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Legal Learning: Handling Self-Storage Collections

Jeffrey Greenberger Comments

No matter what you do, at some point in time, you must face delinquencies and evictions. Either way, you are normally left with an occupant who owes you money. Lien sales rarely raise enough money to pay the full amount of delinquent rent, along with sale and lien expenses incurred to get the occupant physically out the door.

It is a common misconception that selling an occupant’s unit or evicting a tenant from a unit somehow wipes out the debt you’re owed. Nothing could be further from the truth. Further, no self-storage statutes say that if you sell the occupant’s property you have to accept what you get and write off the rest. The same is true if you evict the occupant—it does not mean that you have to “walk away” from what is owed. Eviction is merely an action of ejecting someone, without some of the risks of a sale.

So, should you send your former occupants to collection? Is there a way to report your former deadbeat occupants to credit bureaus? And, moreover, is there value in doing so?

Get It in Writing

Even though your statute does not prevent you from collecting arrearages, you probably should have an appropriate clause in your lease stating delinquent accounts will be forwarded to collections. It can be simple and to the point: “In the event of a default, any delinquent accounts may be sent to collection.”

Your collection agency may also advise you to include an additional sentence stating the costs of collections are also recoverable, in addition to any amount owed as a result of the default. Check with your own lawyer or specific collection agency to assure the lease’s language is appropriate.

Next, a lot of people talk about reporting the delinquencies directly to a credit bureau. There are three major U.S. credit bureaus, namely Experian, Equifax and Trans Union. If you become a member of these firms, it’s possible to report delinquent tenants directly to them, assuming you have the proper software and ability to upload information to their databases, in their format, on a daily or weekly basis. A word of caution: Improper reporting may put you at risk for violating the Fair and Accurate Credit Transactions Act. Hence, if you are not prepared to give your full and undivided attention to credit bureaus, you should not be reporting directly to them.

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