Multiple Units: One Lease Gives You Leverage

by Richard Marmor, Esq.
AZSA Legal & Legislative Chair

This article grew out of a phone call for help I received. I talked about it at two of AZSA’s regional workshops. And although it brings up topics I have written about before, the number of “Gee, I never thought of that” reactions prompts me to write about them again.

The facts: Over many years, the storage operator had rented 20 large units to a single “antiques dealer.” As is typical, each space was put under its own lease. Recently, the tenant notified the operator that he no longer wanted one of the spaces, adding that he was abandoning the contents of that space; the operator could have them. Within short order the tenant added 5 more spaces to his abandonment. The ceiling-to-floor mounds of junk found in the spaces revealed that the tenant was nothing more than a hoarder. Little was saleable, and it promised to cost the operator a lot of money to get rid of the junk. What could he do?

No abandonments

As I have said before, I strongly recommend that you never accept an abandonment. You have no way of knowing if the tenant actually owns anything stored in the space. He can only abandon as much as he has. So if the tenant doesn’t have ownership, what’s being abandoned? Mere possession, not ownership. Accepting an abandonment would thus make the operator a bailee, with custody and financial responsibility to the property’s true owner for it’s full value. The operator dare not sell the stuff. Prudence therefore suggests that we assume that our tenants actually own nothing in their spaces and never accept an abandonment. Instead, foreclose the storage lien and go to auction, enjoying the legal protections of the statute.

Getting Leverage

So effectively, the tenant is now in default on 6 spaces and in good standing as to 14 others. Clearly, the operator needs some leverage here, but if he locks the tenant out of the gate because of the defaulting spaces, he’s arguably himself in default in respect to the spaces that are in good standing.

There is an easy way to get that leverage. Send a letter reminding the tenant that his lease is month-to-month, so that effectively, a new lease comes into being at the start of each month. Then attach a new lease to the letter, saying:

Beginning next month, the attached lease will become the lease contract between us. Your continued occupancy after [date] indicates your agreement to be bound by the new lease terms. If you do not wish to be bound by the new lease, you must vacate the space(s) by [same date]. 

(Be sure to send the letter certified mail, return receipt requested, so if necessary you can later prove that the tenant’s continued occupancy was intentional and not the result of failing to receive the letter.)

Now here’s the key, this single new lease lists all 20 units as “the leased space,” and the monthly rent is the combined total of the rents for all of the spaces. Now, any default, including electing not to pay rent on some of the spaces, is a default as to all of them.*

Partial Rent Payments

That approach solves another common problem, the partial rent payment. Suppose for example that a tenant has rented two similar spaces from you for $100 per month each. As has been your custom, each space is under its own lease. Then, rather than the $200 that is due, the tenant sends in some odd amount like $162 – I have no idea why tenants often do this. What do you do? Do you put $100 onto one space and $62 onto the other, thereby putting one space into good standing and the other into default? And if you then lock the tenant out of the gate due to the second space’s default, aren’t you then in default of the lease for the space that’s in good standing?

Or do you put $81 onto each of the spaces, thus putting both into default? Either way, who is actually putting the space or spaces into default then, you or the tenant? Good question.

But if both spaces are under one lease, with a single account at $200 per month, there are no questions. The partial payment puts the entire tenancy and account into default.

Coup de Grâce

Having now established some leverage over the situation by placing all twenty units under a single lease with a combined rent, the tenant can no longer elect to default under selected spaces. It’s now all or nothing. Next came a follow-up letter to the tenant:

I can’t accept an abandonment of the spaces. If you’ll play nice and timely vacate the spaces you no longer want, no problem. Your rent for the coming month will be adjusted down accordingly. In the alternative, beginning [next month] the rent for all of your spaces will be [triple the current rent].

The tenant played nice.

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

Richard Marmor has been in the self-storage industry for over 30 years, as a facility owner and consultant. He was the founding president of AZSA and is its lobbyist at the Arizona Legislature, where he authored many of the self-storage industry’s laws. An attorney, Richard also created most of AZSA’s forms; he is a regular speaker at AZSA educational workshops around the state; and his articles appear regularly in the AZSA newsletter and website.