There are numerous factors that facilities must ensure they get right, both at sign-up and during the life of the agreement, if they hope to increase fees legally. We all know that many storers stay with us for long periods of time — usually, much longer than the storer initially anticipated. It would be financially unviable for a facility to leave the rate the storer pays for their space at the same level for the whole of a lengthy storage relationship. But is it legal for a facility to increase the fee the storer is paying, and how can they do it?
Getting the basics right — the agreement
For a storage facility to be able to increase storage fees during the storage period, there must be a clause in the storage agreement enabling the increase to occur. All the SSAA’s agreements include a right to increase the storage fee from time to time. However, the wording of this clause has been altered over the years to keep it in line with legislative changes, so it is imperative that member facilities check that they are using the most up-to-date version of the SSAA’s agreement. The current Standard Agreement includes the right to increase fees after a period of notice has been given. Future versions of the Storage Agreements — due for release in the first half of 2017 — will include even more specific wording.
No increases during initial fixed period
When a storer signs up for storage, the length of the initial fixed period is recorded on the front of the contract. Generally, this will be a month, but the term can be longer (or shorter). Once this initial fixed period has concluded the storer is what we call a “continuing” agreement. That is, they continue to store under the same terms and conditions until notice of termination is given
by either the storer or the storage facility. The agreement has been drafted in such a way as to provide flexibility to facility members on this point, and each facility specifies on the front of the agreement the length of notice required at their facility. Hence the amount of notice required to terminate is specified on the front of the agreement and may vary from facility to facility.
You CANNOT increase the storage fee during this initial fixed period. It is only after the fixed period has passed and the storer is a “continuing” agreement that you can increase their storage fees. If you have an open-ended agreement — that is, there is no “until date” or no end date for the initial fixed storage period — there is an argument that you may not be able to increase the
storage fee. Make sure you put an end date on each contract!
How do I increase fees?
You need to give one full account cycle plus two weeks’ notice to increase fees. If you charge your storer monthly, then this will mean you need to give one month plus two weeks’ notice of the
increase or put more simply six weeks’ notice. You should do this in writing. When the storer has agreed to electronic-only correspondence from the facility, you can send an email and SMS with the notice. When the storer has NOT consented to electronic correspondence only, it is considered best practice to send notice of a rate increase by registered/trackable mail.
You should allow the storer the option to terminate and move out without penalty before the rate increase if they object to the rate rise. This would mean, for example, if you usually require 21 days’ notice to terminate you would not penalise the storer for only giving five days’ notice before moving out.
Any increase in storage fees must be reasonable. What is reasonable would take into consideration demand, vacancy levels, CPI, the tenant’s payment history, and so forth. Why can’t we change all fees? Why only the storage fee? Warning! Boring lawyer talk ahead!
Current consumer laws target standard form contracts — our storage agreements are standard form contracts. This is because they are a “take it or leave it” contract — we do not negotiate
individual terms with each storer. There are onerous rules that apply to standard form contracts that do not apply to negotiated contracts. This includes an overarching “reasonable” requirement. Furthermore, any ability to change a standard form contract term without the consent of the other party is automatically deemed an unconscionable clause under consumer laws. In our standard contracts, we enable ourselves to change the storage fee without the consent of the storer, which puts this clause into the “prima facie unconscionable” category. We temper this argument with the following facts:
• It is not reasonable to have a storer stay indefinitely with us and continue to pay the same rate they paid initially, particularly when that storer is with us for many years;
• We only increase fees after giving generous notice of the increase and allow the storer to move out without penalty before the increase takes place.
• We cannot change any other fee — including late fees, cleaning fees etc. — over the life of the agreement.
We believe this ensures our right to change storage fees will not be interpreted as being unreasonable or unconscionable. However, it is important that members enforce rate rises in line with the guidelines set out here.
Make sure your agreements are up to date As an aside, recent changes to competition and consumer law in Australia and changes forthcoming in New Zealand mean it is more important than ever to ensure that facility owners check for updates to the SSAA’s standard agreements and put those updates into use at their facility.
The last update to the Standard Storage Agreement in Australia was released in April 2015, and in New Zealand in March 2016. If you have not updated the agreements you use to these
latest versions, it is imperative that you do so without delay. The previous Standard Agreement includes clauses which are at significant risk of being interpreted as breaching current consumer laws.
You are entitled to increase storage fees as long as you are using the SSAA’s agreements and you follow the guidelines above. And look out for updated Australian agreements, due for release
in the first half of 2017! Simone Hill BA (Hons) LLB, LLM, is the Legal Advisor to the Self-Storage Association of Australasia.