Although the phrase “legislative activity” could be considered an oxymoron, 2016 was by most standards even quieter than normal. That’s not because there weren’t important issues that needed to be pushed forward, but due to the phenomenon of most state legislatures not being in session every year such as 2016.
“Election years are quiet years because a third
of the legislatures don’t entertain new bills and some do not have legislative
sessions,” observes Carlos Kaslow, general counsel to the Self Storage
Then there is the issue of progression. Sometimes it takes
multiple years to get a bill passed.
“A bill may be introduced, but it goes through a
two-year legislative session,” says Scott Zucker, an attorney at Weissman
Zucker Euster Morochnik PC in Atlanta. “Then you have this natural off-period
in the legislative process. This was an off-year.”
To which Zucker adds, “the Self Storage
Association has worked through most of the top 15 or 20 states and now is
working with less populated states and a few larger states where there are
still outstanding items on its legislative agenda, but the volume of the
legislature activity is not as great.”
This isn’t to say the Self Storage Association wasn’t busy. According to Marcus
Dunn, director of Government Relations at the association, “last year we hit 13
states with varied success. Typically, we have seven lien provisions we try to enact
in every state plus legislation on limited lines insurance. These all speak to
the issues of options, standardization, modernization, and legal protection.
Many states have not touched their laws since the 1980s, if they have touched
on them at all.”
In 2016, the Self Storage Association had success with lien
laws in Delaware, pursued insurance in Pennsylvania and Massachusetts, implemented
lien provisions in New York, and passed limited lines insurance in Michigan and
“The law in Michigan now allows a self-storage facility to
sell stored-property insurance,” explains Bill Sheffer, executive director of
the Self Storage Association of Michigan. “It’s defined so as to allow
insurance for loss of personal property not exceeding $10,000, located in a
self-storage facility that is provided under a group or master policy issued to
a self-storage facility for the provision of insurance to customers.”
Basically, the law says that when a potential customer comes
to the self-storage facility and wants to rent a unit, the same customer has
the ability, for a monthly fee, to have the contents insured up to $10,000.
These laws are not always easy to pass.
In Michigan, the first push-back came from the state’s
Department of Finance and Insurance. Its argument was: Why can’t an insurance
agent sell this to customers who want and need insurance? The state
self-storage association polled insurance agents across Michigan and found no one
wanted to take it on because there was no financial benefit since the amount of
compensation from selling the insurance was minute.
“Nobody would want to write the insurance although they
wanted to protect their ability to write the insurance,” says Sheffer. “We got
The bill sailed through the pro-business legislature in
Michigan, but at the last minute the governor vetoed it. “We had to go back to
the governor to explain our positions,” says Sheffer. “The second time it flew
through the process with flying colors. It passed in May this year.”
Tenant insurance or limited lines insurance is definitely on
the agenda of the Self Storage Association.
“We want to make safe options for operators to offer tenant
insurance at the point of sale,” says Dunn. “The tenant comes in, gets the box,
and gets the insurance; the tenant gets everything at the same time, paying the
insurance premium with the rent. Legally, we feel it is better to have all that
in statute. With states that don’t have legislation to codify that, it is kind
of a gray area and we’d rather not expose them to that.”
In 2016, the limited lines license was the issue that got
accomplished more than anything, says Jeffrey Greenberger, an attorney with
Greenberger & Brewer LLP in Cincinnati.
“For 50 years, if you went to the airport and rented a car,
someone in a yellow vest would offer insurance on the rental car,” Greenberger
points out. “There have been exclusions for these policies where you are not
advising the customer as to what to buy but are just offering them a
pre-selected policy they could have if they wanted it. That was the group
enrollment exemption. That’s what the self-storage industry did for years; it operated
under the group enrollment exemption.”
About 23 states now have this limited lines license statutes
(or exemptions) with Missouri, Louisiana, and Michigan coming aboard this year,
Wins For Louisiana One state that passed an insurance licensing bill in 2016 was Louisiana. That was in addition to a lien law reform bill.
“Louisiana was probably our champion in 2016,” says Dunn. “We
focus on seven lien provisions, and in Louisiana we got six of the seven
enacted, plus limited lines insurance.”
Louisiana was one state that made other substantive
legislative improvements in 2016, as many codified procedures were outdated and
“In Louisiana, when you had a default, you had to send a
full copy of the rental agreement to the tenant, which was expensive in postage
and administrative costs,” says Greenberger. “That went away.”
Greenberger ticks off the pluses for Louisiana’s legislative
success: Louisiana has added verified mail or electronic mail rather than
certified mail; actual receipt of the notice is no longer required; advertising
has dropped to one time instead of two; towing is allowed after 60 days for
vehicles and water craft rather than trying to sell; and reasonable late fee
has been added, as well as protection to a maximum value of property as stated
in the rental agreement.
Insurance issues crop up unexpectedly. Although
Kaslow cautions this is not a legislative situation, he talks about a
California issue that recently came up out of the blue.
The California Department of Insurance changed
its interpretation of a law that had been in effect since 2005. What it dealt with
was the errors and omission insurance requirement for operators who held the
limited insurance license in California and were organized as a limited
“For the first decade after passage of the
limited licensing law, the state did not have an E&O insurance requirement
for LLCs. The Department then decided its interpretation of the insurance
licensing law was wrong after a decade,” he says. “It affected a small group of
California self-storage operators who had a license, offered rent insurance,
and were organized as an LLC. If they weren’t an LLC, this didn’t apply to
them. The reinterpretation of the law required them to get an E&O policy,
but the department has granted two extensions at the requests of the SSA. The last
extension expired on Oct. 31, 2016.”
Even operators using protection plans are not
exempt from problems. The protection plan solution proved problematic for a
storage operator in San Diego, which has resulted in a class action lawsuit.
“This is a lawsuit that has been going on for
several years,” says Kaslow. “It is a class action lawsuit against a storage
operator in the San Diego who offers a protection plan. The lawsuit alleges the
protection plan is insurance, therefore, in order to do this, the operator must
be licensed as an insurance company or have agency licenses. The counter
argument is: no, this is not insurance; it is a direct assumption of liability
by the facility operator pursuant to the rental agreement.”
The trial court and court of appeals agreed with
the storage operator. It is now before the California Supreme Court because it
deals with insurance.
It is not the only lawsuit being watched.
In New Jersey, a class action lawsuit was started against
Sovran Self Storage, Inc.
“This is a very watchable case,” warns Greenberger.
A number of years ago, most of the REITs imposed various
fees on various dates as an occupant failed to pay rent, i.e., on this day the
tenant got a $20 fee for letter, a $20 fee for the lock-up, a $50 fee for
advertising, etc. The REITs changed that to say, on a certain day late the tenant
ends up with a lump sum fee (such as $200) to cover everything moving forward.
The question raised in the lawsuit is: If the day after the facility imposes
the fee and the tenant sends a check, does the tenant get any of that money back?
The answer from the REITs has been no.
“The REITs are being sued because that response [the REITs
are not charging the fee when the services are actually incurred] allegedly violates
New Jersey consumer protection laws. They are charging the fee but not
refunding if those services don’t actually happen,” says Greenberger. “This is
one issue that seems to have traction; and it exposes all the REITs in our
industry if they are wrong. It could be a big dollar result.”
New Year, New Laws? Despite the legal distractions, and because of 2016’s relative low level of activity, 2017 promises to be a much more active year. Beginning in the autumn of 2016, a number of states began to plan for battle, eyeing the new legislative sessions cranking up for 2017.
“We didn’t have a whole lot going on in 2016, but we are
watching a few things,” says Melissa Roberts, administrative director for the
Tennessee Self-Storage Association. “We revised our lien law back in 2011 and
did a fantastic job. Six years
later, we are looking at possible modifications for further improvement
of the law.”
In particular, the Tennessee Self-Storage Association would
like to address online auctions and newspaper advertising.
“Our legislative team is looking at a few different options
for 2017, for what we may want to pursue,” says Roberts. “We still have
newspaper requirements in our lien law. That was one thing we left in back in
2011 because we had so many other changes that we did. Changing that is
something we have tossed around for a couple of years.”
Of specific interest is an online auction option.
“The way our law was written back in 2011, that was before
online auctions existed, it specifically says the sale is going to take place
on the property,” Roberts explains. “We need to change the wording to make sure
that we leave it open for online auctions to take place, because right now it
could be read that they are not allowed.”
In September, the Texas Self-Storage Association signed a
legislative alliance agreement with the Self Storage Association, but that
landmark tie-in comes too late to really crank up the process for 2017. “We
have a long list of goals that we will probably pursue in the following session
because some of those things require a long ramping up period,” notes Ginny
Sutton, executive director of TSSA.
For 2017, the TSSA will be working toward just one
legislative goal: getting online auctions incorporated into its statutes.
“That’s the main thing,” says Sutton. “The Texas legislature
meets every two years, so you have to very careful what you ask for; when you
have a great statute like we do, you don’t want to open it up to too much
scrutiny. A lot of Texas operators already conduct online auctions. However, until
that is statutorily allowed, we feel there is still an implied risk that
someone can challenge it through case law.”
The only other issue on the wish list is towing, but TSSA
will back into that space. “We are hoping to find a bill that someone else is
introducing,” says Sutton. “We’ll work with them to get a statute allowing the
towing of vehicles when the owner has stopped paying.”
The one state that appears to be gearing up the most for
2017 is California. Along with the national self-storage organization, the
California Self Storage Association recently interviewed a number of lobbyist
“We want to establish a long-term relationship with somebody
in Sacramento who can help with continued efforts to amend state lien statutes
along with other things that come up,” says Erin King, director of the
California Self Storage Association. “Sometimes things come up, such as with
the newspaper industry, and we want to make sure we have folks on the ground
protecting our interest.”
This isn’t to say the California association doesn’t have an
agenda for next year.
“It is very important that we introduce a bill in 2017 to
amend the state lien statutes, including the newspaper requirement, that is,
storage operators publish in a newspaper of general circulation for two weeks
prior to the sale,” says King. “We would like to see an option for those
advertisements to be published online, eliminating the newspaper requirement,
or having one week of publication.”
The association would also like to have language inserted
into the statute that allows customers to opt-in for email notification. “Not
all customers want notices of lien sales sent to them with that more expensive
certification of mailing,” says King. “To be able to opt into email would be
friendlier to the consumer as well as streamline the communication process for
the business owner.”
Finally, the association wants to be able to have self-storage
owners publish their auction advertisements online as well and make some small
changes to the language on the declaration in opposition to lien sale.
As Zucker stresses, “Every legislative change
that is won has a direct economic impact to a self-storage operator. Whether
it’s late-fee changes, limitation on value provision, limitation due to loss or
damaged goods, emails instead of certified mails, it all goes to reduce the
cost of lien sales which reduce the costs to both the operators and the tenants.
It also protects the owner’s business from litigation.”
Steve Bergsman is an author, journalist, and columnist. His stories have appeared in more than 100 newspapers, magazines, newsletters, and wire services around the globe; his most recent book is “The Death of Johnny Ace.”