Oct 012007

Boat, RV or Vehicle (collectively “vehicle”) storage is a different kind of business compared to the traditional self-storage, particularly when the vehicle will be stored anywhere except in a separate, enclosed storage unit, the business model is quite different. Whether you are renting storage in a lot, a covered building or individual storage units, vehicle storage presents several unique issues.

Creation of a Bailment
The first issue to consider is, with the exception of individually enclosed storage units, any vehicle storage you may permit arguably creates some sort of bailment.

Generally, in the non-vehicle self-storage model, if you are not keeping a key to the unit and the occupant has the ability “store and lock” their own personal property, you do not have the risk of creating a bailment. However, when you store vehicles in a common area, even if you do not keep keys to the vehicle, it is arguable that a bailment created. What is a bailment? A bailment is “The transfer of possession, but not ownership, of personal property for a limited time and for a specified purpose such as the individual or business entity taking possession is liable to some extent for the loss or damage to the property” (Webster Dictionary of Law). Contrast this statement to typical self-storage where you do not take possession of the personal property, but lease space. When vehicles are not behind the walls and a door, if a bailment relationship is created, you have more of a duty to care for the vehicle. Please understand I am not saying you have the responsibility to care of the vehicle, such as washing it or changing the oil, but you do have additional responsibilities (duty of care) to protect the vehicle from damage, notice that it is leaking, report damage as it occurs to the owner, etc. This makes vehicle storage a different business relationship with your occupant if the vehicle is “visible” to you when stored. Just because you have created a bailment does not necessarily mean you want to avoid being in vehicle storage as a business. However, you do need to understand that you have a higher duty of care towards that property. It is not a bad problem to have, just a different one than you are used to. You need to amend or create operating procedures to recognize that you protect the stored vehicles as opposed to not watching property stored in units.

Defining The Space
It is often difficult to define the specific vehicle space that you are leasing to an occupant, if you do not have a paved, striped, and numbered area for vehicle storage. Sometimes a person believes they have leased a certain “spot” at the facility, yet when he returns with his vehicle, somebody else is in that spot. The occupant then claims you defaulted because the facility did not make available that specific space. Even if you have a striped and numbered lot, it is unlikely that all of your RV occupants can actually park “between the lines.” Hence, it is important to have language in your rental agreement that describes the space rented but does not define the space so closely that you will be in violation or default of the lease if another occupant “accidentally” parks his vehicle in that space or part of that space. You should have some type of “exculpatory” type language in your lease that disclaims a default in the event the specific rented space is occupied when the vehicle owner/occupant returns.

In order to coordinate with this type of exculpatory language you may want to consider having one or more spaces marked “overflow parking.” You can then put a provision in your lease which provides that in the event the occupant finds the premises unusable or filled at the time he returns, he is required to park in the overflow spot, and by providing an overflow spot this does not represent a default by the Operator under the Rental Agreement. Additionally, you should include a fine or penalty in the Rental Agreement for parking in the wrong space, in two spaces, or blocking a portion of another space.

Size Matters
Also, don’t forget, there have been a lot of lawsuits recently about the actual size of the space being different than the size represented to the occupant in the Rental Agreement. This type of claim is much more likely to happen with an outdoor storage space, such as in a lot. Make sure you include language that indicates that the sizes are approximate and that you are renting by the vehicle storage space and not by the square foot.

Valet Services
Some of you go even further in the bailment and are providing “valet” service, such as parking the occupant’s vehicles in the vehicle storage building retaining keys so that you can move vehicles in and out of the way of other vehicles that come in or out, or offering services for the stored vehicles such as RV cleaning, dump out, and stocking of the vehicle, boat cleaning, boat storage on racks, warm up and pull out service, placement of boats in the water near your facility at a boat slip or dock. When you undertake to provide these types of services, you are no longer providing vehicle “self-storage.” Once you provide these types of valet services there is no doubt that you are in a bailment situation, such as we discussed above. Do not forget to address these types of services with a properly written Rental Agreement. For example, if you are going to actually move the boat out to the water from your facility you may want to consider having a separate entity operate the transportation of the business and have a separate contract for vehicle transportation of that entity. Certainly in all circumstances, you need either addendums to your lease or a properly written lease for storage and bailment agreement with appropriate releases and disclosures for any of these types of services. You should have your lease and other documents reviewed often by an attorney familiar with this area of the law and also review the entire business plan to see if it would be in your best interest to set up some separate entities to hold various “risky” parts of your operation.

Accurate Information
Obtaining the right information on your rental agreement gives you a better chance of locating the owner in the event of an emergency or default. It also gives you a better defense in the event a claim is brought against you for wrongful disposal or termination of the vehicle under the rental agreement. Consider requiring the following additional information to your lease for vehicle storage:

– the year, color, make, model of the vehicle or boat
– license plate, state of license plate
– VIN or other identification number checked in at least two places on the vehicle.
– copy of the vehicle registration
– if the name on the registration is not the same as the person executing the rental agreement, the person executing the rental agreement must have a statement notarized by the owner, which clearly states that it is acceptable to store the vehicle at the facility.

Just as in self storage do not to allow more than one person to sign a lease for vehicle storage. In addition, require your Lessee to be the actual owner of the vehicle. If you store a vehicle not owned by your occupant, make sure that you have all of the relevant information on the owner of the vehicle. By doing this you will help prevent the possibility of storing something that is stolen. Moreover, you can run into difficulties, if at some point in the future, ownership between the titled owner of the vehicle and your renter becomes disputed. Vehicle storage can be particularly complicated because there are titles and liens involved. If you ever find yourself in a controversy you want to make certain you know who the owner of the vehicle is and hopefully the owner of the vehicle is your occupant.

Make sure as you gather the information for the Lease which we have suggested in this section of the article that you gather information on every vehicle that could potentially be stored in the space. As an example, someone may be storing in one space a trailer and 2 jet skis. This rules as 3 titled vehicles stored. Do not forget to obtain the information on each of the jet skis and the trailer. Further, many occupants come to the self-storage facility to pick up a vehicle, such as an RV and leave the vehicle that they have driven to the facility in his storage space. This creates a problem if you have not previously approved of this other vehicle being stored in the facility. You need information on ownership of the vehicle too. All of the sudden you come in one day the RV is gone and an SUV is in its place, does it belong to your occupant? Is it insured? Is it subject to the terms and conditions of the Rental Agreement which may set things like value limitations, releases of liability for damage, and etc.? As you can see, if there is a chance that another vehicle is going to be left in the vehicle storage space for any length of time, it needs to be an additional listed vehicle on your Rental Agreement. If it is not, all the trouble you have gone through to protect yourself by a Rental Agreement on the main vehicle could be for naught if something happens when a different vehicle is stored by the same occupant in that same space.

Do not forget to check your state’s self storage statute. Some states do have provisions in their statute dealing with from, at a minimum, the superiority of your lien to a filed or recorded vehicle lien, to a maximum of procedures specifying exactly what to do to allow you to obtain a title to a vehicle if the vehicle is in default so that you can properly sell it. Do not assume you can simply go down to your local title agency and obtain a salvage title anytime a vehicle is in default and simply sell it at your next lien sale. This is often not the case.

Hazardous Materials
Vehicle storage presents a special problem because vehicles contain hazardous materials just waiting to spill, leak or explode on the property in the form of gasoline, lubricants, acid in batteries, tires, sanitary toilet chemicals, etc. This problem is exacerbated by the fact that these vehicles are parked on soil, gravel or asphalt, which allows the chemical or spill to quickly enter the soil. Given the volume of liquids and lubricants stored in a RV, as an example, a leak or spill could create a serious environmental hazard on your property. Further, some occupants even try to store extra gas, chemicals, tires, etc. in or around their stored vehicles. Some insurance companies now offer hazardous spill clean up coverage, so far it is limited coverage and reasonably expensive. You should include certain limiting language in your rental agreement specifically targeted to the outdoor storage of vehicles to provide how much liquid (i.e. gas) may be stored in the vehicle as well as preventing additional liquid being stored in the vehicle.

Also do not forget that you could actually be creating an event of default under your mortgage by failing to prevent hazardous waste from being brought in to and used on your property. Make sure you have checked with your insurance agent that your insurance company is aware of the this type of storage at your property and if not buy whatever additional coverage or rider as you may need to allow this sort of function to occur. You may also need to check your mortgage to make sure that vehicle storage which involves allowing this type of gases and hazardous waste onto the property does not violate a term or condition of your mortgage. This is one you would not want to find out about the hard way. In order to determine whether or not you have these risks in your policy, your legal counsel should review these issues. If you are allowing or plan to allow vehicle storage and your insurance policy does not cover these kinds of spills or leaks, find a self-storage insurance policy which permits this use or buy a rider to your existing policy. One spill can cost years of profits.

Drip Pans
You should require a drip pan or absorbent pad under the parts of the vehicle that might leak. I know a drip pan sounds like a funny idea, however, many of my clients now use them and swear by them. A drip pan provides several different benefits to the operator: 1) The obvious is that, if properly placed, the drip pan may catch dripping or leaking fluids which would protect you from the environmental contamination discussed in this article; 2) Since very few people carry their own drip pans with them you can stock them and sell them as a source of ancillary revenue. We recommend a plastic liner similar to that used to build a koi pond. It holds about 55 gallons of liquid with solid sides, almost like a small wading pool, anchored by a cinder block. Both of which can easily be stocked behind your store or in your store and sold because it is a requirement of storage for vehicle storage; 3) There is a customer service aspect that is as you conduct your lock checks and property walks, should you see a drip pan containing some sort of unknown green type fluid you would have the opportunity to call the occupant and advise him that his vehicle is leaking. You noticed a problem so that the customer did not get out on the road and have a break down and you asked your customer to get the vehicle off the property before it causes environmental hazard or damage to your property.

Towing Liabilities
Towing a vehicle off of the property assists you in minimizing your damages, even if you are not able to sell the vehicle once it is towed. (In most states selling a vehicle is complicated, expensive and often does not result in any money for the self-storage owner because of prior liens on the stored vehicle.) If you are allowed to tow the vehicle off the premises and you provide for that remedy in your lease, and if you do it early on after default, you will minimize your damages.

Assuming that you have a default clause in your lease, make certain that one of the remedies in your default clause permits you to terminate the gate access of the stored vehicle in the event there is a default by the Lessee. Thus, in the event a occupant removes his/her stored vehicle from the facility and has not paid his/her rent, you can prohibit him, by lease, from returning the vehicle until rent is paid.

If your state permits removal of the vehicle by a lien right, eviction statute, or by towing the vehicle to an impound lot as a remedy in the event of a default, be sure to give yourself these rights in your lease. Additionally, post whatever signage is necessary or required in your state. In some states, you can consider a occupant who is in default and who you have removed from the premises to be a trespasser if he tries to re-enter the facility.

Rules and Regulations
Not only do you need a lease and/or addendums that covers the aspects of vehicle storage discussed above but you will probably need additional rules and regulations for example, a vehicle stored in the vehicle storage area may be subject to an appearance requirement. You may not want the vehicle to be rusty or have deflated tires, broken windows, pieces of the vehicle stored elsewhere in the vehicle, perhaps you wish to require the vehicles to be operational, currently licensed and accurately registered and/or subject to annual state inspection. If you wish to enforce these rules so that your vehicle storage area does not look like a junk yard these rules need to be incorporated into your vehicle storage lease. Do not forget to make certain that if your rules are on a separate sheet of paper that the rules are incorporated into the lease and subject to the default provisions so that you have grounds to terminate someone’s lease agreement should they not wish to comply with the facilities rules and regulations regarding the storage of vehicles. Your rules and regulations may also include items we discussed above such as back in or front in parking and charges for occupying too many spaces or the wrong space.

If you are running vehicle storage you may need to have some additional lease addendums that may or not apply to the various types of vehicle being stored. For example, the Texas Self Storage Association Vehicle Storage Lease contains approximately 20 different addendums simply to supplement the operations of different types of vehicle storage operations. These addendums include a dump station, a wash station, or a potable water supply. These are matters that must be addressed either in your vehicle storage lease or in addendums to ensure liability and responsibility are properly allocated between the Operator and the occupant. For example, if you provide a dump station and the occupant uses the dump station improperly and this is not covered in your lease or addendum, it is going to be very difficult to charge the occupant for the damage that he has caused to your dump station. Further, should you expect a charge for any of these types of services that may be available at your facility make sure those charges are clearly delineated in a lease or addendum and always reserve the right to close or withdraw a service currently provided.

Right From The Start
It is important to work with your attorney to incorporate these provisions into your lease. And the best time to address these issues is when a occupant is ready to sign a lease and store the vehicle at your facility, before you give them the access code. If you wait until after the rental, when the vehicle is already on your property, it is too late—there is no reason for the renter to give you additional information or to agree to change the terms of the lease. Remember: While outdoor/vehicle storage may be profitable, an unexpected problem not covered in your lease can quickly make it unprofitable.

Jeffrey Greenberger is a partner in the law firm of Katz, Greenberger, & Norton, LLP in Cincinnati, Ohio and is licensed to practice law in the states of Ohio and Kentucky. You can reach Jeffrey at info@test.selfstoragelegal.com or by mail: Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721-5151, or visit his website at www.selfstoragelegal.com.

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