The Top Five Legal Threats for All Self-Storage Operators in 2011

By Jeffrey Greenberger Comments
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Legal Threat No. 1: The TV Show ‘Storage Wars’

Much has been written recently about the new A&E Entertainment TV series “Storage Wars,” but from the perspective of an industry attorney, it represents a great threat to our industry in 2011. First, if you’re one of the facilities where the show is filming, you’re creating Exhibit A in a wrongful-sale trial—a videotaped, nationally televised copy of this particular lien sale for the tenant and his lawyer to pick apart.

As an lawyer, I see errors made in these sales, and it drives me crazy. I keep wondering, when is a tenant going to watch his own goods being sold on national television, recognize the facility did something in error, and file a lawsuit for violations, using the taped raw or edited footage of the sale as proof positive? That is perhaps the smaller of my two concerns.

My larger concern is judges and potential jury members, as well as self-storage tenants, are beginning to believe every self-storage unit is a treasure trove for which you’ll get so much more than what you paid (i.e., the operator never sells a unit for its full value). I’ve had many judges ask if I’m enjoying the show because they are. I politely answer this question affirmatively. However, I know they are starting to believe self-storage units are full of nifty and expensive items. This has bad implications.

Let’s consider a theoretical wrongful sale at a self-storage facility. The tenants (“victims”) sue and allege all sorts of missing valuable property. (For the purposes of this example, you can substitute for wrongful sale other incidents such as theft while your overlock is on the unit, building fires, wrongful access, etc.). In the old days, we would at least have an argument that a tenant who was habitually late in paying his $75 a month rent probably didn’t have $100,000 worth of antique guns in his unit. Judges simply didn’t believe that people who struggle to pay their bills every month would have such valuable property, with the exception of emotional and sentimentally important items.

Now judges and juries are going to think differently. We’re going to allege that what was sold at lien sale or what was in the unit when we inventoried it and put our overlock on it was a mattress, box spring and some old clothing. Tenants are going to allege items such as fishing poles, antique guns and commemorative coins, all of which have been featured on “Storage Wars.” From now on, we’re going to be in a battle to disprove the value of every item instead of trying to make the tenants prove there was value to their items.

“Storage Wars” has done some wonderful things for the industry, however. If nothing else, it’s put a lot more people on notice, in case they missed it when signing the rental agreement, that if you don’t pay your rent, your goods are eventually sold to pay off your bill. That’s actually a great development.

The show should also encourage you to hire an independent third party like an auctioneer, even if your state doesn’t require one, to cut the lock, inspect the goods, evaluate the value of the goods, and sell them for what somebody else other than you deems to be fair market value, lest you be in court someday with a judge who has developed what I will now coin “Storage Wars Bias” toward the value of the property in the unit.

As this industry has grown and matured, it’s clear the freedom to run your self-storage business exactly the way you want it to is gone. You must be a smart, savvy and aware businessperson with more policies and procedures as well as checks and cross-checks to avoid what have become obvious legal pitfalls to the industry in 2011. Good luck!

This article is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

Jeffrey J. Greenberger is a partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati and is licensed to practice in Kentucky and Ohio. Mr. Greenberger primarily represents the owners and operators of commercial real estate, including self-storage owners and operators. To reach him, call 513.721.5151; visit www.selfstoragelegal.com .

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