The Problems With Deferred Maintenance

Posted by Scott Zucker on Oct 1, 2019 12:00:00 AM

Regular maintenance on leased real estate is a topic that affects all property owners and managers. Although budgets are often drafted to consider regular ongoing maintenance obligations, no one, no matter how well a property is doing, wants to carry the added expense of maintenance, repair, or replacement to their bottom line. It is a natural reaction to be cost conscious and profit driven but, as a result, the issue of deferred maintenance impacts owners and operators, especially after a tenant claims injury or damage to property arising from the condition of the leased real estate.

Self-storage is similarly affected. Even with non-residential, non-habitational property, operators must constantly consider their maintenance obligations relating to their driveways, roll-up doors, gates, fences, roofs, gutters, cameras, HVAC systems, and a myriad of other issues that impact their tenants and the property they store.

Interestingly, but not surprisingly, by tracking complaints logged by the Better Business Bureau against self-storage facilities over the last decade, the largest number of complaints have dealt with damage to stored goods arising from water intrusion, mold or mildew growth, or rodent damage, and the majority of those have occurred as a result of deferred maintenance to aging facilities.

This is not to say that the facility owners or operators have incurred liability for those losses. Many of those complaints did not advance, owing to the clear exculpatory language found in most self-storage leases by which the facility can release itself from liability. In addition, a number of those complaints were resolved as a result of the insurance policies that most tenants are required to obtain when they rent space at a self-storage facility.

But the reality of deferred maintenance at aging facilities brings up some larger questions for those owners and operators. The first goes beyond the issue of personal property loss or damage and rises to the risk of personal injuries or even death. It is crucial for operators to invest in their properties if for no other reason than to seek to prevent injuries to their customers and other invitees to their business property. As property owners, there is an implied obligation to keep the property in a safe condition, at least subject to “ordinary care”. As such, there are certain maintenance obligations that must be met, especially regarding the gate systems and the unit doors—areas where the propensity for injuries typically occur.

There is yet a secondary economic rationale for performing this deferred maintenance. Simply put, the ability to compete against newer facilities that may be entering the nearby market. An older facility with reduced street appeal may find it difficult to compete against a newer property if it has not committed itself to maintaining the property as much as is reasonable. No one expects an older facility to transform itself into a brand-new property. In fact, it may be that the older facility can compete on rates better than certain newer properties. But, the failure to maintain the systems and structures of an older facility will undoubtedly impact the rent-ability of the units being offered. A certain level of maintenance is therefore required for business purposes alone.

This understanding, that certain property maintenance can no longer be deferred, has shifted the landscape of the self-storage industry since the belt tightening times after the great recession. In fact, more and more vendors have entered the market to position themselves as service providers for operators seeking facility face lifts. Companies like Janus International (and its R3 Division) and ReRoof USA have poised themselves as one stop shops to help operators renovate and restore their aging facilities. These renovations will not only help reduce tenant complaints and the incidents of property loss and damage but, just as significantly, will lessen the risk of personal injuries on the properties and increase the value of these properties in the commercial real estate market.

Until next month, happy storing!

Scott Zucker is a partner in the law firm of Weissmann Zucker Euster Morochnik & Garber, P.C. in Atlanta, Georgia.