It’s a reality in the self-storage industry that customers will sometimes simply abandon their property. Such an abandonment can take many forms. If a tenant is unable or unwilling to pay his bill, he might:
- Remove what he wants from the unit and leave the rest behind
- Forego any recovery of the property
- Sign an abandonment and release of his rights to the property in lieu of going to lien sale
In each of these situations, the facility operator is left holding the bag, responsible for managing the proper disposal of the abandoned property. Here are some procedures you should follow to prevent this from happening, or if it does, to legally empty the unit.
One way to deter tenants from leaving property behind is to assess a cleaning deposit during the rental process. The amount can be as much one month’s rent, which can only be recovered if the tenant cleans out his space at the end of the lease. Surprisingly, a deposit has a high level of success in motivating tenants not to only clean out their units but to properly notify the operator of their intended departure.
It’s important to address the possibility of an abandonment in your facility’s rental agreement. Although some tenants will tell you they’re abandoning the property, many don’t, so it’s important to have a fallback. Your lease should include some type of language to address the issue of abandonment and what will happen, such as:
This agreement shall automatically terminate if the occupant abandons the space. The occupant shall be deemed to have abandoned the space if the occupant has removed the contents of the space and/or has removed the occupant’s locking device from the space and is not current in all obligations hereunder. Abandonment shall allow the owner to remove all contents of the space for disposal. Occupant hereby waives and releases any claims or actions against owner for disposal of personal property resulting from occupant’s abandonment.
The issue of tenant abandonment is of such importance that many state statutes are getting into the act of addressing the situation as part of the operator’s statutory rights. For example, Massachusetts provides for the following:
Pursuant to Section 105R:9, in the case of an abandoned storage space, the operator shall have the right to take possession of the storage space after 14 days and dispose of any personal property in the storage space by any means so long as the operator has attempted to contact the occupant on two separate days, at least three days apart or, if unsuccessful, has attempted to contact the secondary or emergency contact, if one was provided, to discern whether the storage space is abandoned.
The Maine statute also provides a remedy:
“Abandoned lease space" means a leased space that the operator finds unlocked and empty or unlocked and containing personal property with a value less than $750, or a leased space possession of and all rights to which and any personal property within which have been surrendered to the operator by the occupant.
How to Proceed?
Unfortunately, without a clear written notice from a tenant or statutory permission, you can be left in a quandary when you find a unit for which payment hasn’t been made and in which some property remains. Can you dispose of the goods? Should you initiate the lien process? Are the remnants just “junk”? This becomes a business challenge.
Whenever there’s uncertainty about whether a unit’s contents have been abandoned, the simple answer is to proceed with statutory remedy to sell the contents via your lien rights. But when you discover property in the unit that has no perceived value, such as empty boxes or bags of garbage, it’s often appropriate to simply dispose of the trash. If you choose to take this option, you must photograph the unit and create an inventory of the items to avoid later claims that the unit was filled with valuable goods.
The complication of dealing with business files found in storage units is completely different from the scenario in which an individual tenant has stored his own personal files and gone into default. You have no specific duty to individual tenants who assume the risk of loss to their own files when their unit goes into lien.
However, the rules are different when the tenant is a business storing records—commonly referred to as third-party records—on behalf of its customers, patients and clients. It’s in these situations that you must be ready to handle the property differently from a typical delinquent unit.
The concern about third-party records has been addressed over the last few years in legislative changes. For example, in Arizona and Nevada, it’s now required that self-storage operators include in their rental agreements a provision whereby tenants disclose if they’re storing any “protected property.” This is defined as “Documents, film or electronic data that contain personal information, such as Social Security numbers, credit or debit card information, bank-account information, passport information, and medical and legal records relating to clients, customers, patients or others in connection with an occupant’s business.” Arkansas joined the list of states to address abandoned business records this year.
Pursuant to these state laws, if the tenant indicates that such items are being stored and later defaults, you are first required to contact the tenant in an effort to return the property before moving to lien sale. Next, you should reach out to any additional contacts in the rental agreement.
Finally, you should contact “any appropriate state or federal authorities including, without limitation, any appropriate governmental agency, board or commission listed by the occupant in the rental agreement … ascertaining whether such authorities will accept the protected property and, if such authorities will accept the protected property, ensuring that the protected property is delivered to such authorities.” Only after these efforts are taken without result are you permitted to destroy the protected property “in an appropriate manner which is authorized by law and ensures that any confidential information contained in the protected property is completely obliterated and may not be examined or accessed by the public.”
There are even some states that address the issue of abandoned third-party records by industry. In North Carolina, the law specifically provides that if a lawyer improperly abandons his clients’ files, you must first contact the state bar before destroying them. Under this law, the state can directly take possession of the records without a court order.
It’s important for self-storage operators to review their rental agreements and state laws to address their responsibilities when dealing with abandoned property, especially third-party business records. At the end of the day, it’s always better not to assume a tenant abandonment, and instead treat such situations as tenant defaults that result in the enforcement of your statutory remedies.
Scott Zucker is a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta, which specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. Zucker is a frequent speaker at self-storage industry events, author of “Legal Topics in Self-storage: A Sourcebook for Owners and Managers,” and a partner in the Self-storage Legal Network, a subscription-based legal service for storage owners and managers. For more information, call 404.364.4626; e-mail [email protected]; visit www.wzlegal.com.