Charity Costs $1

By Richard Marmor, Esq.
AZSA Legal & Legislative Chair

One of the more rewarding aspects of our industry is its heart. I think every one of us has from time to time given away free storage space to worthy organizations. I’m here to tell you to stop giving it away for free.

Don’t get me wrong. I still encourage our charitable activities. The problem is that there is a difficulty presented by leases with no rent.

Think about what our leases mean: in exchange for a monthly payment, you give the payer use of some of your real estate. The operative word there is exchange, giving something to get something in return. The law calls what each party gets “consideration,” and it is a necessary part of every contract. If you read most formal contracts, one of the introductory paragraphs almost always begins, “In consideration of the mutual covenants and conditions contained below...” Note the word “mutual,” implying that each party expects to get something from the agreement.1

That concept is central to contract law. In fact, there are court cases in which apparent contracts were deemed to be nonexistent because of “failure of consideration,” that is, one side or the other was not getting something out of the bargain. So if you have a lease with no rent, it’s arguable that the lease contract is “illusory,” that it really isn’t a contract at all. And to have a lien, you have to have a lease: “‘Leased space’ means the storage space or spaces at the self-service storage facility that are rented to an occupant pursuant to a rental agreement” (emphasis added)2.

It gets more complicated. None of us would offer space to an organization that was neither legitimate nor seemingly trustworthy. But suppose such an organization did fail. What would/could you do to recover the space they occupy? Foreclose your lien and auction?

Of course to do that, you would have to have a lien to foreclose. Consider this provision of our lien law: “The operator of a self-service storage facility has a possessory lien from the date the rent is unpaid and due...”3 If they don’t owe any rent, how can they default in its payment? And if there is no default, then there is no lien . . . and if there is no lien, there is no right to foreclose . . . and if there is no foreclosure, there is no auction . . .  See where we’re going here?

The solution: give the space away for almost free: e.g., $1.00 per month, a number small enough that no organization would turn down the offer or see it as other than generous. The key is that there is consideration, so the lease contract is not an illusion and exists, and there is a duty on the part of the charity at which it can default should their organization somehow fail. At least then you can act.

The bottom line is that you not be left with units in limbo for which the only solution is filing a lawsuit to have a charity evicted.

[This article deals with a law related subject at a general level and is not intended for you to rely on. You should consult a lawyer before making a final decision in a situation involving any legal issues.] 

Richard Marmor, Esq. is a self-storage consultant, facility owner and former facility operator in the Phoenix area.  He is also the founding President and current member of the Board of Directors of the Arizona Self-Storage Association, serving as Chair of the Legal and Legislative Committee. 

Source: Behind Closed Doors, AZSA Newsletter Archives