27 Feb 2024
Self-storage rental agreements, as written, are month-to-month leases, subject to renewal. But built into these short-term occupancy agreements is the contractual right of the owner or landlord to increase the rental rate by giving the customer or occupant advance notice of the change. Pursuant to that change notice, the occupant is given the right to vacate prior to the effective date of the new rental rate, thereby avoiding the rental rate increase. If the occupant elects to stay on the premises, they consent to accepting the published higher rate. At least until the next rate increase comes down the pike.
This risk of rate increases is highlighted by the “CHANGES“ clause of a month-to-month rental agreement which contains a clear notice to the occupant that their rental rate is subject to change after thirty (30) days’ notice. Remember again, these leases are month to month not just for the benefit of the owner, but primarily for the occupant, who may consider their storage needs as only short term. A year-long lease, albeit one that would secure their rate for a longer period, limits a user’s flexibility to vacate when their short-term storage use is no longer needed. But that month-to-month flexibility creates a business opportunity for self-storage owners. Often times, occupants end up needing their storage units for longer than they anticipated, which, by agreement, allows the owner to change the rental rates. Occupants who accept the advantages of a short-term occupancy subject themselves to the risk of periodic rate increases.
A typical “Changes” provision reads as follows:
CHANGES: All items of this Agreement, including but without limitation, the monthly rental rate, conditions of occupancy and other fees and charges, are subject to change at the option of the Operator upon thirty (30) days’ prior written notice to the Occupant. If so changed the Occupant may terminate this Agreement on the effective date of such change by giving the Operator ten (10) days’ prior written notice of termination after receiving notice of the change. If the Occupant does not give such notice of termination, the change shall become effective on the date stated in the Operator’s notice and shall thereafter apply to the occupancy hereunder, whether or not Occupant has agreed to the change in writing.
These rent adjustments are more likely to occur when an occupant initially leases their storage unit subject to a discounted rate, or under a “concession agreement", where the Owner accepts a move in at a discounted rate for a finite time, after which the rental rate will revert to the standard “street rate” for the rental unit.
If facilities are offering discounted or concession deals to increase rentals, it is important that the prospective customer be provided with the clear terms for that deal; most notably the time period when the discount ends and the revised rental rate begins, as well as the fact that the revised rental rate itself is subject to change over time. In the case of short-term rentals, a customer must be prepared to accept that, in exchange for the ability to terminate and vacate whenever they want, should they choose to stay on the premises, they must pay the rate as offered by the owner.
All of this talk of increasing rental rates and fluctuating prices has legislatures around the country considering the possible need for rent control in self-storage. Proposed legislation in Texas and New York all failed to move forward, likely due to the reality that self-storage pricing is simply a matter of choice and contract. Every prospective and current tenant is free to leave if they don’t like the price of their rental unit. The market dictates the price. It’s as simple as that. If the tenant chooses to stay and use the premises, they are obligated to pay the rent that is being charged. Self-storage is not a necessity. It is a discretionary purchase. Storing personal property in a rented space is a voluntary decision by a customer. Again, if they don’t like the price offered by their landlord, they can vacate and move to another location.
While there is certainly no illegality in offering discounted rates to incentivize customers to rent, these concession agreements, often phrased as “dollar move in” specials, are often fraught with complications for businesses that do not clearly communicate the terms and conditions of these deals to their customers. The general recommendation is that a customer sign a rent discount addendum with explicit terms and conditions concerning the discounted prices and their eventual change. This type of transparency is an effective solution to resolve all of the angst and noise about rent concessions and resulting rent adjustments.
This article was originally published in Self Storage Legal Monthly Minute by Scott Zucker, February 2024
Scott Zucker is a founding partner in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber P.C. and has been practicing law since 1987. Scott represents self-storage owners and managers throughout the country on legal matters including property development, facility construction, lease preparation, employment policies and tenant claims defense. He also provides, on a consulting basis, advice to self-storage companies in the areas of foreclosure and lien sales, premises liability and loss control safeguards. Scott can be reached at 404-364-4626 or by e-mail at Scott@wzlegal.com
