Over the last few years, with the demand for more affordable housing and the rise in smaller living spaces, Ontario has seen an explosion in the number of self-storage unit rentals. In Ontario, storage unit rentals are governed by the Repair and Storage Liens Act (“RSLA”), not the Commercial Tenancies Act (“CTA”). As a result, the rights of storage unit owners and their tenants are often misunderstood. This blog addresses the rights of storage unit owners when a tenant defaults under a storage rental contract.
What happens when my tenant does not pay rent?
Under the RSLA, when your tenant misses a rental payment, you may terminate your contract and re-enter the storage unit immediately.
What if my tenant breaches a non-monetary term under the contract?
Unless your contract states otherwise, when your tenant breaches a non-monetary term, you may terminate the contract and re-enter the unit immediately. However, in this case, it is best to first give your tenant a written Notice of Default and a reasonable opportunity to fix the issue, especially if they have never been in default before.
If your tenant has diligently begun to fix the default but cannot reasonably do so within the timeframe you have given to them in your Notice of Default, consider extending the timeframe. If the tenant does not fix the default within the extended timeframe, it is best to deliver a written Notice of Termination, which can be effective immediately, unless your Notice of Default was already clear about how and when you would terminate the contract.
What if my tenant leaves their belongings in the unit after termination?
1. Termination because of unpaid rent
From the moment a tenant stores property in your storage unit, you have what is called a “possessory lien”, or legal claim, against that property for the amount of the unpaid rent and any other amounts the tenant owes you under your contract or under the RSLA. As long as the property stays in your possession, your lien/claim will have priority over anyone else’s interest in that same property. You are entitled to keep the property in your possession until the tenant pays the entire amount owing to you.
When you terminate a storage rental contract for unpaid rent and your tenant leaves property in your storage unit, you have the option (in accordance with the procedures in the RSLA) to: (a) sell the property; (b) keep the property; or (c) donate the property to a registered charity.
a. Sell the property
Before you can sell the property, you must (a) wait 60 days from the day the rental payment is missed and (b) give 15 days’ notice of your intention to sell the property to:
· the tenant;
· if there is a vehicle in the unit, to the registered owner of the vehicle;
· if there is property other than a vehicle, to the person you believe is the owner of that property; and
· after running a search in the Personal Property Security Registry, to everyone who comes up as having a registered security interest in the property or a non-possessory lien against the property.
Your notice to these people must contain certain information, as set out in the RSLA.
b. Keep the property
Before you decide to keep the property, you must (a) wait 60 days from the day the rental payment is missed and (b) send a written proposal to keep the property to the same people listed in the “Sell the property” section above.
Once a person receives your proposal, they will have 30 days to object to it in writing. If they object, you can either (a) sell the property by taking the steps in the “Sell the property” section above, or (b) you can apply to the Superior Court (with notice to the person who objected) to ask the Court to deem the objection “ineffective”.
The Court may deem an objection ineffective if:
· the objection was made for a purpose other than to protect that person’s interest in the property; or
· the fair market value of the property is less than what the tenant owes you.
If the Court finds the objection to be effective, you cannot keep the property and must sell it by taking the steps in the “Sell the property” section above.
If no one objects to your proposal, you must keep the property in full satisfaction of the debt. If the value of the property is less than what the tenant owes you, you cannot bring a claim against the tenant for any additional amounts.
c. Donate the property
Before you can donate the property, you must (a) wait 60 days from the day a rental payment is missed and (b) then you must hold onto the property for an additional 12 months. After this timeframe has lapsed, you can donate the property to a registered charity if:
· the property has a fair market value of less than what the tenant owes you; and
· you have not already given notice or a proposal to anyone of your intention to sell or keep the property.
You must also maintain a record for 6 years of the property that you donated and the registered charity.
Return the property to your tenant or the property owner
Keep in mind that at any time before you sell, keep, or donate property left in your unit, your tenant (or any person listed in the “Sell the property” section above) may pay you the full amount your tenant owes you and take the property back.
Reasonable care in storing property
You must use “reasonable care” when you store and preserve property left in a unit unless a higher standard of care is imposed by law. Also, unless you and the tenant have otherwise agreed, while storing property:
· you must ensure that you always know which property was left behind by which tenant;
· you may register a security interest against the property in the Personal Property Security Registry; and
· you are entitled to recover from the tenant your “commercially reasonable” expenses incurred in storing, preserving, and preparing the property for sale, if applicable.
2. Termination because of a non-monetary default or contract expiry
The RSLA does not address a unit owner’s right to property left behind when a storage contract is terminated for a non-monetary default or when the contract simply expires at the end of the term. In the commercial leasing context, judges have held that property left behind by a tenant remains the property of the tenant unless the landlord can prove that the tenant abandoned the property. As mentioned above, storage rental contracts are treated differently from commercial leases under the law, but because the RSLA does not address this issue, and to avoid disputes, your storage contract should state that all property left in the unit under these circumstances will be deemed “abandoned” and that you have the right to dispose of the property as you see fit.
Before disposing of any abandoned items, you should check the Personal Property Security Registry to confirm whether anyone else has a security interest in the property, and you should examine the property for any indication that it may be leased or owned by someone other than the tenant.
If you think that terminating the contract and trying to re-rent the unit might be too costly for you, consider including a provision in your storage rental contract that will allow you to fix your tenant’s non-monetary defaults yourself and then recover your expenses from the tenant in the form of rent.
Conclusion
Storage unit rentals are unique tenancies, governed by a unique piece of legislation. To avoid unnecessary and costly disputes, it is important to follow the rules in the RSLA and to have a lawyer prepare and periodically update your storage contract to ensure that your rights are clear and that the terms address the gaps in the RSLA.
