Coronavirus & Price Restrictions
Once a state of emergency is declared, many states have price restrictions, commonly referred to as price gouging laws, that take effect. Although these laws differ, they generally put a cap on raising prices for certain goods and services above a certain percentage from the amount charged immediately preceding the declaration, subject to certain narrow exceptions. Some of these laws are clearly applicable to self storage, some clearly are not, and others are uncertain in scope.
Importantly, many of these laws create so-called strict liability offenses. In other words, it only must be proven that the unlawful rate increase occurred, without a valid exemption provided by the law, not that an operator had a specific intent to violate the law or “gouge” the tenant.
Although no SSA member would intentionally raise their rental rates dramatically during a declared state of emergency, the laws may affect an operator’s ability to implement even standard rate increases. For example, in California, an operator may not charge a rental price greater than 10 percent more than the amount charged immediately preceding the declaration, subject to certain narrow exceptions. If a California operator charged $100 for a unit immediately preceding the declaration and raised the rent to more than $110 during the state of emergency, the operator may be in violation of the law.
During a state of emergency, members should consult with their legal counsel regarding the application of their state’s pricing laws before changing rental rates for both current and prospective tenants. Given how dynamic the current situation is, members should also frequently monitor announcements and statements from state and local officials that could extend, modify, or revise their state of emergency as the coronavirus situation changes.