2021 1st Quarter Edition


CSSA Advocacy Activity

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Price Gouging

2020 was an unprecedented year to say the least. While long-lasting effects of the COVID-19 pandemic are still largely unknown, the California State Legislature scrambled in the final hours of 2020 to pass new legislation and amend existing legislation to address concerns of the community in light of the pandemic, including the concerns of the self storage industry. One piece of legislation that was reconsidered in late 2020 was California Penal Code Section 396, California’s anti-price gouging statute.

The legislative intent of Section 396 is to prevent iniquitous business practices that would take unfair advantage of consumers’ vulnerabilities during an emergency or disaster by disproportionately increasing the price of essential goods and services.  Such practices could make goods and services related to the health, safety and welfare of the population unobtainable or inaccessible during extremely difficult times.  Section 396 is triggered by a state of emergency or local emergency as declared by the President, the Governor or declaration of a local emergency by an official, board or other governing body, and specifies that such disaster may be natural or manmade (Cal. Pen. Code §396 et seq.).  Once an emergency is declared and for a period of 30 days thereafter (or longer if extended by the applicable authority), it is unlawful to sell goods and services, including specifically “storage services”, at a price that is more than 10% greater than the price charged for such good or service immediately prior to the declaration of emergency (Cal. Pen. Code §396 et seq.).

While the intention of Section 396 is admirable to ensure the public is not price gouged during a state of emergency, the effects have broadly debilitated self storage operators who rely upon pre-pandemic business plans that include 10% or greater price increases.  By way of example, an operator that offered discounted or promotional rental pricing immediately prior to the pandemic may very well be stuck with those discounted prices plus the 10% increase threshold until such time as the state of emergency expires (current expiration date is March 4, 2021, subject to additional extensions).  To address this concern and others, the CSSA, in partnership with the national Self Storage Association, pursued a strong lobbying effort during 2020 to obtain less burdensome language in California’s anti-price gouging statute, and landed with some success.

 Specifically, the final version of Senate Bill 1196, which was signed by Governor Newsom in 2020 and is effective law as of January 1, 2021, amends subsection (l) of Section 396, in relevant part (shown in bold), to provide that businesses offering goods or a service are permitted to consider prices normally charged to consumers of such goods or services, for purposes of calculating whether a price increase for such good or service violates the 10% threshold.  While the analysis for determining a price that an operator “normally charges” for a unit has yet to be tested, the addition of the “services” and not merely goods is certainly an improved, and more favorable, standard for storage operations given the nature of this industry.

In conclusion, Senate Bill 1196 has codified language that softens the harsh effects of Section 396 on self storage operators. If a generous interpretation of Section 396, clause (l) is adopted, operators may be able to raise rental rates to an amount that approaches levels that would be applied under normal circumstances for both existing and prospective customers. However, operators must take into consideration other interpretations of the language in clause (l) and should also be aware of local laws that may contain additional prohibitions against price increases. In considering whether to raise rental rates, operators should consult counsel as well as review the applicability of Section 396 and any local restrictions.