What Is a Storage Facility Contract?
Storage facility contracts are agreements that define the relationship between a storage facility operator and a client, who wishes to store personal property owned or controlled by the client, in exchange for compensation such as a storage or rental fee. Storage is typically used to better organize a client’s personal property or to safeguard it while the client relocates or during other events, such as traveling or to eventually sell the property.
While not always a specific type of contract when it relates to storage facilities, for example, storage facility contracts are sometimes referred to as bailment contracts or warehouse contracts. A bailment contract, commonly used in the context of modern storage, is an agreement for the transfer of ownership in property; however, the property is transferred from the client to the facility operator without transfer of title . The client in this case is the "bailor," and the facility operator is known as the "bailee." A warehouse contract is a type of bailment, but it specifically involves the owner of a storage facility who occupies space within the facility, as opposed to the entire facility like a warehouse.
Storage facility contracts are primarily used in business for issues relating to storage with a facility, or a location owned or controlled by a storage facility where clients’ personal property is stored. Some of the property which is commonly stored includes vehicles, jewelry, and other fine goods. Overall, storage facility contracts provide both the facility operator, or client, a physical location for long-term or short-term use of space. Often times, this includes terms specific to leasing rental space at a facility for rental fees, the amount of which can vary based on certain factors.
The Essential Clauses in a Storage Facility Contract
Any contract with a storage facility must include the following important terms. Without these terms, the contract may fail to protect you if damages occur.
Duration of storage facility contract
What is the duration of the rental contract? Are monthly rentals the default, or is the unit rented for a specific term? Are renewals automatic? Be sure to find out if the contract can be terminated early, and under what circumstances. For instance, a terminated account could be billed at the full monthly rate, instead of the pro-rata share. Are late fees applied? Is there a grace period?
Payment terms
Is payment due on the first day of the month? When does the contract go into effect? Does your monthly payment include insurance? Is insurance coverage required? What type of coverage is required? Is the coverage provided by the storage facility? Can you add coverage for high-value items? Are there additional fees not covered by the monthly rate, such as electricity for climate-controlled units? Does your deal include a secure place to park, such as a gated entryway? Will you have access to security footage if something happens to your stored items?
Termination
Under what circumstance can the contract be terminated? Are there penalties for early termination? Is the terminated account billed at the full monthly rate? Is there a grace period for late payment? Can any charges accrue from the date of termination until the following month? Make sure you ask about security deposit and rental rebate as well, and find out how long it takes for them to be returned. Does the facility require insurance? What kind of insurance? Is it mandatory? Does it cover all items in the unit? Is it provided by the storage facility? Can you add high-value items to your coverage?
Liability
What are the storage facility’s liability terms? Are items covered by the monthly rate? Are there any limits on that coverage? Are there any exceptions to the security offered? If the facility has a forced-sale clause, do you understand what that means and how it can affect your stored items? Does the unit have a lock or cylinder? Are all storage units in a gated area? Are they secured by keypad, passcode, or fingerprint? Does the facility have security guards? Are units monitored by cameras? Do employees receive security training? Is there an onsite manager?
Common Mistakes
Navigating the complex world of storage can lead to disputes if certain key elements are not sufficiently addressed in the storage facility contract. Below are common pitfalls to avoid:
Storage contracts can have narrow time limits in which a claim must be made, or notice of a loss must be given. A claim or notice made after this time limit may be ineffective. One party’s loss may be another party’s windfall. For example, a storage company may not be responsible to pay the customer for damages it causes to the property being stored by the customer. Commercial entities that are faced with an imminent insolvency and likely bankruptcy may seek to suspend or terminate any contractual obligations they might have, especially payment obligations. A claimed holding lien may be unenforceable. A person who is injured on the premises of a self-storage facility may claim damages against the facility under a number of different legal theories. Some of these theories may be barred by a limitation of liability clause in a storage contract. A storage unit may not be property (goods) that can be bailed.
Legal Issues
Although the contract that governs the relationship between the storage facility owner and the client typically sets forth the legal rights and responsibilities of the respective parties, it is important to appreciate that the contractual terms cannot violate the governing storage laws. In other words, any rights or obligations set forth in the contract cannot be in violation of the governing statutory provisions. For example, according to California state law, "least until 55 days after the date of mailing or delivery of a notice …" of lien sale differs from the 14-day notice period set forth in the contract. Clients should take heed that the governing statutory notice shall control and not the contract provisions despite the fact that they are seemingly designed to generate more revenue from delinquent clients via late fees.
Further, although the law requires, in certain circumstances, that the client give some form of notice to the storage facility owner that the client has vacated his or her space, based upon the exact language in Matthew Tidwell v. Storage West, et al., the burden should not fall on clients who fail to provide such notice. In Tidwell, the trial court judge found, among other things, that the client’s "failure to give Storage West ‘written notice of such change’ was sufficient grounds for its denial of Plaintiff’s claim." Noting that the governing statute did not say that the client’s failure "to give notice that he was vacating the space was a today basis for denying the claim," the judge further noted that "[c]onstruing a statutory provision which lacks the determinative article ‘the’ to create a ‘today basis’ for denying a claim seems presumptuous." Even though this language is arguably dicta, that opinion should be considered as guidance for future courts to "abhor unduly harsh consequences" to the client . The bottom line: strict adherence to the contract not only makes the legal enforceability of the contract in question but places the client at risk that no recovery is possible for property damage and/or loss since most contracts provide that such losses are limited by the contract terms.
Fees. As in the Tidwell case, whether a provision in the contract allowing a facility to charge a particular fee is enforceable will turn on the language in the contract. In Tidwell, the weekly storage charge was $15.00, but "the contract also provided for the imposition of a minimum $25.00 late fee for any payment that was not made ‘on or before’ the due date." Reiterating California’s position on liquidated damages set forth in Bus. & Prof. Code § 21701 and § 21702, the judge concluded that the imposition of the $25.00 late fee was "unreasonable and unenforceable."
Additionally, state law only allows the storage facility owner to recover the cost of court proceedings in connection with the enforcement or foreclosure of a lien. In Tidwell, the client was charged the fee for the attorney’s services to draft the lien sale notice of sale. However, which is in violation of the contract, Tidwell had to pay both $275 for the attorney fees and the cost with storage facility owner’s attorney fees.
According to Sections 21701 and 21702, the facility owner may charge for the costs of procurement and attorney fees incurred in the enforcement or foreclosure of the lien. In general, the amount charged must be reasonable based on the attorney’s hourly rate; however, if a client is aware and agrees to the fees prior to the foreclosure or lien sale, then the itemization of the fees will be enforceable. As with most of the issues discussed herein, case law will continue to evolve regarding enforceability of section 21701 as it pertains to the facility owner and terms in the contract.
How to Write a Good Storage Facility Contract
As a rule of thumb, storage facility contracts should follow some common steps:
Steps 1-3: Initial Information
- Storage Unit information
- Rate and Methods of Payment
- Use of the Unit
- Alteration, Removal and Damage
Steps 8-10: Storage Facility’s Rights and Obligations
Steps 11-15: Tenant’s Responsibilities and Liabilities
Although this list is not exhaustive, it does cover the most important aspects that must be addressed in a storage facility contract.
When to Hire a Lawyer
There are many reasons why you should seek legal advice before signing any contract, particularly with a storage facility. Some of the biggest companies in business today have been brought down by contracts they did not read carefully, or did not understand.
Your personal belongings are at stake here! Don’t just trust the facility to be honest with you, scouring through some Internet articles and reviews about the company as well as asking previous and current members can give you further insight to the company, but do not trust this whole-heartedly. Contracts can hold many hidden surcharges and fees, as well as legal clauses that could cause you a lot of grief down the road if not read or understood properly .
Some clauses that can have a huge impact on your finances or sanity down the line include but are not limited to:
If you do not understand what you are getting into, or you are not satisfied with the answers you receive from the self-storage facility when you ask questions regarding the contract, you should seek legal advice. A member of the Canadian Bar Association could help you get through the whole contract without much confusion or dispute.
It can somewhat feel like signing a lease, but with much more potential fine print that could lead to future issues. That is why we highly recommend seeking legal advice before signing a contract to store your personal property at a self-storage facility.