sending out a certified notice, getting it back as undeliverable, and then proceeding with your lien sale hoping the tenant does not come back later and allege that you failed to follow the statute by serving the tenant with the required certified mail notice. This is particularly important because there have been many cases where the tenant claims that they provided an updated address to the facility, the facility claims it knew nothing about it, and the litigation begins. The additional advantage to eviction is that the clerk of the court is handling issues of service and maintains that record for court review. You have much less to prove if the tenant wants to come back and claim they did not get notice, and you have a third party who was responsible to accomplish and verify service.

Third, some Self-Storage statutes are ambiguous about "other defaults," and there are times where you just want to get rid of a tenant even though the tenant pays rent, for example, if the tenant leaves a lot of garbage around the facility, or you suspect the tenant is causing damage or manufacturing drugs in his or her space. You notify the tenant you do not want to renew the lease next month, and the tenant does not leave and tenders rent. What do you do? Can you overlock, lien the property, and sell it? Maybe yes, maybe no, but you can always evict for holding over after the expiration of the term.

Fourth, you need not give up hope that by performing an eviction, you have relinquished all rights to make claim against the property stored in the premises. Many times operators file for a money judgment, either with the eviction or as soon after the eviction as possible. If you go to perform the set out and find property of value in the storage unit, you can file for what is called an "Execution Against Property" or a "Live Execution", asking the court to seize certain property that it finds and sell it on your behalf in order to satisfy or partially satisfy your judgment. While this may sound like a bit of a strange concept, let me particularly focus on a motor vehicle. Except for a few states that have some provision about how to get a vehicle re-titled in a Self-Storage default situation, the rest of the states are pretty much left with a patchwork of other laws arising from garage, storage, towing company liens, parking lot liens, and liens belonging to mechanics or artisans to try to fashion a remedy to get the vehicle out of the name of the tenant and into the name of the Self-Storage facility operator in order to sell the vehicle. I contend that one of the best ways to actually remove a vehicle is to evict the vehicle and include a claim or file a subsequent claim for money at the same time, or as soon as the eviction is done. The eviction may be able to be arranged so you know where the vehicle is located (another part of your property or to an impound lot), then you obtain a judgment on your money claim. You can then ask the court constable or bailiff to attach (execute) the vehicle and sell it at a sheriff's or constable's sale to try to satisfy some or all of your judgment. The advantage here is that rather than your trying to patch together the various laws in trying to comply with your state's title requirements and Bureau of Motor Vehicles or Department of Motor Vehicle's rules and regulations, a sheriff or constable of the court is responsible for getting the vehicle re-titled and sold. In my opinion, the sheriff or constable may be liable, not you, for any mistakes they make in the re-titling of the vehicle, taking a great strain and great amount of potential liability off the Self-Storage operator who does not have the time or interest in becoming a professional vehicle title expert.

Fifth, in states that have delays in allowing an operator to exercise the lien rights (such as Indiana cited above) an eviction action may actually be quicker than a lien sale. Every jurisdiction that has evictions varies in the amount of time it takes to get an eviction, and therefore this may not be true in your home jurisdiction. Check with your local legal counsel.

However, when you weigh the exposure to potential liability for not selling the property correctly; not getting proper notice to your tenant of your lien sale; facing a claim for wrongful disposal; missing a deadline in the statute; not giving enough time under a statute; and when you compare the effort and time in tracking down vehicle titles and getting vehicles re-titled, no matter what the delay, if you have a feeling that there is something of value in the unit, or that your tenant is particularly litigious, an eviction may not be just an answer to your problem--it may be your best possible solution to the problem tenant.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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Do You Need a Separate Vehicle Storage Lease Agreement? A LEGAL PERSPECTIVE
by Jeffrey Greenberger, Attorney at Law

Many of you may treat vehicle (car, RV, boat, etc.) as a regular self storage transaction and may lease the vehicle storage spaces, be they in outdoor parking lot or semi enclosed covered building with your regular self storage lease and then wonder, am I missing something? Should I have a separate vehicle storage lease and/or does my self storage lease need any additions or special provisions that cover vehicle storage?

The answer to the first question whether you need a separate vehicle storage lease or not depends not on legal answers but in your preferences for your operation. The answer to the second question, do you have to have some additional language provisions or coverage in your lease for vehicle storage, is an absolute yes.

To more completely answer the question about a separate document, you will need some additional language and additional provisions for vehicle storage, adding this language and provisions to your lease can make your lease a good bit longer. If you are absolutely set on keeping your lease to a certain page limit or you are simply afraid of having all the extra details bog down your non-vehicle storage lease presentation, then perhaps a separate lease or vehicle addendum is appropriate for you. However, you may want to include vehicle storage language in your main self storage lease so it triggers discussion between you and the tenant if the tenant is planning on storing a vehicle in a "conventional" self storage space. If your tenant will be storing a vehicle in a conventional self storage space you will want to gather the information and impose the rules and provisions that we will discuss below even though it is not an outdoor spot or a "vehicle storage building". If you have a lot of vehicle storage or if you will be storing a lot of expensive vehicles an entirely separate lease may be appropriate, otherwise a self storage lease with an addendum may be right for you.

In any event you need to address some separate issues when vehicles are stored. Here are some of the provisions that need to either be in a separate vehicle lease or added to your conventional self storage lease. First, you must have appropriate information about the vehicle. Unlike property stored in conventional self storage you may never know the actual owner of a mattress however, you should know the owner of the vehicle. It is imperative to get appropriate information about who owns and who has liens on vehicles in storage.

Second, vehicles have a certain amount of specific information that you need to have before you enter into the Lease Agreement. These items include such things as VIN or hull number, the make, model, color, style of the vehicle. You also want to have all of the possible insurance information including the name and number of the agent. We go so far in our practice to ask our clients to require copies of both the title and registration of the vehicle as well as a photo copy of the insurance card or other insurance documentation.

Third, there are different rules and regulations for vehicle storage as opposed to conventional storage and even vehicles that are going to be "behind the door" of a conventional unit should be requited to comply with certain rules and regulations. For example, you will probably want to control the appearance and condition of vehicles that are stored at your facility. You therefore need to have rules such as the vehicle must be operable not stored on blocks, all tires inflated, no broken glass, minimal rust, and that the vehicle maintain current registration and if appropriate state inspection, you may also want rules in your lease about properly blocking and chocking tires, and the direction in which you want vehicles parked front in or backed in. Other rules to consider are gate hours for entrance and exits which may not be appropriate if you are storing a fishing boat and fisherman may want to pick up their boat at 4:00 in the morning before sunrise and your "gate hours" are 6:00 a.m. to 9:00 p.m..

Fourth, you also need to make provision for the fact that while you generally prohibit hazardous waste at your property you are actually inviting, by operating vehicle storage, many gallons of gasoline, oil, hydraulic fluid, sanitary toilet, batteries, brake, transmission fluid, and etc., onto your property. A provision must exist for how these vehicles are stored; whether or not your going to require some sort of pan that would retain fluids under the potential leaking sources of the stored vehicle; what happens in the event of leak; whether or not you are going to allow the vehicle stored with full or partial tanks of gas, oil, etc., and winterization requirements.

Fifth, many vehicles may want to use some sort of on-site electricity to maintain trickle chargers or other battery systems. An appropriate provision must be made to either allow or prohibit the use of electricity at the facility and if electricity is allowed what rules and charges apply.

Sixth, people who park vehicles particularly RVs are also often looking for a place to dump garbage, empty chemical toilets and so forth. Your lease must address whether or not you are going to provide and/or whether you allow for dumping of chemical toilets, dumping of trash, and use of potable water at the facility.

Seventh, your lease also must deal with preventing people from working on and/or changing fluids at the facility. It is bad enough to worry about leaks in vehicles but then to know that someone is actually intentionally unscrewing the plug in an oil pan is an environmental nightmare just waiting to happen.

Eighth, you need to reserve the right to move or remove the vehicle if it becomes necessary. A vehicle sometimes needs to get out of the way either for pavement repair, replacement, building painting, or because you need to dig a trench, a truck needs to get through to the facility, or a government authority orders the vehicle move because of unstable land. If you do not have the right to move or remove the vehicle in a emergency situation and/or a situation where you have given notice and the tenant has failed to move it you are going to have to be able to tow the vehicle around or off yourself. These sorts of rights must be granted to you in the lease or addendum, in advance.

Ninth, please also do not forget you need to have appropriate rules and regulations about what happens if the rented parking space unavailable is for some reason. Either a tenant has accidentally parked in the wrong spot, parked over the line or somebody has blocked the access to the space or the vehicle storage area inadvertently. You need to disclaim these sorts of issues in your lease and provide a remedy so that you are not facing people who demand rent deductions and are screaming about "breach of lease".

Tenth, many owners also impose rules regarding notification of absence from the property. You may want people to check in and out if they are going to be gone for a long time so that if a vehicle is suddenly missing you may want to report it as stolen or missing to the owner or, you may not know a tenant has terminated their lease by just moving out and may have to wait a month or so to figure out rent is behind before you can presume that the space has been returned to you.

Eleventh, also, remember that whatever vehicle you take information on for the lease is the vehicle for which the space is rented. For example, many tenants will come to the self storage facility and leave another vehicle behind in the space when they take their RV out on the road. While this may not be bad, the information you have, including insurance information, title and registration information is on a RV. Suddenly there is a car in that spot, is it your tenant's car? What information do you have about the car? How long will the car be staying? Is the vehicle insured? None of these questions can be answered unless you make provision in your lease for disclosure of information about other vehicles that may be left in the spot while the main vehicle is out being used, or prohibit this practice and require that only the vehicle identified in the lease may be stored in the space at any time.

Twelfth, your lease also needs a different level of stated value limit. That is many of you have maximum value of property stored of just a few thousand dollars. This limit may not make sense for a $500,000.00 RV. Some language in your lease may need to be amended or the addendum must address the higher value limits and your conditions for allowing high value vehicles to be stored at your facility. Again a lot of this has to do with checking to make sure the vehicle is properly insured so that any damage or loss that occurs at your facility is a covered event.

Thirteenth, you also need to comply with your various state statutes to give yourself all the remedies possible in the event of a default. For example, some states have towing statutes which may allow you to remove a stored vehicle in the event of default however, those statutes may require certain signage be posted. Make sure you have complied with all of those requirements and make such statements in your lease to allow you to exercise these remedies in the event of a default.

As you can see, there are many issues, all of which got rather light treatment in this article, that must be considered and should be treated differently in a vehicle storage situation over situation where someone is storing household goods and furnishings. While many of the provisions of your conventional self storage lease are also appropriate for vehicle storage there are so many others that need to be considered and dealt with appropriately. You should seek legal counsel to help you revise your lease to include vehicle storage or assist you in preparing an addendum or new lease for vehicle storage. The one thing you should be certain to take away from this article is that vehicle storage is not an afterthought that fits in with your conventional self storage lease.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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OH, THE WORDS YOU CHOOSE! A LEGAL PERSPECTIVE
by Jeffrey Greenberger, Attorney at Law

Let's face it, except for the annual legal issue my column is rarely "on topic" with the monthly theme of the magazine, mostly because I never bother to ask about the month's theme. However, Kimberly told me that this would be the annual marketing issue and I decided to try to be topical.

Mind you, what I know about marketing is next to nothing especially compared to the other authors in this issue, but as a lawyer in the industry I look at your ads, particularly in the yellow page directories, and I wonder if you mean to say what you say in your ads.

I know there is tremendous competition not only to place your ad ahead of the others but also to say something in your ad that will draw that perspective tenant to your facility or to call you ahead of all the other ads that appear.

I also know you do not set out with the intent of deceiving in your ads, but taken literally, the wrong customer (or his or her attorney) could make a lot of hay out of your ads.

Lets start with the most obvious, "free truck with move in". Tell me when to show up, I will be happy to move in to your facility. Make my truck a minimum of a half ton preferably in black. Perhaps what you would be better off saying is "free truck use with move in". Also, if the truck is not 100% free, some disclaimer language belongs in your ad. There are limitations to every truck usage agreement. The usage is limited by the number of hours the truck can be used, the mileage that tenant can incur and, often the tenant is responsible for gas and insurance. Go ahead and splurge on an asterisk in your add and at the bottom of the ad say "*certain restrictions apply, see manager for details". Do not set yourself up for a state Attorney General's claim.

Next, "full time resident manager onsite". I hope you are ready to pay a lot of overtime and somebody please explain to me how the manager lives without ever going to the grocery store, church, or to visit family and friends. I even have some difficulty with the term "resident manager". Your managers leave the facility, so they are not on the premises 24 hours a day, 7 days a week. What are you implying with this advertising statement? The average consumer would probably imply there is greater safety and security because somebody is watching the facility at all times.

"Video Surveillance". Sounds harmless enough. Many of you have video systems, often they are digitally recorded such that you can go back and revisit "the tape" if something happened at the facility within a certain past timeframe. However, the actual definition of surveillance is: "To watch at all times as if a detective". The actual definition of surveillance implies that you are not just taping the happenings at your facility but that somebody is actually watching these cameras at all times 24 hours a day, 7 days a week. The same is true of the use of the word "monitor or monitoring". If you do not physically have someone watching the screens of the camera who can detect something irregular and deal with it in real time while it is happening you do not have video surveillance or video monitoring, you may have a video recording system or closed circuit television system (CCTV)but that is not what the ad says.

Not to pick on managers but, the term "professional staff" shows up in an a lot of advertising. Professional as defined by the American Heritage Dictionary College Edition includes "Performed by persons as a source of livelihood." That definition does not bother me however, another of the interpretations of the word is: "Having great skill or experience on a particular field or activity". If you change managers or office staff on a regular basis you may be implying something to the public that sounds good on paper, but may not actually be accurate.

The one that drives me probably the most crazy is the term "security". Whether it be in reference to alarms, a gate, a wall, a fence, or otherwise you are implying something by this term you do not want to imply. Security is defined as: "Freedom from risk or danger; safety or freedom from doubt, anxiety, or fear; confidence or anything that gives or assures safety". Have you heard somewhere along the way that you want to be careful about implying that the facility is safe or safer than other competition because people may rely on that and sue you? Guess what? When you say you have security alarms, a security fence, a security gate, security lighting, and etc., you are saying (by definition) that because of these services the customer is free from danger, risk of loss and that you, as my customer are safe.

If you know me you may think I was going to pick on the term "climate control" in your ad. I am not going to do that since there is no national definition of climate control. Just remember to carefully define the term climate control in your lease. If you are only heating and not cooling or vice versa, and if you are not controlling humidity you are a different climate control than "Brand X" down the street. Make sure your customer understands that.

However, when you use the word "dry" in your advertising I do get concerned because unless your facility is in a really arid region that never gets rain or snow and you have three roofs over the top of you, you are not by definition dry. Dry is defined as "Free from liquid or moisture; not wet, damp, or moistened" or "marked by the absence of natural or normal moisture". Are you sure there is no way the roof is ever going to leak? Dry is just not a great advertising word from a legal standpoint. If you were so bold as to build a facility that has walls exposed to the outdoors, your facility is probably not, by definition dry.

Finally, what is in a name? Most of the experts throughout this issue recommend that you pick a name that has some relevancy to a particular location. For example if you are close to the airport then perhaps Airport Self-Storage or if you are on Smith Road perhaps Smith Road Storage. However, when you pick a name such as Fortress, Fortified, Fort Knox, Invincible, Security, Secured, Safe Way, or Perfect/Perfection, and etc., you really are implying to the consumer more than you may have intended.

While this article is certainly surrounded by others in this issue awash with great marketing ideas, take a moment and do a reality check. Look at your ad, understand the definition of the words you are using in your ad, do not forget to look at your ad as if it is being read by somebody who does not understand exactly what self-storage is or does (an uneducated consumer or perhaps your state Attorney General). Make sure you actually can live up to the claims you make by the words you choose.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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WHY BUY/SELL SELF STORAGE INSURANCE?
by Jeffrey Greenberger, Attorney at Law

It never ceases to amaze me when I speak to my clients about how few customers actually purchase self-storage insurance. I was so amazed at the low number I have started asking managers why they think so few people actually buy Self-Storage insurance. While I have discovered a litany of answers from the managers, the two that strike me as being raised most commonly are; 1) that the customer believes that their goods are covered by their homeowners insurance (managers are stating this or agreeing with tenant's statement; and 2) the manager just is not sure how to emphasize the importance of self-storage insurance without making the facility sound like a disaster waiting to happen.

I am not an insurance sales person, I get no commission from any of the insurance sales people however, over the years in working with clients discussing lease clauses I have come to recognize that there is a legal answer to the question: Why should the tenant buy separate self-storage insurance? Over the years of describing this rationale to my clients, it has almost developed into a sales pitch. I thought I would use my column this month to share with you my line of thinking on this subject. If it helps you and your managers, all the better. If I have offended any self-storage insurance companies, I am sorry.

I do make one assumption in this column. That is that you have included in your lease a value limitation on the items stored. We have covered this issue previously in ISS articles (March 2004) but briefly I am assuming you have a clause in your lease that says that the value of the items stored in the self-storage facility will not exceed some "x" dollar limit. This is where the "pitch" begins. There is a three pronged education process that the tenant needs to go through at the moment that you are discussing or showing the tenant the value limitation. As my friend, Jim Chiswell always says "if it's in writing they will believe it to be true" and in this case it also happens to be true. First prong is to make sure that the tenant understands that rarely is the self-storage facility be liable for loss or damage to stored property. There are certainly instances where you can be liable and that is why we put the damage limitation in the first place, but it is rare and you want the tenant to leave the facility understanding that if there is a loss they really should not look to the facility for recovery. This is a concept that is worth educating your tenants about for two reasons: (1) it helps drive this hypothesis of why to sell insurance; and (2) we really do want the mind set of the tenants to be that the facility is not responsible for damage or loss that occurs to their property.

The second prong of the education process is to then overcome the objection that a tenant may have to the dollar value of limitation, let us use as an example a $2,000.00 value limit in the lease. The tenant needs to understand that although they value their property as, often priceless, the actual value is based on what it is worth, depreciated. So if a tenant paid $8,000 for a complete living room set and then puts it into self-storage five years later, in their mind their living room set is worth what they paid for it. Generally, (except in Texas) the appropriate measure of damage if the self-storage facility is liable, at all, is that the facility would be liable to the tenant for the actual cash value of the property. Actual cash value is a fancy legal term. The way I explain it to my clients is the yard sale or flea market value of the property. We all know that as soon as you drive a new car off the parking lot of the dealer it immediately begins depreciating. Well so does used furniture, camping equipment, mattresses, used appliances and even unused property because styles change and age automatically depreciates most property that would be stored in a self-storage facility. (I am assuming you are not storing antiques, art etc., at this juncture in the column.) So now you have explained to the tenant that if you are ever liable as a facility, which you rarely ever are, you would only be liable to the tenant for the actual cash value/flea market value of their property. So if something was damaged, lost to fire etc. and if you were liable, you would be liable for a greatly reduced amount of money. Obviously, I am not trying to chase away business by de-valuing the tenant's property but that is a great picture to paint in the mind of the tenant.

Finally, you need to explain to the tenant that there are two values to obtaining self-storage insurance. (1) Self-Storage insurance may provide replacement cost coverage not actual cash value. If the tenant can not agree with the concept that they would not get enough money in a recovery from you to replace the property you need to explain to the tenant replacement cost coverage is what insurance may provide. You are not an insurance company, that is what insurance companies do. That is why it is so important to have insurance on your property. Then you need to help the tenant understand why it may not be in the tenant's best interest to rely on their homeowners or renters insurance policy. Homeowners and renters insurance policies have limitations which you may be familiar with as a homeowner or renter. In my opinion there are greater exclusions or higher limits and deductibles for things like water intrusion and mold in a homeowners policy. Often homeowners insurance policies do not cover certain types of water intrusions or mold at all. Conversely, the majority of the companies who write self-storage insurance in this industry have policies that do provide coverage for these types of losses and, these are some of the most common type of claims that you see in a self-storage case these days, dampness and/or mold. Thus, you are sort of setting yourself up for failure if you do not coach the tenant into buying self-storage insurance. If you tell the tenant that it is likely their homeowners or renters insurance would cover the stored property, and you have not seen that policy to know what the exclusions are, what the limits are and what the deductibles are you are probably crossing the line acting as an insurance broker giving insurance and/or legal advice. You can not do this. However, you can without knowing what the tenant's homeowners or renters policy is say self-storage policies often cover a lot of things that are not often covered in your homeowners or renters insurance policy and encourage the tenant to compare and contrast coverage.

As you can see, not only have you helped educate the tenant, but you have also fixed it in their minds that the facility is probably not liable if there is a loss, that if there is a loss you are going to be liable for a ridiculously low sum on money that it would never be worth suing for; you have probably helped you and your facility avoid claims if there is a loss at a building from a certain percentage of your tenants; and you have also helped act as a friend to educate the tenant as to why spending the extra few dollars a month who would buy them the protection that not only the tenant needs. I feel that this rationale can not only justify the value of the insurance and educate "people away from suing you" if there is a loss or disaster but will help back you up in the event there is some sort of litigation later over a loss. You have really not stuck your neck out, you probably have not disenfranchised the customer nor have you had to back pedal on the value of the product that you are offering them with self-storage. Remember every self-storage policy that you sell is almost assuredly one less lawsuit that your facility faces in the event of a loss, damage or disaster.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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IS YOUR SALE "COMMERCIALLY REASONABLE"? A LEGAL PERSPECTIVE
by Jeffrey Greenberger, Attorney at Law

For those readers who are in states that have self-storage statutes, many of your statutes have a section that discusses how goods are sold after you have properly defaulted a tenant asserted your lien rights, notified the tenant of your intent to sell the goods, etc. These statutes generally require that the sales be "commercially reasonable." In talking with operators, it appears many of you gloss over those two words, "commercially reasonable," not exactly understanding what they mean and therefore you are conducting lien sales in many different ways. As examples, (and I am not saying that in every state these would be wrong, but you should check with your legal counsel) some of you are: 1) removing the stored items to an auction house away from your self-storage facility to sell them in mass with other auction house items; 2) taking sealed bids and not soliciting bids from the public; 3) conducting a private sale whereby your hauler or auctioneer buys all of the goods for one dollar and then takes them away from you and sells them at a subsequent auction; and/or 4) simply disposing of the property on the day of sale rather than selling the goods. Again, I am not saying that any or all of these options are necessarily wrong across every state in the country, however, as you have gotten to know me through these articles, you know I am hung up on the definitions of words and how they may effect your operations. As a lawyer, I am trained to take all words in statute seriously and consider what they all mean, one by one, and as they are put together in a statute.

The term "commercially reasonable" is not one you can simply look up in a law dictionary to get a definition and, unfortunately, most state statutes do not define the term "commercially reasonable" in the self-storage statute or in any other "related" statutes. However, most of the states that have self-storage statutes have also adopted what is called the Uniform Commercial Code (the "UCC"). The UCC addresses the buying, securing, and selling of goods, commercial paper and other items. Since the UCC has been adopted in most, if not all, states that have a self-storage statute, and thus the UCC is "statute" in your state, we can look to the UCC for a definition of "commercially reasonable". The UCC sets out a twelve-part test of what makes a sale commercially reasonable. Remember, this test has nothing to do with self-storage in particular, but looks at the sale of any type of collateral or liened property from a repossessed car to commercial equipment. This test is not exactly on point with everything you do in self-storage, but it sure gives us a good glimpse into what a judge could use as a basis to determine whether your sale was "commercially reasonable" if a tenant should come along and sue you for an improper sale.

The test from the UCC as to what makes the sale commercially reasonable is as follows: (1) the nature of the collateral, including its fair market value; (2) the resale price of the collateral; (3) the nature and amount of advertising to get buyers to a sale; (4) the use of genuine, reasonable efforts to reach the appropriate market best able to use the collateral; (5) whether the secured party's efforts are reasonably calculated to reach a reasonable number of bidders or potential purchasers in the appropriate market; (6) the method used to solicit bidders or potential purchasers; (7) the number of potential buyers contacted prior to the sale; (8) the nature of the sale (i.e., Was it public or private? Was it conducted in a reasonable manner under normal business conditions using normal business practices?); (9) were the services of an experienced, professional auctioneer employed; (10) the number of bids actually received; (11) the presence of collusion or self-dealing; and (12) the good faith of the secured party.

What can we learn from this twelve part test? Test part 1 is of concern if the stored property (collateral) has some real value to it, not bags of garbage. Perhaps selling a unit with a $5,000.00 fair market value to a sealed bid for $1.00 may not fit the definition of commercially reasonable. The same is true for test part 2. If the collateral is then re-sold by others for a great amount of money, your selling it for a low amount of money to that potential seller may make your sale unreasonable and may expose you to liability not selling it for "fair market value". The test parts 3 and 4, looks at your advertising and its reach. While many self-storage statutes require advertising in a paper of general circulation for two consecutive weeks, some of you are advertising in "less expensive" and less circulated newspapers. Particularly, if you open a unit and see that there are some items of potential value, like antiques, it would seem that this test imposes upon you some duty to reach antique dealers above and beyond advertising in your local newspaper. Test part 8 gives special concern examining whether the sale was public or private. Could a private sale expose you to additional liability? Perhaps, if the sale was not really open to all bidders who may show up that day have an opportunity to bid the price up. That is, you sell to your hauler and he is the only bidder because there is no "real" auction or public sale. One bid is taken for an amount agreed on in advance and that bid is the winner. A judge could say that your practice violates the test part 8. Also, look at test part 9, whether a service of an auctioneer was used. Apparently, the UCC considers that auctioneers raise more money than selling it yourself in the format of a public sale. Again, not every one of these tests is iron-clad thus an auctioneer is not required to prove you conducted a reasonable sale, but we have to at least think about the test. Test part 11 may be the biggest concern. The presence of collusion and/or self-dealing. This can come into play if you, as the operator, are the only or winning bidder or someone "usually" wins because you or your manager helps that bidder understand what is in the unit to establish a value. If the unit contains valuable items which may not have been disclosed in the inventory or may not be visible from the outside this could be a violation of the test and expose you to liability. We certainly hear stories of managers taking more "formal" inventories or rummaging through units a little bit more to know whether the unit is worth the owner or friend bidding on, but then not disclosing that information in the inventory or advertisement for the unit. Everyone is not dealing with equal and fair information and that could violate part 11 of the test.

The purpose of this month's column is to potentially set off an alarm bell with you. Many operators are so aggravated with a tenant by the time they put that tenant up for sale, the number of months of rent have accumulated, the tenant has not been cooperative or communicative and the sale seems like a complete waste of money, adding additional costs in the form of advertising, certified mail, auctioneer fees, etc., to an already probably uncollectible delinquency, that the sale seems nothing more than a big waste of time and money.

In a certain percentage of cases, the sale is a waste of time and money, the contents are valueless to anyone but the actual tenant of the unit, and, it may be hard to get a single bid no matter how much money you spend on advertising. That does not mean you disregard the sale. All of that aside, one lawsuit by a tenant claiming that you did not sell his/her goods in a commercially reasonable manner could potentially cost you more than you will spend on advertising units for sale for the next 20 years. Thus, I urge extraordinary caution when planning a sale and strongly recommend that you to speak with your legal counsel to review your sale strategies and determine whether or not what you may be doing may cross the line of what might make a sale commercially reasonable in your jurisdiction.

As always, it is best to avoid a sale at all costs, at any time, under any circumstance. I always urge my clients to find any possible way to settle, even if it is less than full value, rather than sell. It is almost too hard for a self-storage facility to sell in a commercially reasonable way. It will take a lot of effort, a lot of expense and there is a lot of risk involved. That does not mean you should not conduct sales, it does mean you should think long and hard about your sales pre-procedures and sale day procedures and how sales have occurred in the past.

Jeffrey Greenberger is a Partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self Storage field and should not be substituted for the advice of your own attorney.

Jeffrey's website, www.selfstoragelegal.com , contains Jeffrey's legal opinions and insights into the self-storage industry, as well as an article archive.

Jeffrey is the legal counsel for the Ohio Self Storage Owners Society, Inc., and the Kentucky Self Storage Association, Inc., as well as a regular presenter at Inside Self Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at jjg@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721 5151.

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