AI In Self-Storage: The Legal Risks Of Automating Operations

Artificial intelligence (AI) is quickly making its way into industries far beyond Silicon Valley, including the traditionally low-tech world of self storage. Operators are increasingly drawn to AI tools that promise efficiency and cost savings in areas such as lease execution, payment processing, customer communication, and even default and lien procedures. While the potential benefits are real, the legal risks of relying too heavily on AI in such a compliance-heavy industry should not be overlooked.

Lease Execution and Contract Formation

Self storage leases are the backbone of the business, and AI systems are now being deployed to streamline the process of onboarding new tenants. AI-enabled platforms may generate leases, present terms digitally, and even collect electronic signatures. The legal risk lies in ensuring that these processes satisfy contract law requirements for consent, notice, and enforceability. For example, operators need to ensure the proper applications of Clickwrap or Browsewrap lease execution. If tenants are merely directed to “accept” terms by using the website, enforceability may be challenged. Courts are more likely to uphold agreements when tenants affirmatively click to accept clear and conspicuous terms. Similarly, operators need to verify that their systems include required disclosures and consents, the absence of which would potentially expose operators to claims of unfair practices or unconscionability. Operators must ensure that AI lease platforms comply with electronic signature statutes (such as the ESIGN Act) and that their digital presentation of terms is both conspicuous and legally defensible.

Payment Processing and Tenant Communication

AI-driven payment platforms can automate reminders, accept digital payments, and track tenant account status. This reduces staff workload, but creates exposure in several areas, including: 1) Data Privacy and Security: Payment systems handle sensitive financial information, triggering obligations under state privacy statutes (e.g., California’s CCPA) and payment card industry (PCI) standards.

A breach, even if caused by a third-party AI vendor, can lead to liability for the operator; 2) Error and Accountability: If an AI misapplies payments, generates duplicate charges, or sends incorrect account notices, the operator—not the AI vendor—bears the legal responsibility; 3) Debt Collection Laws: Automated reminders and delinquency notices may trigger compliance issues under the Fair Debt Collection Practices Act (FDCPA) or similar state laws. AI systems that generate aggressive or misleading communications could expose operators to claims of harassment or unfair practices.

Default and Lien Procedures

Perhaps the most legally sensitive use of AI in self storage involves tenant defaults and lien sales. State lien statutes are detailed and unforgiving, requiring precise notices, deadlines, and sale procedures. AI tools that automate these steps may significantly increase efficiency (and reduce cost) but the process could amplify risks if not managed correctly.

Courts have little tolerance for deviations from statutory lien procedures. If AI generates a defective notice, miscalculates a deadline, or fails to provide proper public advertising, the operator could face liability for wrongful sale. Lien enforcement often requires human judgment, such as determining whether a payment was properly credited or whether military service protections apply under the Servicemembers Civil Relief Act. Operators need to work with their vendors to ensure that attention is given to these nuanced factors as part of their default and lien procedures.

Practice Pointers

It is inevitable that AI will impact operations in the self storage industry, but there are strategies to consider as part of this integration that should be followed. First, there should be regular testing and auditing of all AI systems to make sure that they are operating correctly. Second, there should be assigned human oversight to the operational processes used to address sensitive decisions that are outside of standard program protocols. Third, operators should focus on ensuring they have strong data security and privacy protections in place for any AI system handling tenant data. Lastly, 

there should be an effort to include clear transparency that the customer is interacting with an AI system rather than a human. Disclosures are key here and tenants should understand that they are communicating with AI as compared to a human customer service representative (or even given a choice), as part of the AI process.

Conclusion

AI offers tremendous opportunities for self storage operators to streamline business operations, but blind reliance carries real legal risks. From contract formation to payment processing and lien enforcement, operators remain responsible for compliance. The safest path forward is a hybrid approach: leveraging AI for efficiency while maintaining human oversight to ensure that every step aligns with the strict legal requirements governing self storage operations.

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Scott Zucker is a partner in the law firm of Weissmann Zucker Euster + Katz P.C. in Atlanta, GA. Scott specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. For more visit www.wzlegal.com. 

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This newsletter is for the purpose of providing general legal insight into the self-storage industry. It should not be substituted for the legal advice of your own attorney.