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Should You Charge a Security Deposit on Storage Unit Rentals?

Jon Fesmire | December 15, 2017 @ 12:53 PM

As a self storage facility manager, you know that there is extra work to do every time a tenant does not completely clean out his or her unit when moving out.

So, should you charge extra fees to account for this work? You want to stay competitive, but you also want to have those expenses covered. After all, a tenant who stays one month and leaves a storage unit littered with trash and discarded possessions may end up costing your facility more in work hours than you made from their rent.

Let’s explore your options.

Security Deposits

The purpose of a security deposit is to cover expenses incurred if your facility has to do extra work on a storage unit, typically cleaning, after a tenant moves out. The standard rules are that, upon moving out of a unit, the tenant must leave it clean and swept. If they do, they have fulfilled the obligations of the contract, and the facility refunds the tenant’s security deposit. However, if the tenant neglects to clean the unit, then the deposit is forfeited and the facility keeps the money to help pay for the time it will take to clean the unit.

If a facility charges each tenant a security deposit, in general, it is the same amount regardless of the unit size. These fees are usually between $25 and $45.

Admin Fees

A security fee is not an admin fee. While security deposits are concerned with what happens at the end of  a tenant’s stay with the facility, admin fees are concerned with the initial paperwork. A tenant’s admin fee covers the time and work it takes for you to set up his or her account, gate access, and so on. Unlike security deposits, admin fees are non-refundable. When facilities charge admin fees, the price is generally between $10 and $25. You may consider rolling this fee into a security deposit and charging one lump sum or you may choose to charge only a security fee or only an admin fee.

What Should You Charge?

So, should you charge each tenant an admin fee, a security deposit, both, or neither? Of course, that’s up to you, but here are some factors to consider.

  1. Most facilities charge one or the other. If you charge both, your initial price of entry for tenants is greater, and makes your facility look less attractive.

  2. You know that in the beginning, you will have to do a tenant’s paperwork and get them entered into the computer system. You will probably also have to show them around the facility. Admin fees are meant to cover those costs.

  3. Admin fees are non-refundable, while deposits are refundable. In other words, you never have to pay back the admin fees, while most tenants will clean out their units and you will have to refund their deposits once they leave.

This may explain why more facilities charge an admin fee, and not a security deposit. The admin fee may be lower, but it pays for work you have to do. Charging an admin fee rather than a security deposit also shows a degree of trust in your tenants, that they will follow the contract and clean their units when they move out.

While you need to decide what works best for your facility, in most cases, we suggest charging admin fees only.

Jon Fesmire

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