Vehicle storage—particularly outdoor storage—is a very different business from traditional self-storage. Nowhere is the difference more distinctly drawn than when a tenant stops paying rent and the facility operator has to do something with the stored vehicle. Further complicating matters, there’s some question about whether outdoor vehicle storage is really traditional self-storage, depending on the definition in your state.
The biggest problem is many stored vehicles have a pre-existing lien and, in most states, your self-storage lien doesn’t trump it. Thus, even though you may follow some of the suggestions in this article for recouping lost rent, including obtaining a title to sell a vehicle, you may not be able to successfully do so. This is because you likely won’t raise enough money in the sale to satisfy the superior title lien, and no one wants to buy a vehicle for which a clear title cannot be obtained. Effectively, therefore, you cannot sell the vehicle.
So what do you do if a vehicle like a boat or RV goes into default at your storage facility? The answer depends on your state. A few states have clear procedures for obtaining a title to sell a vehicle in the event of default. These procedures need to be followed carefully. You don’t want to wrongfully sell a vehicle in these states because your liability can be extensive if you do.
The most notable example of a specific procedure to sell a vehicle is in California, which outlines a series of steps you must take, including notices to the appropriate state departments for registration of the vehicle or vessel. The common theme in the states where there’s a clear procedure for obtaining the title and selling the vehicle is the notice to the lienholder, which gives the lienholder the opportunity to “scream or die” before your ability to sell takes precedent over a pre-existing lien.
Many of you are thinking, “I don’t remember reading anything in my statute about whether or not my lien is superior to the vehicle lien.” It’s almost certainly there, you just haven’t read your statute the right way to look for it. Almost every statute contains a sentence or two that discusses the nature of your lien and, if you look, it will almost always say your lien either is or isn’t superior to pre-existing liens.
Other states, such as Virginia, allow for the storage lien to be superior, but only to a limited dollar figure. Again, there’s a question as to whether it’s worth all the paperwork and risk to the facility to sell a vehicle only to be able to claim the first $250 or $500 of the proceeds. If there’s a pre-existing lien, it could make claim to any sale proceeds, up to the amount of lien.
Some states don’t have a formal written procedure for the sale of a vehicle in default. That doesn’t mean there isn’t one, it just means you have to work a little harder to find a solution. In some states, there are statutes governing the operation of private parking lots, often called garagemen statutes. There is often some type of lien statute for mechanics in most states. Check with your local legal advisor to determine whether you can avail yourself of the remedies under what I call “garage lien” statutes.
In some states, it’s clear you can assert a garage lien against the vehicle. In others, there are prerequisites, such as declaring yourself to be a private parking lot and posting signage. In still other situations, the determination may be made depending on whether the vehicle is stored in an enclosed locked unit, a non-segregated space, indoors or outdoors.
At the end of the day, almost every one of these statutes is affected by the existence of a superior lien. Again, while you may be able to assert a garagemen’s lien, that lien is still subordinate to a pre-existing title lien. This would make all the rights and remedies available to you somewhat moot because you probably won’t be able to sell the vehicle for enough money to pay off the lien and still make it worth your while. There’s also the risk of a lawsuit that follows the sale of a vehicle if there’s a pre-existing lien.
If you choose to use your state’s mechanics lien statute, pay close attention to it. I question whether a storage operator is truly eligible for it. Typically, you’re not taking the vehicle in for repair or improvement before the storage charges are incurred, and these statutes speak of a repair improvement before storage charges are applied.
Some operators have had no problem obtaining a title under a mechanics lien act in their state. While the Department of Motor Vehicles (DMV) may not have given them a lot of trouble, an operator may have “skipped” a few words in the affidavit he signed to get the title, and that’s a problem. While a title may be issued, that doesn’t mean DMV made an independent inquiry as to whether an operator met all the requirements. That would happen later if the operator were sued by the vehicle owner or lienholder for making an improper and, dare I say fraudulent, affidavit to the DMV.