When a Condominium Association Rents Storage Space to Owners,The Association is Bound By The Same Laws As Popular Commercial Facilities Such As Public Storage – Article By Joan E. Lewis-Heard, Esq. Edited by David C. Swedelson, Esq.
Article By Joan E. Lewis-Heard, Esq. Edited by David C. Swedelson, Esq.
Many California condominium associations have common area storage lockers, rooms
or areas that are made available to the owners. Sometimes, the storage area is assigned
in a deed as exclusive use common area. More often then not, these areas are not
assigned, and the board has the ability to assign and rent them to owners. And boards
and the association’s management often have no idea of the issues that storage areas
can create until they are smack dab in the middle of a dispute with an owner.
There are many commercial self-service storage facilities that serve the general public;
one of the more popular ones is called “Public Storage”. Although homeowner
associations that rent storage spaces to their owners generally do so on a much smaller
scale, when an association does rent out these areas to owners, it is considered to be a
“self-service storage facility” as defined under the California Self-Service Storage
Facility Act (Business and Professions Code Sections 21700
et seq., referred to in this article as the “Act”) and therefore must comply with the same laws that apply to Public
Storage. This designation becomes extremely important and should dictate the type of
agreement that the association enters into with the owner for the use of the area, space
or room that is being rented to the owner. And the Act is also important to consider
when an owner becomes delinquent in their rent for the storage area, because the
association must take care both to not run afoul of the self-service storage lease and to
not take any collection actions that are prohibited for the owners of self-service storage
facilities pursuant to the Act.
A self-service storage facility, as defined in the Act, is a business that was/is designed
and used for the purpose of renting or leasing individual storage space to individuals or
businesses who have access to the space for the purpose of storing and removing
personal property. While a self-service storage facility does not include a garage or
other storage area in any private residence, a self-service storage facility would include
storage lockers and facilities inside a condominium association garage. This means
that an association is not acting as a self-storage facility if storage areas are deeded or
designated in an association’s governing documents to be used by the owner of a
particular unit. When an association begins renting storage spaces or areas located in
the common area to its owners or residents for a fee outside of the regular
assessments, it becomes an operator of a self-service storage facility and subject to the
Act.
Similar to, but independent of an association’s ability to foreclose on a unit when an
owner fails to pay their assessments or association fees, if an owner falls behind on
their storage unit rental payments, the association can “evict” or “foreclose” on the
storage space and clear out the owner’s property, but only after following very specific
statutory steps. However, unlike the foreclosure of a unit, following which the
association must return the personal property, the lien on a storage space actually
attaches to the personal property kept inside of it, and gives the association the right to
sell these items in order to cover the debt. The association, as the operator of the selfservice
storage facility, has a lien on all personal property located within the storage
space for rent, labor, late payment fees, or other charges present or future, incurred
pursuant to a rental agreement and for expenses necessary for the preservation, sale or
disposition of personal property subject to the provisions of the Act.
Although there are some similarities as far as the notices that have to go to the
association owner that is not paying rent on the storage area, the lien and lien sale
process for storage units differs substantially from the delinquent assessment lien
process for foreclosure of residential units. First, if any part of the rent or charges due
from an owner remains unpaid fourteen days after it is due, the association may
terminate the owner’s right to use the storage space by sending a preliminary notice to
the owner’s last known address. The notice should include an itemized statement of
the amounts due, a statement that the owner’s right to use the space will terminate on
a specific date (at least 14 days from the date of the letter) unless all sums are paid
prior to that date, a notice that the occupant may be denied access to the storage space
after that date, notice that a lien may be imposed, and the contact information for the
association agent that the owner should contact to respond.
If such a notice has been sent, and the total sum due has not been paid as of the date
set forth in the notice, a lien attaches on the property stored in the rented space as of
that date. The association may then enter the space and deny the owner access to that
space (by, for example, changing the lock). If the notice was sent via certified mail and
the total sum due was not paid as of the termination date, the Association may
immediately remove any property found in the space to a place of safekeeping. If the
notice is sent by regular first class mail with a certificate of mailing, access can be
denied to the owner, but the association may not remove the property until fourteen
days after the termination date in the notice.
In either case, the association must send the owner who is not paying for their storage
area a notice of lien sale and a blank declaration in opposition to the lien sale (the form
declaration is provided in the text of the Act). The notice of lien sale must be served
by certified mail postage prepaid and must notify the owner who is using the storage
area that the right to use the storage area is terminated and that the owner no longer
has access to the storage property with the storage property subject to a lien and the
amount of the lien, the property that was kept in the storage space will be sold to
satisfy the lien after a specified date (that is not less than fourteen days from the date
the notice was mailed) unless the amount of the lien is paid or the occupant executes
under penalty of perjury and returns by certified mail a declaration and opposition to
the lien.
The association must advertise for the sale as required by the Act, and can then
conduct a public sale of the contents of the storage unit. The association is entitled to
keep the amount of the proceeds sufficient to cover the amount of the lien (all of the
overdue storage charges), plus the cost of conducting the sale. Any proceeds of the
sale in excess of the lien amount and cost are to be retained by the association and
made available for the former occupant to reclaim for a period of one year from the
sale. After one year from the sale, if the owner has not claimed the proceeds, the
association must surrender them to the county in which the sale was held.
The personal property pre-lien, lien and notice of sale requirements are very specific.
An association may not repossess the personal property contained in the storage locker
or space immediately upon non-payment, and the property cannot simply be discarded
if the owner does not pay. Like when the association forecloses on a unit, the
association must take care to follow all of the procedures when attempting to evict an
owner from a storage space. Even though the association is a non-profit corporation
(or unincorporated association) and its rental of certain storage areas comprises only a
minor portion of the business that it conducts, the association renting the storage
space is considered a commercial landlord and must follow all of the specific
requirements for self-storage companies, just as if it were “Public Storage”.
While this law is not overly complicated, it is likely a good idea for an association to
consult with legal counsel regarding compliance with this Act. We have had clients
who did not realize that there were any legal requirements relating to storage spaces,
and they have been sued for their failure to comply with the Act.
– Click here to download this article via PDF –
Amber Property Management 