2/4/08

Art Doten Attorney, Wolters Kluwer Financial Services

Most banks and credit unions offer safe deposit boxes as a service to their customers or members.  Unfortunately, doing so can subject them to potential risks of liability if, for example, claims are made that items were placed in the safe deposit boxes and are now missing, damaged, or destroyed.   

Even though the safe deposit box contract typically is called a lease and refers to the bank or credit union as the lessor and to the customer or member as the lessee, the case law in most states generally considers the relationship created to be one of bailee and bailor, rather than landlord and tenant.  The difference is significant, because it affects the burdens of proof, including both the burden of coming forth with evidence and the burden persuasion.

A bailee generally has both of these burdens and thus will be liable unless the bailee proves that it was not negligent.  A landlord generally does not have these burdens and thus will not be liable unless the tenant proves that the landlord was negligent. 

Consequently, a well drafted safe deposit box lease should contain language designed to convince a court--to the extent possible--to treat the relationship as one of landlord and tenant, rather than bailee and bailor.  Such language should include the following:

• A provision that the bank or credit union will generally not have access to or possession or control of the safe deposit box or its contents;
  
  
• A provision that the bank’s or credit union’s responsibilities and liabilities will be limited to those of someone who leases property to another; and
  
  
• A provision that the relationship created will not result in any presumptions adverse to the bank or credit union or in the bank or credit union having the burdens of proof, persuasion, or coming forth with evidence at any stage of any litigation regarding the vault, the safe deposit box, the safe deposit box contents, or their loss, damage, or destruction. 

A well-drafted safe deposit box lease should also include the following (among other things):

• An area for gathering lessee identification information;
  
  
• A provision for the appointment of one or more deputies;
  
  
• An area for specifying the lease date, the box number and size, any box keys, any vault keys, the initial annual rent, any requirement of notice of rent due, any authority to debit rent to the lessee’s accounts, any security deposit, the number of lessees required for access, the number of deputies required to act for a lessee, and the lease type (such as individual, joint, corporation, or partnership), as applicable;
  
  
• A provision regarding the days and times when the lessee can have access to the vault and the safe deposit box;
  
  
• A provision regarding security procedures, including keys or combinations to the safe deposit box or vault, passwords, PINs, signatures, fingerprints, handprints, or other safeguards;
  
  
• A promise that the bank or credit union will exercise reasonable care;
  
  
• A provision that the bank’s or credit union’s responsibilities will not extend beyond the exercise of reasonable care;
  
  
• A provision limiting damages for liability to the extent permitted by state law;
  
  
• A provision specifying the rights of joint lessees;
  
  
• A provision specifying the rights of deputies;
  
  
• A provision indicating that the contents of the safe deposit box are not insured;
  
  
• A provision that the lessee cannot store illegal or dangerous items in the safe deposit box;
  
  
• A provision regarding court orders;
  
  
• A provision regarding termination, vacation, and removal of contents;
  
  
• A provision regarding remedies, including the bank’s or credit union’s rights and obligations in the event the lessee abandons the safe deposit box without removing its contents;
  
  
• A provision regarding notices and changes; and
  
  
• A place for the lessee to acknowledge that the safe deposit box lease has terminated, that the lessee has removed the contents, and that the lessee has no further rights under the safe deposit box lease.

A well-drafted safe deposit box lease, including the provisions set forth above, will minimize the risks of liability inherent in a bank’s or credit union’s providing safe deposit boxes to its customers or members and will otherwise establish the rights and obligations of parties to the relationship.

Wolters Kluwer Financial Services state-specific safe deposit leases address potential liability concerns.