ARE YOUR RENTAL AGREEMENTS SIGNED? Are Your Rental Agreements Signed?


The Importance Of Regular Lease Audits


By Scott I. Zucker, Esq.


I


t seems like the only time a tenant’s file is checked to verify that they have a signed lease is when that tenant


goes into lien. By that point, it’s a little late to be discussing how a tenant was able to access the facility and move contents into a space without actually signing a lease. But if you are an opera- tor who has dealt with this situation, don’t worry. You are not alone. In fact, there has been an increase in situations like this, where tenants are able to access and secure a storage unit with- out ever having to finalize their move-in process, including the requirement to execute a rental agreement. There are plenty of arguments to be


made that the tenant accepted the terms of the facility’s rental agreement when they took possession of the space, and more so if the tenant paid any money to the facility for the benefit of the use of the space. But in the absence of a signed rental agreement, the facility must be prepared for the potential challenges it might face from a tenant whose prop- erty is to be foreclosed. Did the tenant have knowledge of the facility’s lien rights over its contents? Did the tenant consent to the imposition of a lien? Judges and arbitrators are often


reluctant to confirm the rights and pro- tections granted a self-storage facility operator against its tenants without the


32 Self-Storage NOW!


presentation of a signed lease. Commonly, a tenant in default who is presented with the risk of foreclosure will contend that they were never pre- sented with the terms and conditions of the lease or otherwise “did not know” that their stored property was subject to a lien and foreclosure. In such a case, the operator must build its defense from other facts in the case, rather than the simple act of presenting a copy of the signed lease to the deci- sion-maker for the dispute. So, what should an operator do?


First, if this is happening at your facil- ity, you must review your rental pro- cess to determine how this is happen- ing. Is there a flaw in your management software? Is it a failure of your on-site manager? Whatever the cause, the gap in the process must be fixed so that, in no uncertain terms, a tenant must exe- cute (electronic signature is fine) a rental agreement before taking occu- pancy of a rented space. Second, a facility should conduct regular audits of its tenant files (electronic and/or physical) to verify that, for every unit occupied on the property, there is a corresponding executed rental agree- ment. If a signed rental agreement is missing, the facility would have the right to request the execution of a cur- rent lease from the tenant as a


condition for being allowed to remain a tenant at the facility. In the absence of a signed lease, a facility operator would have the right (after notice and an opportunity for the tenant to cure) to restrict or control the tenant’s access to the facility until the tenant complies with its obligation to present a signed lease. If the tenant refuses, the operator reserves its right to termi- nate the tenant’s occupancy and require the tenant to vacate (by evic- tion or unlawful detainer if necessary). Self-storage facilities can be busy


places, and owners and managers are often distracted by marketing, selling, and maintaining the operation of their business. But one of the most import- ant and vital pieces of a self-storage business is the confirmation of the rights and responsibilities of the owner and tenant through the initial execution of the parties’ rental agreement. Check out what’s happening on your proper- ties. Don’t wait until it’s too late before conducting your audits.


Scott Zucker is a partner at Weissmann Zucker Euster & Katz, P.C., a law firm based out of Atlanta, Georgia, and a partner in the Self Storage Legal Network, a legal information service available through the national Self Storage Association. He can be reached at Scott@wzlegal.com.


SECOND QUARTER 2024


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