Chasing down delinquent renters ranks right up there with restroom duty among the least popular jobs in self-storage.
The difference is that if a storage operator violates state lien laws en route to dispensing with a tenant’s property at auction, the financial effect on the facility could be far worse than running out of toilet paper.
Despite the risk of lien litigation, self-storage consultant Jim Chiswell still sees plenty of haphazard work when it comes to the fair, much less legal, treatment of tenants whose rent is overdue.
“We still see smaller operators out there who simply open the unit, go through it, take anything good, throw everything else out and rent the unit again,” Chiswell said. “But increasingly, the legal implications eventually catch up with them.”
Mark Beck, vice president of operations for Northridge, CA-based StorCal Self Storage, appreciates the necessary nuisance of resolving delinquencies.
“The most heartbreaking, money-losing venture in storage is selling people’s stuff. It’s a lose-lose all around,” Beck said. “To my mind, the goal is not to do everything you can to make the sale happen—it’s to prevent it from happening.”
6 tips for handling overdue tenants
How can a storage operation minimize the cost and drama of delinquencies? Here are six steps every storage facility should take.
1. Know your state’s lien laws.
Most states have lien laws and update them periodically. You can find current lien laws for 46 states and the District of Columbia on the Self Storage Association’s website.
2. Update your lease.
Chiswell strongly recommends using an attorney who specializes in storage agreements. “You need to update your rental agreement at least every couple years, due to legislative changes and case law,” he said.
3. Train your staff.
Make sure everyone on your team understands your facility’s lease. “That’s not automatic,” Beck said. “Sometimes, you’ll have a store manager who wants to own the process.”
4. Inform your customers.
When a customer moves in, be sure to cover the delinquency process when you’re reviewing the lease with him or her.
5. Encourage auto pay.
“Surprisingly, the more customers you have on auto pay, the fewer auctions you have, because the payments happen automatically,” Beck said.
6. Be proactive.
“Try to find a win-win with delinquent tenants,” Beck said. “Maybe they can downsize into a smaller unit or pay you 70 percent of the value of the items in their auction-bound unit and move on. It’s worth trying to find that balance.”
Give a little respect
Once a customer falls behind, the timing and delivery of notifications must align with state law and with lease terms. But Beck said that’s even more important today, in light of social media, to treat delinquent customers professionally.
“Today, it’s so much easier to broadly communicate your frustration that the storage company sold your stuff,” he said. “If that person feels that they were treated with respect, it also reduces the likelihood that they’ll post their frustration online.”
The outsourcing option
One popular way to ensure compliance with lien laws and to ease the burden on staff is to outsource the entire lien process. While some self-storage software includes a collections function or app that generates delinquent notifications via email and even text, Late2Lien provides an automated system, from late notices to lien sale and all steps in between.
Launched three years ago by self-storage attorney Jeffrey Greenberger, Late2Lien automatically updates its notification forms and timelines to each state’s lien laws, and works hand-in-hand with software from vendors like SiteLink. Every notice generated and collected is scanned and archived, right down to receipts for certified mail.
Not only does Late2Lien free up managers for more productive tasks, it prevents the human errors that often make the lien process more costly and time-consuming.
“Our system is so intuitive that it actually protects the owner-operator from the manager entering incorrect information,” said Tammy Salvo, director of business development at Late2Lien. “If they try to assign a sale date and time that is too soon and would not warrant a lawful sale, the system will not accept it.”
Drop in delinquencies
Clients credit Late2Lien’s official-looking notifications and timely processing with a 28 percent to 34 percent drop in delinquencies.
“Our clients always say, ‘Why didn’t we do this sooner?’” Salvo said. “Their delinquencies are diminishing, their auctions are diminishing, they’re getting paid quicker from tenants and their managers can now focus on more important things. We take care of getting the non-payers out; they can focus on getting the paying people in.”