Military Risks for Self-Storage Facilities: Limitations and Waivers Under the Servicemembers Civil Relief Act
|Copyright 2014 by Virgo Publishing.|
|Posted on: 08/09/2012|
By Anita Byer and Martin Salcedo
Owners and operators of self-storage facilities understand delinquent and defaulting tenants are part of the business. When collecting money from overdue tenants, they might turn to their state lien laws for guidance to ensure they follow legal procedures for collections and eviction. However, when it comes to tenants who are in the military, operators need to tread even more carefully and follow the Servicemembers Civil Relief Act (SCRA).
The SCRA is a federal law designed “to provide for, strengthen, and expedite the national defense” by temporarily suspending various judicial and administrative proceedings that may adversely affect the civil rights of servicemembers during their military service. This sought-after protection is generally obtained by giving servicemembers additional benefits and safeguards during their military service than those enjoyed by non-servicemembers.
In addition to dealing with default judgments, the SCRA applies to a wide variety of commercial situations, such as evictions, installment contracts, mortgages, residential and motor vehicle leases, and telephone-service contracts. In some cases, the SCRA applies to a servicemember’s dependents.
So, why should self-storage owners and operators be particularly concerned about the SCRA? Consider the following:
Enforcement of Storage Liens
The SCRA affects how a storage lien may be enforced against a servicemember. Before reading the actual statute, however, it’s necessary to understand the following definitions.
Under the SCRA, “a person holding a lien on the property or effects of a servicemember may not, during any period of military service of the servicemember and for 90 days thereafter, foreclose or enforce any lien on such property or effects without a court order granted before foreclosure or enforcement.”
Simply stated, the SCRA requires a lawsuit and an order from the court before a lien can be enforced against a servicemember. Importantly, this requirement extends 90 days beyond the servicemember’s period of military service.
Additionally, in a proceeding to foreclose or enforce a storage lien under the SCRA, “the court may on its own motion, and shall if requested by a servicemember whose ability to comply with the obligation resulting in the proceeding is materially affected by military service: (1) stay the proceeding for a period of time as justice and equity require; or (2) adjust the obligation to preserve the interests of all parties.”
While the intent of this provision is clear, the result may not be. Since the SCRA grants the court broad discretion to either delay the lawsuit or preserve the interests of all the parties, including the servicemember, it’s possible a self-storage operator will not obtain the desired relief.
Differences From State Lien Statutes
What makes the SCRA’s provisions significant is not how they restrict the enforcement of storage liens, but how they differ from some state’s statutory mechanism. In Florida, for example, the first step requires the tenant to receive written notice by personal delivery or Certified Mail to the tenant’s last known address. This notice, which must also be posted conspicuously at the self-storage facility or on the unit, must include:
The second step requires an advertisement of sale be published once a week for two consecutive weeks in a local newspaper of general circulation. If no such newspaper exists locally, the advertisement must be conspicuously posted in at least three places in the same neighborhood as the self-storage facility for at least 10 days before the sale. Such advertising or posting cannot start until after expiration of the time given in the notice, which cannot be less than 14 days.
The advertisement must include:
Note the contrast between the SCRA’s need for court approval and Florida’s quasi-self-help mechanism. The difference is substantial.
Waiver of Rights
A servicemember may agree to waive any of the rights and protections afforded by the SCRA. To be valid, a waiver of rights that applies to the repossession, retention, foreclosure, sale, forfeiture or taking possession of property that is security for any obligation must meet the following requirements:
Given the limitations posed by the SCRA, it’s beneficial to obtain a waiver of rights from a servicemember. However, care must be taken to ensure the waiver not only satisfies all of the SCRA’s requirements, but it’s properly drafted to permit a self-storage facility to take prompt and appropriate action against a defaulting servicemember. Consequently, it’s advisable to seek the assistance of experienced counsel.
For many owners and operators of self-storage facilities, the decision to obtain a waiver of rights from servicemembers is an easy one, especially considering the manner in which the SCRA limits collection options. For those failing or refusing to obtain a proper waiver, the need to abide by the SCRA is underscored by the penalties awaiting violators.
Regardless of the chosen course of action, self-storage operators should respect the intent of the SCRA, which is to protect servicemembers who are unable to defend against a claim because they’re occupied elsewhere in service of their country.
Anita Byer is president and CEO, and Martin Salcedo is general counsel and self-storage risk management group member of Setnor Byer Insurance & Risk. Headquartered in Plantation, Fla., the company is an independent insurance agency dedicated to developing comprehensive insurance and risk-management solutions for clients throughout the United States. For more information, call 888.253.8498; visit www.setnorbyer.com.