Lease Essentials
The Great Benefits Provided by the TSSA Rental Agreement
by Connie N. Heyer, TSSA Legal Counsel
The lease contract. The single most important transaction between a landlord and tenant.
For the protection of both the landlord and the tenant, a written lease needs to be in place to outline exactly “the deal.” For this “Back to Basics” look, let’s focus on this single most important landlord/tenant transaction.
Tip #1: Use it!
Use the TSSA lease. The TSSA lease is tailored for Texas law, which is unlike self-storage law in any other state. The TSSA lease is updated to keep up with legal requirements as well as best practices and important protections.
Tip #2: Read it.
(Early and often!) Have your managers read through the lease in its entirety, ideally multiple times. It is very helpful to be able to answer tenant questions by referring directly to language in the lease. You can’t and should not answer legal questions and interpret a legal contract, but most questions can be answered by saying something like, “As to your question on late fees and when they are incurred, refer to paragraph 4…”
Tip #3: Understand it.
Come to TSSA seminars! Take advantage of the FAQs available in the TSSA Goldbook© and in the Ask the Experts online database. Managers should have a good understanding of the lease terms they work with every day. Among other things, the TSSA lease outlines insurance responsibility, caps the total dollar amount value of items tenants can store in a unit, prohibits storage of sentimental items, prohibits storage of certain items like flammable materials, prohibits sleeping/living in units, and much, much more.
Following are some of the more important provisions of the lease. I am hopeful this article can be a starting point for enhancing all owners and managers’ knowledge of important parts of the lease.
PARAGRAPH 1: TENANT INFORMATION
This paragraph literally lists who the legal tenant is. The tenant is the person or business named on the first line of TSSA lease paragraph 1 (tenant’s first and last name or business name). The tenant signs the lease. The tenant is the only person legally responsible for rent and other lease obligations. The tenant is the one to whom the facility must send any legal notice.
If the tenant is an individual rather than a business, do not allow anyone other than the person listed as the tenant to sign the lease. For example, the answer to “Can I rent this unit for my mom, who will come in and sign later?” is “No, but if she can’t sign now, you can be listed as the tenant and sign the lease. With your consent, when your mother comes in to sign a lease, we can void the existing lease.”
When leasing to a business, the legal name of the business should be listed in the first line in paragraph 1, and the business name should be listed at the signature line with the employee’s printed name and signature under it, as in “Main Street Widget Company, by Jane Doe, authorized agent (signed by Jane Doe).” A best practice in this scenario is to require authorization for this person from the company on letterhead. It can be short and sweet, but if you aren’t sure the individual is the company owner or authorized to store goods, a letter stating that this person is authorized to transact business and sign a rental agreement on behalf of the business is ideal.
Paragraph 1 also contains a blank for a Social Security number. It is difficult to perform a check on military status without one should you need to. That being said, there is no legal duty to collect a SSN from tenants and many facilities do not. If renting to a military tenant, you could obtain this information on a separate Tenant Information form that is kept safe.
Paragraph 1 also contains a blank space in which the tenant may list names of people to whom you may provide access. This access may be provided at your option; it is not mandatory.
Finally, paragraph 1 lists emergency contacts for the tenant. There are “default” emergency contacts (like spouses, siblings and adult children) to whom you may, at your option, provide access if the tenant dies, is jailed, is missing or incapacitated (the individual would sign an affidavit swearing one of these events has happened). The tenant may also list specific names and contact information for additional emergency contacts.
PARAGRAPH 4: “DOLLARS AND DATES”
This paragraph lists all the dollar amounts involved in the transaction, both on the day of renting and anything that could apply in the future. Monthly rent (paragraph 4a), due date (par graph 4b), late charges, NSF charges, and all other fees you intend to charge the tenant should be listed in this para- graph. Something to remember is that you aren’t obligated to charge the fee just because it is listed (it can always be waived), but you should not try to charge the tenant any fee which both of you have not agreed to in advance.
“NOTICE TO TENANT AND RELEASE”
This is the language at the bottom of the first page of the TSSA lease that really stands out—we have used bold, italicized and in some sections all-caps fonts, and that is intentional. This statement is comprehensive and packed with important liability language and it should be initialed by the tenant!
This is important information for both you and the tenant. This paragraph references late charges. It also makes clear that there are no representations of safety or security. It contains a negligence waiver and non-liability language related to bodily injury and property damage. It contains non- liability language for fire, smoke, dust, water, weather, insects, vermin, explosion, utility interruption and theft. Finally, it notes the tenant’s insurance and self-insurance duties. As mentioned, it is quite comprehensive and offers the facility owner a great deal of protection.
PARAGRAPH 9: “TERMINATION AND MOVE-OUT NOTICE”
This paragraph outlines how both you and the tenant may part ways amicably. First, the tenant must comply with any minimum lease term per paragraph 3. If a tenant wants to move out, he must provide you with at least a 10-day written notice of lease termination/non- renewal via mail, hand delivery or email. If you want the tenant to move out, you must provide him with at least a 15-day written notice of lease termination/non- renewal via mail, email or hand delivery.
Regarding rent due at move-out, Paragraphs 28 and 38 outline how amounts due at termination and other termination-related provisions are calculated. For example, the tenant is liable for rent for the remainder of the month of move out, or for 10 days after move-out, whichever is longer. So, for example, if the tenant moves out July 10, the tenant owes full July rent. If the tenant moves out July 25, the tenant owes through August 4 (four days prorated for August). Of course, you can waive any part of that amount if you desire. But this language encourages tenants not to expect refunds of rent already paid if they did not give enough notice to allow you to rent the unit to another tenant.
PARAGRAPH 20: “NONLIABILITY AND RELEASE FOR LOSS OR INJURY; AND INSURANCE”
This paragraph makes clear that your facility is not a warehouse and has no possessory duty of safekeeping (no bailor/bailee relationship). So, you are generally not liable for damages from vermin, leaks, etc.
This paragraph also binds the tenant to a $5,000 cap on the value of stored items. If the tenant stores items worth more than that in the unit without your permission, he is in breach of the lease. It also makes clear that tenants cannot store items of sentimental value. All of this is for both the tenant’s and your protection. Finally, the paragraph outlines the tenant’s duty to purchase insurance if he stores more than $1,000 in goods in the unit and notes that the tenant is considered to self-insure for all items not covered by his insurance.
PARAGRAPH 24: “LESSOR’S REMEDIES”
This paragraph outlines your remedies in the event of a tenant default, such as failing to pay rent. You have many remedies, all outlined by this paragraph. You may lock an unlocked space. You may overlock, code out and wheel boot (if a vehicle or trailer) for any breaches of the lease. You may give notice to vacate and file with your local justice court for eviction. You may assess any charges due under paragraph 4. You may seize the unit (the steps that constitute seizure are defined in this paragraph so be sure you are following them). Finally, you may exercise your Chapter 59 right to foreclosure and auction.
PARAGRAPH 30: “CHANGES IN RULES OR AGREEMENT”
This paragraph allows landlords to change provisions of the lease after providing appropriate notice to the tenants. Notice of a minimum of 30 days is required for increases in dollar amounts (like rent increases). Some provisions that do not involve increases to dollar amounts can be changed immediately after written notice is provided. This is a good way to handle gate hour changes and any other change desired.
PARAGRAPH 31: MISCELLANEOUS
As the name implies, this is something of a "catch-all" paragraph to address issues not addressed elsewhere.
Boilerplate but essential legal language, such as "time is of the essence" and "Texas law applies" are included for a reason. Additionally, the fact that managers can't make oral promises which override the executed lease is also clearly spelled out. This paragraph is also where you'll find the important stipulation that mediation is required when a lawsuit is filed, except for legal actions taken by a lessor (facility owner) for rent, foreclosure, eviction or charges spelled out in Paragraph 4.
SUMMARY
Without a lease tailored to the self-storage industry, you are exposing yourself to liability, as self storage is different from other commercial real estate rentals and different laws apply. Use the TSSA lease. It’s one of the best benefits of your TSSA membership.
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