We’ve all heard stories about some storage facility that really went overboard managing their rates. Tricking customers into thinking their 50% off the first month is the going rate then doubling their price without notifying the renter, or worse.
But have you heard that some state legislators are trying to address those less-than-scrupulous patterns by implementing total rent control on the self storage industry?
We sat down with Joe Doherty of the SSA to ask him where this and other legal problems stood - and how worried operators should be.
Rate management is a fundamental part of running a self storage business. Without raising rates sometimes, we’d still be charging people ten bucks a month.
In fact, one of the biggest pieces of advice you would have heard at storage association conferences over the last few years was to implement rate management tactics - otherwise, you were just leaving money on the table!
Rate management was always a balance between making money and keeping your customers happy. Now, there’s an additional twist to the game - are state legislators annoyed enough by rate management practices to outlaw rate increases altogether?
Not exactly - the most common form of rent control revolves around how much a landlord (because almost all rent control targets residential rent) can increase rent by over a given period of time.
That would mean you’re still allowed to raise rents, there would just be a cap on the degree.
One prominent bill that started everyone worrying about this problem was introduced in Texas. It specifies that rent on a self storage unit could not be raised within the first year of a tenant's stay, or unless the operator provides written notice of the increase in rent at least 30 days before the rent would be increased.
This bill did not become law, but it’s illustrative of how future legislation might address the issue.
Adding extra legal hurdles to the business is never good. Storage operators know how much of a pain it can be to comply with lien laws - more legally required notifications, and the lawsuits that could come with them, are not good.
Luckily, this bill, and the others like it in other states, did not become law - in part because the SSA legal team fought it.
The US legal process is slow and complicated by design - any bill that passes has dozens of influences pushing it forward, and the same goes for bills that don’t pass.
That being said the SSA did mount a defense of our industry. This is one of the many reasons you should join the Self Storage Association! Your dues contribute to the team of lawyers that work to keep laws like this from passing.
The SSA team mounted an argument that the month-to-month nature of self storage leases helps customers more than it hurts them - and that rent control violates the way a month-to-month market has to work.
Rent control might make sense in an industry that has long leases, but if the customer can leave whenever they want, the rent increase doesn’t present an undue hardship. Just like in the rest of the economy, customers can choose a different provider if they don’t like the price.
This flexibility benefits both the facility and the patient, and the SSA legal team was able to convince lawmakers of that fact. The bill is currently not moving forward.
This one particular Texas bill could have made a huge headache for self storage operators in Texas - but it’s not the only such attempt that the SSA is fighting off.
According to Joe, similar laws have been proposed in New Jersey and New York City. None of them have passed yet, but it's good to keep an eye on potential legal troubles like this.
Update: Lawmakers in Georgia have introduced similar rental rate limitations, but this bill is accompanied by several other regulations. Read more about self storage rent control in Georgia here.
The best place to keep up with legal news that might directly affect your business is your state self storage association! If your state doesn’t have an association, then check in with the national SSA.
While this particular legal challenge has been thwarted, it pays to keep up with industry news so you can get ahead of changes.
The story behind the proposed Texas law is part funny, part scary. This entire industry-shifting law came about because of a single complaint from a single tenant whose rent was raised too aggressively.
The complaining tenant was an aide to a Texas state representative. That tenant convinced the representative that self storage rent increases need to be controlled, and the legislator agreed.
That’s all it takes to get industry-shifting laws passed, under the right circumstances.
Ironically, the upset tenant then moved to a new community and rented from the same storage operator.
Joe argues that legislators generally want to help people and don’t always understand our industry. In these instances, the SSA is mostly tasked with educating the legislators on how self storage works - and how we can help their constituents.
At the moment, storage operators in Texas don’t need to worry about new bureaucratic headaches, but there's always a change that the bill is resurrected and pushed forward in the future. Join the Self Storage Association to help keep the industry running smoothly!
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