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Avoiding Self-Storage Legal Danger With SCRA Compliance

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By Roy Kaufmann

Collecting unpaid rent on self-storage units is neither fast nor easy. Moreover, the process is fraught with legal danger. One misstep and you could find yourself sitting behind the “defendant” sign in a courtroom. Or equally disheartening, if not more so, the government could slap you with penalties for noncompliance with the Servicemembers Civil Relief Act (SCRA), which could amount to hundreds of thousands of dollars.

This was the case for San Diego-based Across Town Movers. The company settled a suit with the U.S. Department of Justice in 2015 in which it agreed to pay $170,000 in penalties for selling the belongings of a deployed Navy officer. Such sales are prohibited without a lien, and operators can’t get a lien without a court order if the client is an active servicemember.

The United States has statutes, including the Fair Debt Collection Practices Act, to protect consumers from abuses such as unfair collections practices. Although federal law sets rules regarding your right to lien, seize, sell and dispose of tenant property, each state is different and may enact stricter rules. It’s your responsibility as a storage operator to be aware of and heed these rules, lest you be forced to suffer the consequences.

The Act

SCRA is a far-reaching consumer-protection act that was passed in 2003 to safeguard active-duty military personnel from certain penalties, including liens and foreclosures. Its purpose is to provide these personnel with relief from worries such as bills while they’re serving their country. Your self-storage business is subject to the SCRA, and noncompliance can be costly. Areas the SCRA covers include:

  • Mortgage relief
  • Lease termination
  • Eviction protection
  • Interest rate cap of 6 percent
  • Stay-of-court proceedings
  • Reopening of default judgments

Now more than ever, it’s critical for self-storage operators to grasp the scope of the SCRA. Violating the act can result in fines and penalties, including imprisonment. The SCRA grants protection not only from liens, but from the sale and disposal of property. This protection extends to members of the military reserves when called to active duty as well.

Notification

You might think a servicemember has a duty to inform your storage facility if and when he’s going on active duty. It would save you a lot of time and trouble if he did. In reality, servicemembers may have a moral duty in this area, but they don’t have a legal obligation.

However, there are steps you can take to encourage your military tenants to notify you of their status. For example, you can post signs asking them to inform the storage manager before they go on active duty. This is a request, not a legally enforceable rule, but it may make for fewer headaches. You can also add a line or a paragraph on the lease asking if the prospective tenant is in the military or reserves; although this information can’t be used as proof in a court of law. You should also ask for the names and numbers of family members in the event of an emergency. This information can be used later as a means of helping identify the tenant and his military status.

Another option is to ask all tenants to sign a waiver saying they voluntarily give up their rights under the SCRA. This waiver can’t be attached to the lease, however, and tenants can’t be compelled to sign it as a condition of renting. The waiver must also stipulate it only applies to the lease. If the tenant does agree to sign, he must do it during or after his period of active duty. If it’s before, it’s unenforceable.

Verification

When a tenant stops paying rent and you have no information about his military status, you must find out before you place a lien on the unit or auction the property. For this endeavor, there are a number of paths to consider. Many turn to the Defense Manpower Data Center (DMDC), the government office in charge of curating information on U.S. Department of Defense personnel.

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