It’s questionable whether online self-storage sales are really legally permissible in about 30 states. It’s probably the example of a better mouse trap around which the laws have not yet grown up. It just isn't absolutely clear that online auctions are legal and permissible in the self-storage application.
For now, if you’re in a state with restrictive statute requirements and you're interested in an online-auction service, ask a lot of questions and understand that no provider is going to guarantee that an online sale is legal in your state. You may feel you’re reducing a lot of stress and business problems by going to online auctions, but understand that you’re also taking a calculated risk.
Disclaimer: Jeffrey Greenberger is legal counsel for Storage Battles, an online-auction service serving the self-storage industry. This column is for the purpose of providing general legal insight into the self-storage industry 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.
Insider Insight to Online Auctions
Inside Self-Storage asked Jim Grant, president and CEO of StorageBattles.com, an online-auction website serving self-storage businesses, for insight to the process.
What happens if a buyer doesn’t remove the property from the facility after winning the bid?
To ensure proper cleanout and removal of the property, a cleaning deposit is taken by the facility before allowing access to the auctioned unit. Upon satisfactory cleanup, the deposit is returned. It has been hypothesized about what would happen if the winning bidder does not pick up his belongings. The storage facility can choose to do one of three things:
- Accept the second highest bidder, which is usually within $10 of the winning bid
- Reschedule the auction
- Charge the bidder's credit card for the full amount of the winning bid, with the proceeds being sent to the storage facility as payment
At StorageBattles.com, the bidder would be subject for removal from participating, and the storage facility would treat the unit as forfeited.
How do you address seller concerns that providing photos of unit contents in advance of the sale could potentially attract thieves?
We don’t think having the pictures online attract thieves. We’ve never had a problem with a break-in after conducting the thousands of auctions we’ve had. Maybe it’s because a storage facility does have security, whether it be perimeter walls, gates, cameras, door alarms, access codes, locks on the units or management.
A list of items must be stated in the notifications ahead of time, either in an online auction or onsite auction. After a unit's lock is cut at an onsite auction and the people can see the items, does that entice the losing bidders to come back and break in? Probably not.
Also, it would be difficult to know which unit the product is in, as the unit number is not listed on the Web page. The facility enters the unit number into the system so it can track the sale, but it is not listed on the Web page. The buyer only knows the unit number after he wins the unit and pays for it in cash at the facility.
On another note, while talking about security, online auctions are much more secure for all the buyers. At a live auction, people show up with thousands of dollars in cash, as that is the requirement for purchasing a unit. We see them on “Storage Wars” flashing all that money. Eventually, someone is going to show up and either rob the entire crowd or follow someone out of the parking lot and rob him as he drives home. With online auctions, the only person who shows up to pay for the unit with cash at the facility is the buyer, and no one knows when this will be except the facility manager.