Tennessee Bill Proposes Changes to Self-Storage Lien-Sale Process
Copyright 2014 by Virgo Publishing.
By: John Carlisle
Posted on: 03/08/2011



 

Proposed Tennessee state legislation in the form of Senate Bill 1293 and House Bill 1265 would lift the newspaper advertising requirement for self-storage lien sales and allow facilities to contact auctioned tenants by “verified mail,” which could include e-mail and hand delivery, among other changes.

The new advertising requirement would still require facilities to post clear auction information, such as the time, date, place and manner of the sale. However, to be “commercially reasonable,” an auction would require at least three bidders, but no newspaper ad would be necessary under the revised Tennessee Code Annotated, Section 66-31-102, which governs self-storage.

On the “commercially reasonable” standard, Sherry Cole, a member of the Tennessee Self-Storage Association Board of Directors and chair of the legislative committee, explained the three-bidders rule may not be hard and fast, depending on the nature of the auction. In an example, Cole posed a situation where a rural facility was auctioning a printing press and only two known printers existed within 50 miles. If both printers were contacted about the sale, the advertisement could be deemed “commercially reasonable.”

As for lien-sale notification, the new law would allow for owners of the state's roughly 1,200 self-storage facilities to deliver notices by hand, which is not currently an option. It also allows owners to send notices by “verified mail,” which refers to the U.S. Postal Service’s certificate of mailing. At a base rate of $1.15, the certificate of mailing is far less costly than Certified Mail, which starts at $5.54. Finally, the bill approves “electronic mail to the occupant’s last known address.” It does not specify an e-mail proof-of-receipt requirement.

Cole said the impetus for pushing for advertising and notification changes came from survey results. Between Dec. 15 and Jan. 15, the TNSSA asked its members to poll customers on a wide range of issues. Among the 350 customer respondents:

  • 80 percent said they do not subscribe to a local newspaper.
  • 83 percent said they do not read the legal notices in a newspaper.
  • 80 percent said they had regular e-mail and Internet access.
  • When given four choices for preferred methods of receiving notifications if they default on their rent, 53 percent of respondents chose e-mail, and only 2 percent chose via a publication.

“The law should enhance communication between businesses and consumers,” said Cole, who also is a self-storage owner. “The current law does not allow us to use a more efficient means. In fact, the law is doing a disservice to operators and consumers.

“(The law) needs to be modernized. Technology has changed in the past 31 years,” she said, referring to the time when the notification means was initially codified.

In other changes, the bill would officially give owners the right to charge a late fee. Cole said the absence of this language from the current law causes much confusion among association members, who are unsure of their recourse when tenants are late or delinquent. Additionally, the bill would expedite the vehicle delinquency process, giving owners the right to auction or have the vehicle removed at 60 days instead of the current 90.

The longer owners don't have access to their space, the more they lose, Cole said.

The TNSSA delivered a proposal for the bill in August to state lawmakers. Concurrent to the bill has been a $15,000 fundraising campaign, at which the association is now at 90 percent of its goal, Cole said. She now encourages members to switch from giving money to writing letters and making phone calls to their legislators.

Sen. Steve Southerland and Rep. Charles Sargent are spearheading the joint bill, which if passed would go into effect July 1 and affect all subsequent self-storage rental agreements.

The most recent draft of the proposed legislation, introduced to both houses on Feb. 22, can be read at http://e-lobbyist.com/gaits/drafts/275596. The bill is scheduled to be reviewed by the Senate Commerce, Labor and Agriculture Committee March 15.

Ongoing discussion of this bill is occurring on Self-Storage Talk, the industry’s largest online community, on the thread “House Bill 1265 and Senate Bill 1293” at http://www.selfstoragetalk.com/tennessee/4654-house-bill-1265-senate-bill-1293-a.html.