An informal arrangement between a self-storage operator and a tenant has led to lost revenue and locked self-storage units.
Last April, Mark Rekucki, president of Clifton Park Self Storage in Clifton Park, N.Y., agreed to allow McGinn, Smith & Co. store business records in 11 self-storage units. The company’s president, David Smith, was a longtime customer of the facility. In addition, Rekucki was working with the company potentially leasing space at one of his other properties.
Storage for April was free while the company hunted for a new office. If storage was still needed at the end of April, a representative from McGinn Smith was expected to sign a lease and begin paying the $145 unit rental for each of the 10-by-13-foot storage units.
However, the brokerage firm was raided around April 20, and federal agents took control of the storage units and all contents. The U.S. Securities and Exchange Commission then obtained a court order freezing McGinn Smith's assets and filed a civil complaint accusing the firm of defrauding investors of tens of millions of dollars through sales of unregistered securities.
The records were consolidated into nine units at Clifton Park Self Storage, but no one is paying the rental fee—which equates to roughly more than $5,000, according to Reducki. The self-storage operator hesitates to lock the government out of the unit—as he would normally do with a tenant who doesn’t pay—nor can he proceed with a lien sale.
Reducki has spoken with the lawyer handling the complex case for the government. The lawyer is reviewing the case, but says it’s complicated because the storage was offered rent-free and no contract was signed.