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The Risks of Sale and Disposal: Words of Caution and Guidance for Self-Storage Operators

Michael Rice Comments
Continued from page 1

Avoiding lawsuits is in your best interest since they can be expensive and expose your business to a costly legal judgment. Plaintiffs who’ve had their belongings seized and auctioned will generally appear sympathetic to a jury. The emotional effect on a jury is always a risk and cannot be underestimated. Items that may not have been worth much while in storage suddenly take on a sentimental attachment under the scrutiny of a legal proceeding. To avoid being perceived as insensitive, the defendant (self-storage owner) must demonstrate complete adherence to the notice requirements and timeframes prescribed by state statutes for such actions.

For consumer-protection claims in general, including sale and disposal claims, the courts require careful documentation of the defendant’s actions prior to the sale or disposal in question. Your state’s lien laws and consumer-protection statutes normally include specific legal requirements and timelines for these sales. It’s critical you be aware of these requirements and comply with the law regarding your right to place a lien on and sell a tenant’s property. Also be sure to comply with the requirements spelled out in the statute regarding your duty to notify your tenant of your intentions and his obligations.

How important is it for you to follow these laws and discuss these issues with your insurance agent and attorney? In financial terms, it literally pays to be cautious. The risks for violating your state’s consumer-protection laws may be extremely costly. In many jurisdictions, penalties are contained in the language of the statute and may include triple the plaintiff’s claimed damages (or more) in addition to paying the plaintiff’s (customer’s) legal fees.

If you were to find yourself in a case where your customer alleged hundreds of thousands of dollars in lost property, such a jury award may well exceed the limits of your sale and disposal liability insurance policy. As a result, your facility would be responsible for paying the balance of the judgment not covered by your policy. 

An Alternative to Lien Sales

Since the laws governing liens on property and sales of such property may seem to provide more benefit to the plaintiffs than the defendants, you should be aware of an alternative available in virtually every state that may obviate lawsuits deriving from lien seizure and sale: your state’s eviction process. This article is not intended to provide a step-by-step guide to eviction, and there have been very scholarly and informative articles on the subject written by people who have experience and knowledge in such matters. However, the eviction process is available to self-storage facilities just as it would be to apartment owners and the like.

While the process may differ in various jurisdictions, in most cases, it follows a pattern requiring the facility owner to file an eviction order with the court which, if granted, can be given to the local police or sheriff to execute. The potential benefit of this alternative is that once an eviction is filed and granted, the facility may become once-removed from the process by involving the court and the police or sheriff. At that point, a lawsuit filed solely against the facility becomes much less likely and far more difficult to prosecute.

Once again, this article is not intended to be construed as advice to use this option. However, it may be in your best interest to discuss this alternative to traditional lien sale and disposal auctions with your attorney and insurance agent. 

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