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Tiptoeing Through the Minefield of Self-Storage Lien Sales

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By Murphy Klasing

When I defend cases in which facility operators have been accused of violating lien-sale laws, I always remind the jury that this is the self-storage business, not the self-auction business. Despite what many “Storage Wars” viewers may believe, auctions aren’t a way for operators to make money. Nevertheless, lien sales are a necessary part of the industry. When a tenant stops paying rent, an auction is recourse for the operator to remove that customer in favor of another who will pays his bills.

One of the most important things to remember when conducting an auction is the process by which a self-storage operator can foreclose on the belongings of a tenant without a judge’s order is an “extraordinary” remedy. Normal people tend to think of “extraordinary” as meaning remarkable, exceptional, amazing, sensational or phenomenal, but a lien sale is rarely any of these things.

A self-storage auction is “extraordinary” in that it’s an unusual occurrence. When it comes to lien sales, various states have given storage operators this remedy to streamline the business, but it doesn’t come without a price.

Lien-Sale Minefield

Of the lawsuits I’ve handled in which the plaintiff claimed a lien sale was conducted improperly, 100 percent have involved allegations that the operator failed to follow one or more technical aspects of the lien-sale process. Plaintiffs accuse self-storage businesses of:

  • Not properly noticing the sale
  • Conducting the sale on the wrong day
  • Not posting the sale in the newspaper long enough
  • Not conducting a proper inventory
  • Failing to have a sufficient number of bidders
  • Failing to have a written lease

When they’re correct on just one of these or another technical violation, the self-storage operator can be in trouble.

To understand why, put yourself in the court’s shoes. From its perspective, your state legislature went around the court to grant you authority to take someone else’s property without its assistance. Remember, we live in the United States, where your life, liberty and property can’t be taken from you without due process of law. In the context of a self-storage lien sale, the only “due process” the tenant is given is a set of specific rules the facility operator must follow rather than obtain a foreclosure order from the court. In the court’s view, if you want to act as judge and take away someone’s property, you’d better follow every rule without exception or excuse.

Thus, if you conduct auctions without a firm grasp of the rules and a solid plan to not only follow the law but maintain proof that you did, the court will administer its own due process against you. This is another reason the courts state that your holding a lien sale is “extraordinary” and not business as usual. If you want to proceed to the bonus round (the sale), you have to win the game (conduct the pre-auction process flawlessly).

Tiptoe Around the Mines

My advice is to follow the rules. Here are five key tips to help you travel safely through the minefield.

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