Lien Sales and the Military: What to Do When These Self-Storage Tenants Go Into Default
By Amy Campbell
Lien sales have increased exponentially for most self-storage operators over the past couple of years. While the economy has left many unable to keep up with their self-storage rent, the popularity of reality TV shows has others lining up to capitalize on their misfortune. Unfortunately, nearly every self-storage operator has come across a military tenant in default at one time or another.
As the law protects these tenants through the Servicemembers Civil Relief Act (SCRA), it’s vital self-storage owners not only understand SCRA, but follow it to the letter. Violating it will not only lead to bad press, but can also hit a self-storage operator where it counts—the bank account. Violations of SCRA can lead to civil lawsuits and even federal penalties.
The SCRA applies to servicemembers in every state and can be enforced by the U.S. attorney general in some instances. It also includes requirements directly aimed at self-storage operators. If you don’t understand it or just need a refresher, here are few articles from the ISS archives on the topic and avoiding wrongful-sale lawsuit in general:
- Military Risks for Self-Storage Facilities: Limitations and Waivers Under the Servicemembers Civil Relief Act
- Gay Marriage and the Servicemembers Civil Relief Act: A Self-Storage Operator's Obligations to Military Tenants
- Avoiding Wrongful-Sale Lawsuits in Self-Storage: Doing Lien Sales by the Law
Of course, no one wants to sell the belongings of a military person defending his country. Yet, self-storage is a business. Few operators like to have a unit that’s not producing rent. So what’s an operator to do? There are a number of threads on Self-Storage Talk on the topic. Most suggest operators do everything they can to locate the military person or even a family member. Even if past rent cannot be recouped, the military member’s belongings can sometimes be removed, enabling the self-storage operator to once again rent the space.
May of the threads also include links to military websites that enable you to look up the tenant’s name to see if the person is still active military. Once you have this information, posters suggest you send a Certified Letter to the tenant’s acting commander. Some operators have had success with this tactic.
U.S. courts take this topic very seriously so you should as well. In 2011, Bank of America and Morgan Stanly agreed to settle a $22 million federal civil suit for improperly foreclosing on military personnel.
The best course of action is to be proactive rather than reactive. While no operator wants to consider every rental could end up in default, it does happen. Think of it as the prenup in the self-storage industry. You hope the tenant-operator marriage is great, but you have a back up just in case things go south. Here’s a great article from the ISS archives on everything you should get from every tenant during the signing of the rental agreement.
If you do have qualms about selling a tenant’s unit—military or not—take a moment to consider the ramifications. Are you sure you’ve followed your state’s lien law? Have you tried everything you possibly can to contact the tenant and settle the debt? While the ultimate goal is to reclaim your space, your secondary goal should always be to stay on the right side of the law.
Ever had a military tenant go into default? How did you handle it? Share your thoughts by posting a comment below or on Self-Storage Talk.
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