Weather The Storm: Keeping Your Facility Disaster-Ready

Business involves a lot of planning: strategic, financial, operational. But in self-storage, where you not only have to protect your own interests but the personal property of thousands of customers, disaster response planning becomes all the more crucial.

Here’s a primer on steps to take before and after a disaster to minimize stress for your tenants while limiting your own legal, financial, and operational exposure.

What does that process look like? Seeking legal guidance is a good way to start. Self-storage attorneys represent owners and operators and are equipped with a much greater understanding of the industry than general practice lawyers. They can review your insurance policies and leases to ensure that they’re worded for your maximum protection.

Here, J. Ashley Oblinger, an attorney in the law firm of Weissmann Zucker Euster Morochnik & Garber P.C. in Atlanta, Ga., identifies characteristics of a well-crafted lease and highlights noteworthy exceptions. The definition of a “disaster” is broader than you may assume, encompassing both natural and manmade threats beyond severe weather or fire.

“Any decent rental agreement will release the operator from liability for things like theft or rodents, vermin, insects, and floods,” Oblinger says. “The operator is not in control of the property, so they shouldn’t be liable for things that happen to it.”

But, as he clarifies, that doesn’t put you in the clear for every water-related issue. “If you know about something wrong with the roof, you have to fix it. Even though the rental agreement might release you from liability for water damage, a lot of times the court’s not going to agree with that contract language. Make sure that you’re keeping up the maintenance at your facility.”

Most self-storage facilities are protected from claims that are due to natural factors beyond human control, such as severe weather phenomenon. These “Acts of God” may include damage caused by wind, water, lightning, hail, mudslides, and earthquakes.

However, even if an Act of God caused the damage, a tenant still might take you to court. Their counsel can try to show negligence on your part, for example, if the damage was due to poor maintenance. Although they may face steep odds, it’s a good idea for you to choose coverage such as customer goods legal liability insurance to help cover your legal costs.

Lawyers aren’t your only allies in disaster response planning. Some consulting companies within the self-storage industry offer training, often as a part of their larger package of services. Their guidance can contribute to greater disaster preparedness.

Carol Mixon, founder and president of SkilCheck Services, Inc., shares an example from her procedure manual. “I have a whole section on what to do, from top to bottom, when there’s an emergency. Who are the first people you should call? The first call’s 911, right? Then after that, it’s the property owner, and so on.”

While planning seems like a reasonable approach, Oblinger finds that many self-storage operators wait until after a disaster to seek advice, magnifying their response burden.

“If you already have a plan in place, that can significantly reduce the stress because you have a checklist to follow,” Oblinger says. “You have people’s property that might be damaged beyond repair. You’re fielding calls from tenants. They’re going to want to visit the facility, which might not be allowed. All this is going to create more stress on the facility and their employees.”

Your disaster response checklist will at least create some clarity and direction in moments when both may understandably be scarce.

“We had a major fire at one of the properties we managed,” says Barnholdt. “And it put every system policy and relationship that we had to the test really quickly. It was a super stressful, very fast-moving situation.”

But the outcome could’ve been much worse. “I think we had about a 90 percent tenant insurance penetration at this property when it happened,” Barnholdt adds. “That’s something that we worked really hard to achieve. So, the majority of our customers had a clear path to recovery.”

Insured tenants may receive at least some compensation for their losses and are less likely to seek that from you.

There are some ways to minimize such risks. As Oblinger explains, “A good rental agreement will address this at the start by including a use provision that prohibits the storage of hazardous and flammable materials.”

Some self-storage operators require tenants to list the basic contents of their unit at move-in as part of the lease. It also helps for property managers to maintain a visible on-site presence, especially during move-ins and move-outs, to stay aware of what’s being stored. “It’s not surveillance, it’s just good management,” says Barnholdt.

However, these measures rely on tenants being honest in their disclosure and strictly adhering to rental agreements. While tenant compliance isn’t guaranteed, taking these steps can reduce the likelihood of stored property causing damage to your facility.

Tenants are responsible for insuring their own property against damage caused by other tenants in incidents like the one Mixon experienced. Oblinger recommends including an indemnification clause requiring tenants to “defend and hold the operator harmless for actions brought by others for the tenant’s conduct” to make this expectation clear from the start.

“I think the biggest mistake an operator can make in a disaster situation is to not notify the tenant and try to hide something,” Oblinger says. “It’s better to be transparent on the front end, especially when you’re dealing with hurricanes, earthquakes, fires. It’s not going to really affect your legal liability, because what happened, happened. I wouldn’t recommend anybody admit fault.”

While no one likes delivering bad news, it’s your responsibility as an owner or operator to let your tenants know when a disaster impacts your property. What’s the best approach? Since some disasters may limit tenants’ access to power and communication services, you’ll want to cover the bases. Make information available through multiple means, including an answering machine recording at your company’s main phone number, a company website message, text messages, and signs posted at the facility.

When notifying tenants, always clarify whether they can immediately access the facility. Public safety officials may prohibit local travel or access to a specific property due to safety concerns. Your rental agreements should specify that tenants can be temporarily denied access in emergencies.

Of course, you won’t focus all your disaster aftermath efforts on tenants. You’ll be thinking about the impact of the disaster on your business. “Start to create a plan with your insurance company,” Oblinger says. “And if you sell insurance to tenants or have a protection plan for their property, bring those companies in too, because there’s probably going to be tenant claims.”

Oblinger also strongly advises that you find out what your insurance company will and won’t cover and if they’ll defend you against tenant claims. If not, alternative counsel may be necessary.