Legal Remedies for Vehicle-Storage Operators: Methods for Recouping Unpaid Rent and Reclaiming Your Space

By Jeffrey Greenberger Comments
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Other Options

In states where a solution is not clear, the best option may be to simply have the vehicle towed by a local towing service rather than risk your time, energy and money trying to sell it. In most states, towing companies have terrific lien rights, a lot better than any you, as a storage operator, may ever have.

To use this alternative, there are almost always prerequisites, for example signage and perhaps even clauses in your rental agreement that allow you to tow in the event of a default. Check with your legal counsel and the towing company you intend to use to ensure you’ve complied with all requirements. You may not recoup your storage charges this way, but in the end, you’ll probably save a decent amount of time and money by quickly reclaiming your space and avoiding legal risk.

In some states, there’s simply no remedy available. In states such as Ohio, it’s virtually impossible to consistently obtain titles to vehicles based on storage liens or otherwise. Your success depends on your luck of the draw at the DMV window. In these states, the best remedy for a vehicle in default is probably an eviction.

When I say eviction, I mean a court action in Forcible Entry and Detainer, similar to removing a tenant from an apartment, shopping center or office building. This is the act of filing a complaint with a court of law, having a hearing, and receiving the right to remove the occupant’s property from your rented space. In an apartment, it’s the furniture, dishes and food. In a vehicle-storage facility, it’s a car, boat, RV, etc. I contend you have no option but to evict in some states. Thus, the argument about time and expense is moot.

Preventing Defaults

Almost always, a vehicle brought to your facility will already have a pre-existing lien, although it is possible a refinance could occur or a lien could be placed on the vehicle after it’s put in storage. The key is to ask questions about lienholders and other vehicle information at the time of lease signing, not when the vehicle is in default.

The most important thing you can do in vehicle storage is to get the relationship right in the first place. That means knowing you’re storing a vehicle, what vehicle you’re storing, who is the actual title holder, and who are the lienholders. You need to know enough about the vehicle to later obtain a copy of the title if necessary, including the vehicle identification number (VIN) or hull number and other identifying information. In the best case, a copy of the title and registration should be on file with you at the inception of the tenancy. Having this information in advance, as well as ensuring your tenants are set up to pay rent via an automatic bank withdrawal or credit card authorization, will greatly reduce the number of vehicles that end up in default.

The next step to being a successful in vehicle storage is knowing your rights before a vehicle goes into default. This is something worth discussing with your storage attorney or local legal counsel. Understand your rights so you know how to react if a tenant goes delinquent.

Also make sure you stay in touch with the lienholder if there’s a default. A lienholder generally doesn’t want its collateral sold for pennies on the dollar, regardless of whether you’re allowed to sell it. This  simply causes more title problems for the lending institution. You’ll often find that if storage charges are not being paid, neither are monthly payments on the vehicle. Sometimes it’s simpler to work with the bank to pay you some storage charges and allow the vehicle to be repossessed than to go through all the steps listed above.

Most important, do not force the title. Perhaps it's better to say, do not intentionally flub your title paperwork just to get a title so you can get a vehicle out of your space. If all you’re interested in doing is getting the vehicle off your property, you have other remedies, be it towing or eviction. Remember that most forms submitted to state motor-vehicle departments are in the form of an affidavit, meaning a statement that you’re swearing is true and accurate. If you cannot agree or you have to “skip words” to get to the end result, do not sign that affidavit. The stakes, by way of a lawsuit or wrongful sale, are clearly greater and much more expensive when you’re involved in a vehicle sale.

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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