Intro to Self-Storage Auction Laws: Get It Right

September 9, 2011 19
Intro to Self-Storage Auction Laws: Get It Right

Thanks to basic cable, storage auctions seem to be the rage of American society these days. But with widespread exposure comes widespread misinterpretation, and attendees at your next auction may not understand the nature of a lien sale or the laws under which storage facilities operate. Facility owners have widely varying (and often unwritten) guidelines or company policies they follow for auctions. On top of that, the lien laws they’re required to obey differ from state to state. Newcomers to the world of storage auctions, including newer members of your staff, must become familiar with these laws and how they could be misinterpreted, or run the risk of being held liable for an improperly conducted auction.

Playing fair.

Wayne Blair, auctioneer at Blair Auction & Appraisal, has been in the storage auction business for more than 12 years. Thanks to the growing popularity of auctions and contracts with local auctioneers, he is able to help storage facilities with their auctions in 13 states and counting. Blair stresses that many people, storage operator and customer alike, don’t realize the main function of a storage auction is to recoup lost costs from a delinquent tenant.

Most storage facilities don’t expect profits from a storage auction. Gains from the winning bid are meant to pay off the rent owed, and if there’s anything left over, many states require the facility owner give that money to the delinquent tenant. Of course, in some cases, the tenant might be completely unreachable. Check your state lien laws on how to proceed; a few states allow the facility to keep the money if they cannot contact the tenant within a full year. In some cases, as in Blair’s home state of Michigan, the leftover cash belongs to the state.

“Some [storage owners] think that once the tenant becomes delinquent, the [content of the unit] belongs to them. That isn’t true,” Blair said.

Hunting down the M.I.A. tenant.

The first requirement before planning an auction is to attempt contacting the tenant by any and all available means. A letter demanding payment on the rent within a set timeline (as indicated by state lien law) should be mailed to the tenant. While common law dictates that facilities put out a newspaper ad for two consecutive weeks prior to the auction, legislation is changing as media trends alter the methods and accessibility of communication. For instance, many states now allow the auction notice to be published on the facility’s website.

While advertising an auction is a good way to increase public awareness of your facility, its primary function should be to contact the tenant. The ad should list the date and time of the auction and a simple, general description of the unit’s contents.

State requirements vary when it comes to the time frame within which the tenant must pay off his or her rent. This period can be as short as 30 days or as long as 90 days. Furthermore, the tenant will usually have to owe a specific past-due amount in order to legally continue with the auction.

Getting the details right.

As we’re talking, Blair asks me to call back in half an hour. His workers have found a car with a bad vehicle ID number in their storage unit. Before he goes through with the auction, he’ll need to do an extensive lead check on the car to ensure it actually belongs to the tenant. In case anything goes wrong, he has a $2 million liability policy.

Even with such extensive coverage, Blair’s company ensures that each potential facility client complies with all lien laws imposed by the state. While the auctioneer obviously can’t dictate in-house rules at any self-storage facility, Blair recommends owners establish a workable company policy that is both compliant with state law and easy for anyone to understand. Getting a handle on the fluid nature of lien law can be difficult, so Blair suggests that new facility operators seek out their state self-storage association to network with experienced owners about common policies and concerns.

After all is said and done, storage auctions are necessary to maintain the flow of business. Blair recalls working with a storage facility that refused to hold auctions, years ago. After 60 delinquent tenants and multiple bank loans, the company finally went under.

“The storage facilities just want to be able to pay their bills,” Blair said.

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  • http://westbeltstorage.com Columbus Storage

    We have a small storage facility and we hardly have auctions. Most of the time we can work it out with the tenant. However, if they disappear and leave stuff in the unit, we don’t have a choice, but to auction it off. Most of the time we hardly recover the rent owed.

    • idontknowmyname

      i wouldn’t doubt it.. i think you will get more customers when your honest about making sure you do what you can to get an agreement worked out with the tenants then they can go and tell people how you helped.. but i am sure you get an auction that no one bids because it is just trash bags.. if i ever own a storage unit i will get all the info from the tenants and thier licens and ssn so i can make sure they know i can take action if they leave trash there for 3 months and here i would be for 3 months having no income and also have no one bid.. i would make sure they pay for the time i had it there, the clean up,court fees etc …by taking them to court to show them i will not play that game.. i would also include that info in my contract since only the crooked people would be the ones that had to worry

    • John

      You must be one of the rare honest storage facility owners. My experience is that storage facilities raid the lockers before putting them up for auctions more than half the time. Since the owners of the contents rarely attend the auctions, nobody ever finds out.

  • http://www.rivertonselfstorage.com/connecticut-self-storage.html Riverton Self Storage

    We generally do not have many storage unit auctions at our facility, but we get tons of inquiries about them. It is amazing how many more questions we have been getting about self storage unit auctions since the auction television show came on.

    • Wegotstuffstore

      That is because your not that big, and you have paying tenants… And as far as inquiries.. Because everybody is looking for the GOLD RUSH !!!

      • mom-of-3

        on STORAGE WARS.. it is set up.. they make bidding look better on the show to push people to go and do it.but you have a cleaning fee (you get back if you have it cleaned in that time frame) and a few other fees when you bid. also on storage wars, they have the workers take off the lock , put treasure in all the units they are bidding on, then they lock it back up.otherwise they wouldn’t all have enough stuff to have a “war” on to see who makes more money.. this was said from someone on the show..

        • John

          It’s the producers who add those little hidden treasures. At first they simply publicized the auctions that turned out good for the bidders but they didn’t have enough treasure lockers to include in all the episodes. That is when they started to “salt” the units with little treasures. As I understand it, about 2/3 of all the treasure on the show is planted. Based on my own experience, that is about right. I used to buy units about 3-4 times a week and I did that for about 20 years and I got one treasure unit about 2-3 times a year. My best deal ever was when I paid $300 for a locker that had a jewelry box in it with some Tiffany gold jewelry in it. I made about $10k out of that locker. My second best deal was paying about $200 for a locker with about $3000 worth of tools in it (what I actually sold them for) . That is out of 20 years of doing that. For the longest time the average locker would be $100-$300 in cost and I would sell the contents for $300-$750 at the flea market. But when the storage wars shows started up and got popular all of a sudden lockers were going for $1000 and up and still only had $300-$750 worth of content (what I was getting at the flea market) so I went out of business. Now the only people who make a killing in the storage locker auctions are the auctioneers and the crooked storage facility managers who swipe stuff out of lockers.

  • Pingback: Building Hype For Your Storage Auctions at Self Storage Blog: The Storage Facilitator

  • Danny Norris

    in the last year i have bout several storage units that were up for auction and afterwords have found evidence that the unit had already been gone through (“ran sacked if you can call it that” )and thin sold to the highest bidder. this should be stopped. in my eyes that is still theft.I will continue to try and find out who to contact in these cases to see what can be done about it..!!!

    • Wegotstuffstore

      Not being Rude BUT, You are not a Seasoned BUYER Nor expert. Typically you can spot those things when you look inside during the auction… It’s (in My experience) Usually the Managers who rummage and steal — YES .. I’m pointing the finger.. OR the Owners of small unit complexes… Most States require the locks cut off (with 3rd Party supervision, That’s not Bribed) and the contents be disclosed when they are required by law to advertise that the unit will be auctioned off !!!

  • http://www.aussie-storage.co.uk/ London Storage

    e don’t have a choice, but to auction it off. Most of the time we hardly recover the rent owed.

    • Wegotstuffstore

      Chalk it up to the cost of Doing Business.. But ,In relation to the Money Made by the Storage Facilities across the Nation it’s kind of like Shoplifting Theft,… It’s figured into the equation… Your not losing money or you would be OUT OF Business !!! So Cry the Blues to someone else !!!

    • John

      I assume you are required to let the rent go into arrears for a long time before you are permitted to auction off contents. In my state it used to be one year in arrears then a 90 day notification period before they could auction off the contents. Usually the facility owner only recouped about 10% of back rent and had to take the owner to small claims which rarely ended well. But then the law was changed and now it’s 90 days in arrears and 30 days notice. With the storage locker auction craze, storage locker auctions usually allow the facility to break even now. There was talk of allowing storage facilities to require a sort of renter’s insurance that covered defaulted amounts should they default but they couldn’t get the law passed.

  • http://www.storageauctionsexpert.com Storage Auction Experts

    There are so many laws to follow, and it’s important that self storage facilitators get it right the first time.

  • Gonzo

    Michigan anyone? First time this has happened…. Found a 22 cal. Ruger in a storage auction and when I went to register it they demanded that I turn it over for 6 months while they contact the person to whom it is registered to….(the tenant)… They will then have 6 months to claim the handgun… In the past myself and with all other auction people the handgun was registered in your name because it was your item when you purchased the unit…… Gungrab? Anyone hear of this going on? This is in Livonia, Mi

    • i want to own a storage unit

      yes ..i saw them take a gun away from someone on storage wars

      • bennett

        you cant get guns from storage units along with certain items,you legally have to be registered from your SSN so some guy that is harmful or has to be on certain meds can’t get a gun and go kill people with all the ammo and guns in the units they won.. you would have a lot of people that can’t get guns because of offences, going to units to bid if it was allowed… not that they don’t know how to get it illegally, anyways but what can you do

    • John

      Laws vary by state. In my state fire arms (except certain antiques) cannot be sold via such auctions and have to be turned over to local law enforcement. They then check to see if any crimes can be connected with the fire arm and If none come up the gun is destroyed. They usually store it for years in the meantime. Also, automobiles, motorcycles etc cannot be included in such sales. If one is found in such a unit it must be reported to the DMV. that is a profit killer because you cannot remove the vehicle legally without written permission from the DMV which takes 90 days. Even then it’s not yours. You are then required to transport the vehicle to a state impound lot where it will stay until the owner can be located. If the owner is never located then the vehicle is auctioned by the state. In other words, fire arms and motor vehicles cannot be sold via storage auctions. The one thing you hope is that when you win your auction is that you don’t find a small car hidden at the back of your unit. Basically it means you are screwed. In other states the only reason you can’t keep the contents of a storage locker is if it is illegal to own in the first place or if the items are stolen. Best to know local laws before bidding.

  • Paulina LeBlanc

    Can the delinquent tenant go to the auction and bid to by his own unit in California ?