In my experience, tenant storage has been a major issue for property managers, leasing personnel and risk managers. When tenants seek out additional storage on a permanent or temporary basis, odds are they are considering their own interests in their decision. In reality, tenants taking additional storage in a facility where they operate, can be a major headache for those running the property.
Storage spaces can take the form of a number of uses.
- Storage Trailers placed behind stores or in parking garages
- Use of unrented space in or around a building
- Dedicated storage area used for property management
The use of these spaces can put property managers / owners in very difficult positions. The most importantis that lessees are using the real estate for purposes other than what their lease dictates. What if an employee or worse a customer was hurt working inside the unapproved storage space? I can tell you (from experience) the injured person will not seek damages from the employer or business. They will come after the landlord or property management company responsible maintaining the common area facilities. Lawsuits, court dates, damage control, public relations remedies would be necessary to correct the situation.
The situation could have been avoided had the tenant simply leased / licensed space from the landlord. The agreement doesn’t need to take the form of an existing lease nor are you going to charge “commercial market rent” when quoting. You also need to obtain a separate certificate of insurance protecting ALL parties involved. This reduces the risk to the managing party. You may also ask, what do I charge the prospect interested in storage space. I simply contacted a few area off site storage providers for rates and then made a determination. Be prepared that tenants are not going take kindly to your solution of the situation. Some tenants will say they can seek storage off site. If so, that’s fine too as they won’t use your space illegally anymore. You can present your solution as a cost-effective way to avoid a very expensive problem in the future. Speaking in terms your tenants’ attorneys are going to understand should end the conversation.
Landlords are not looking to squeeze every dime from their tenants. In reality, they are trying to provide the safest environment possible to conduct business. Leasing storage space is no different than leasing commercial space. You need have to document to protect all parties involved in the transaction.
Greg: I recommend in all instances that there be a written document setting forth the tenant's rights to storage space in a lease. Issues of liability, insurance, rents, etc. can be addressed in the additional document or at a very minimum, an addendum to the lease for the primary space. This is necessary, even when the landlord chooses not to charge additional rent. Too many legal issues without a writing addressing them.
ReplyDelete