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As the California forest fires are raging out of control and hurricanes line up in the Gulf of Mexico we recognize all too well that residential and commercial developments, including self storage facilities, are not immune from natural disasters. Unfortunately, no matter how cautious a facility operator is, there always exists the possibility of a natural occurrence that can result in damage to a facility and its tenants’ contents. In addition to the emotional and financial impact a disaster can have on a facility operator, that operator, as a landlord, must prepare to manage such disasters, including the role and responsibility of the tenants whose property has been lost or damaged.
Have a Plan
After a loss occurs, it is incumbent upon the facility operator to protect the property (and the tenants’ contents) from further damage. Therefore, efforts should be made to cover or board up areas that remain open to the elements and rope or fence off access to damaged areas, hiring temporary security if necessary. Also, when a loss occurs, it is important to fill out incident reports and take photographs or videotape footage to document the loss and the operator’s efforts to mitigate further damages.
Next, it is crucial that the tenants be notified. Notices should be given by phone, text and by written notice via e-mail and, if needed, by first class mail. The notice should explain the status of the damage to the facility and whether the tenant can access the facility to inspect/recover its stored property. Access to a tenant's goods can usually be given unless the damage is such that it would be dangerous for the tenant to enter the facility property. The written notice should also recommend that the tenant notify his or her insurance company.
After you have notified your tenants, contact your insurance company. Many insurance companies will not be obligated to cover your claims if they are not given reasonable notice of the occurrence and have a chance to investigate it. Contact your claims agent by phone and then follow up in writing. This is also the time to contact any insurers responsible for tenant insurance programs offered at the facility or any parties administering facility protection plans.
The Tenant’s Responsibility
Prior disasters and the resulting cases have taught us that a facility operator has the right to deny tenants access to the facility if it is not yet safe to enter. It is better to risk the loss of personal or business property stored on the premises than to allow the risk to life or limb of tenants who may want (or even demand) entry to the damaged property. Facilities should not permit tenant access until the premises (or specific areas of the premises) have been declared safe to enter. The Courts have upheld the right of landlords, like self storage operators, to deny access even at the cost of ongoing damage to the stored property left in the space during the time when access is restricted. The Courts have found that a self-storage operator should neither be considered a bailee nor found to be negligent if it restricts its customers’ access over concerns of facility safety.
Ultimately, once access is permitted, the tenant will be responsible for reclaiming its property located at the facility or abandoning the contents as unsalvageable. Additional notices should be sent to the tenants providing them appropriate deadlines to meet these obligations. If the tenants do not return to claim their damaged property, the property may need to be moved by the operator to another location or disposed of based on its condition and estimated residual value. In the end, it is the tenants who are responsible for the handling of their property that is stored at the facility. Should they choose to ignore that obligation, they risk the loss of their property once the facility begins the process of rehabilitation and reconstruction.
Handling Tenant Claims
Certainly, if the disaster which occurs is one which could not be controlled by the facility, most leases and rental agreements will protect the facility operator from tenant claims arising from the loss of their property. Self storage leases should contain specific language that the facility will not be held responsible for the loss of or damage to its tenants’ stored property. The lease should provide that the tenant's property is to be stored at their own risk and that the facility does not take care, custody or control of the property stored. Since some states will not enforce such exculpatory clauses contained in self storage leases, it is important that facilities, as part of their lease agreement, require the tenant to obtain its own insurance for its stored property.
Unfortunately, when a tenant's property is lost or damaged, regardless of the cause and even if the proper lease protections are in place, a tenant will sometimes sue the facility to recover for the loss. This is where customer goods legal liability insurance coverage comes in. This specialized self storage insurance protects a facility from tenant claims arising from the loss or damage to their property. This insurance will cover the cost to defend a facility against any lawsuits which arise from damage or loss claims and will cover the court costs and payments to the tenant if such payments are warranted or awarded by the court. Self storage operators should be aware that standardized comprehensive and business liability policies will likely not cover tenant loss and damage claims and therefore this type of unique specialized coverage is needed for this type of protection.
Notwithstanding all good planning and good intentions, disasters can wreak havoc for self storage operators. By recognizing a straightforward approach of safety first, an operator can hopefully avoid greater problems associated with tenant personal injuries. Once the dust has settled from the disaster and safety has been verified, the process can then move ahead toward the recovery of the tenants’ property and repairs to the facility. As long as the proper insurance is in place, the financial impact of the disaster can hopefully be controlled.
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 operators 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 email@example.com.
This article was originally published by Scott Zucker, September, 2021.