Originally posted in Tilting The Scales.
This fall’s Dallas tornado was especially vexing to Winn Blohn who stored many personal belongings in Sasha Stach’s Stach-a-Lot Self Storage unit. Sasha denied access to all the units for weeks. Can Sasha do that?
Yes. While the words “lease,” “license,” “rental agreement,” “contract” and “rent” are sometimes used interchangeably, a lease and a license are quite distinct under the law.
Simply put, a lease is a contract that conveys an exclusive possessory leasehold interest in real property. In a lease, a landlord gives the tenant the exclusive right to possess the property and, in some fashion, both parties agree to share the risk of damages, as from a tornado. Even more, Texas has codified many of the tenant’s rights even if they are not in the lease agreement. The related legal issues involving leases were addressed in the TiltingTheScales tornado blog six years ago.
On the other hand, a license is merely the privilege to act on another’s property. In a self storage rental agreement, the facility user contracts with the owner for the right to access and store personal property on the owner’s premises, and the owner assumes almost no responsibility or risk – no responsibility for water damages, burglary, access (possession) in an emergency or the like. There are no statutory rights to possession and use comparable to the landlord-tenant statutes. The contract contains all the rights and remedies – such as they are – between the facility owner and the facility user.
Despite what the paperwork might have been called, Winn had a license with Stach-a-Lot Self Storage. Under Texas law, calling an agreement either a lease or a license does not necessarily make it so – the Courts look to the character of the agreement itself and the intent of the parties.
Winn had a contract, not a lease. The stark contrast between an expected landlord-tenant relationship and the limitations of the storage space licenses became evident after the tornado. Unlike a typical lease, an occupant’s access to a storage facility is likely to be conditioned to give Sasha wide latitude to maintain order, including limiting hours of operation, requiring verification of Winn’s identity and inspecting vehicles that enter the storage facility. In the event of an emergency, typical self-storage language gives Sasha Stach the right to enter the storage space without notice to Winn, and “take such action as may be necessary or appropriate to protect the storage facility, to comply with applicable law or enforce Owner’s rights.” That’s what happened to Winn.
And, then there’s the rent. If you’ve read my partner Bill Drabble’s article on price gouging law in Texas, you may have been appalled. If that bothered you, check out what the facility owner can do after the lease term ends.
Because it’s a license subject to whatever terms the parties agree in their contract and because storage units are typically rented month to month, upon some short written notice to Winn (such as 15 days), Sasha probably has the right to change the monthly rent to whatever amount she wants – reasonable or otherwise. And, if the new rent, which becomes effective when the next date rent is due, is not timely paid, Sasha can exercise all rights of default under the license.
Remember – A license is not a lease. If you choose to sign a self storage agreement, know that your legal rights against the owner. In the event of a natural disaster, like a tornado, consider how quickly you may need access to the storage unit, the value of the contents and if you have sufficient insurance for the contents. Know that you should expect little from the owner to protect your belongings and that access to your personal property may be unacceptably (but legally) delayed – and it might not all be there when you arrive.
Pros and Cons of Self Storage SBA Loans vs. Traditional Loans
Decide wisely between SBA and traditional loans for your self-storage business. SBA offers lower down payments, but traditional loans provide lender reliability. Make informed investment choices for your storage facility.