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New York Lawmakers Consider Ban on Self-Storage Lien Sales During COVID-19 Emergency, Operators Seek Solutions

Update 11/17/20 – While SB 9075 remains with the New York Legislature’s Senate Rules Committee, self-storage industry officials are urging customers at risk of delinquency to work directly with their facility operator on solutions that will satisfy both parties. “While we can’t guarantee any particular arrangement, we are seeing the majority of storage operators offer rent deferrals, payment plans and even abatement of amounts owed in exchange for vacating the storage unit,” NYSSA Chairman Jon Dario told the source.

Some tenants who are struggling to pay self-storage rent feel their special payment arrangements are still beyond their means. One customer, who asked to remain anonymous, told the source she agreed to pay her outstanding balance even though she knew it was unrealistic to keep up with the payments. “My second payment is due today; I can’t pay it,” she said. “I said to them, ‘I hate signing something that I know that I can’t uphold. I’m only signing it because I had no alternative.’”

Dario indicated it’s important for customers to communicate with their self-storage provider to come to an agreement on outstanding balances on a case-by-case basis. “First, do not ignore communications from your storage facility,” he said. “Second, reach out to the storage facility, explain your situation, and request some special arrangement.”


11/2/20 – The New York State Legislature will consider a new bill that would prevent self-storage operators from enforcing liens on delinquent accounts while the state is under its COVID-19 emergency order. Introduced last week, Senate Bill 9075, also known as the Pandemic Self-Storage Act, would remain in effect for one year after the state of emergency is lifted.

The legislation is intended to complement the Tenant Safe Harbor Act passed on May 27, which established a statewide moratorium on evictions for tenants who fall behind on rent payments during the pandemic, according to a press release issued by state senator Brad Hoylman, who’s sponsoring the bill with state representative Jeff Dinowitz. “Many New Yorkers have been hurting for months during COVID-19. There’s no clear end in sight to the pandemic and no guarantee of federal and state relief anytime soon,” Hoylman said. “Our Pandemic Self-Storage Act ensures struggling New Yorkers won’t lose their personal possessions located in self storage units by lien sales because they don’t have the money to keep up with storage fees.”

“During this time of unprecedented upheaval across all aspects of society, nobody should move forward with the seizure and sale of people’s personal property. Many New Yorkers are experiencing financial hardship during the pandemic, and it may be difficult for them to return to their storage unit to collect their belongings if they can no longer afford the fees,” Dinowitz said. “We need to implement a moratorium on liens and sales of these units until after people have been given ample opportunity to get back on their feet.”

The measure is opposed by the New York Self Storage Association (NYSSA) and national Self Storage Association (SSA). Officials described the bill as “far overreaching” and “completely unnecessary” in a Nov. 2 email newsletter to SSA members.

“Pandemic-related financial distress among our customer base was a concern at the onset of the COVID crisis, which is why the industry delayed lien processes during the first few months of the pandemic; but actually, the self-storage sector has not experienced dramatic variations in delinquencies,” said Tim Dietz, SSA president and CEO. “The associations look forward to working with the New York legislature to craft balanced legislation that protects self-storage customers experiencing COVID-related financial hardships without harming self-storage owners.”

The Self-Storage Pandemic Act is believed to be the first statewide measure introduced to curtail lien enforcement. In June, Los Angeles passed an ordinance requiring self-storage operators to suspend rent and late fees for tenants who demonstrate an inability to pay due to circumstances stemming from the coronavirus pandemic. Any postponement of payments will remain valid for three months after the local emergency is lifted by the mayor. Two other California cities, Livermore and Pasadena, have also tightened regulations on self-storage operators during the pandemic. Livermore banned self-storage lien sales, while Pasadena added self-storage to its eviction moratorium.

As introduced, the New York bill doesn’t require delinquent tenants to submit any documentation to request a stay, such as a loss of income due to a crisis-related workplace closure. It simply prohibits self-storage operators from enforcing a lien by holding a public or private auction during the “COVID-19 covered period,” which it defines as beginning on March 7.

“The rights of self-storage operators and their customers should be balanced. A blanket moratorium to solve a problem is never sound policy,” said self-storage attorney Scott Zucker, a founding partner in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber P.C. “Instead, one approach to this issue could be if the occupant notifies the operator and provides proof of actual COVID-related payment problems, then the lien sale can be stayed. Certainly, another approach could be that the tenant be given the right to redeem their property from the facility without payment, with the operator reserving their contractual rights for the eventual payment of the outstanding rent.

“Bottom line, if the concern is the fact that occupants truly want their property back, the occupants should be responsible for the effort to recover that property,” Zucker added. “When given the chance to recover their stored property, in many instances the occupants may simply choose to take some items and abandon the rest. At some point, the facility operator should have the right to take back its rented space and rent it to another customer.”

Jeffrey Greenberger, partner in the Cincinnati law firm of Greenberger & Brewer LLP, said the bill makes little legal sense considering there are numerous ways business entities can stop providing services to non-paying customers, such as failure to pay a cell-phone bill or keep up with car payments. “Let’s be frank about self-storage: Storage is a place you put your extra stuff. I know some people will say they put their stuff in storage because they are homeless, but due to the moratorium on evictions, I find that argument to apply to a very slim number of people right now,” Greenberger said. “The reality is people who cannot pay for storage are complaining because they cannot or choose not to pay rent for a place for their extra property. The solution is to give away their extra stuff if they cannot pay for it right now, not burden self-storage owners with holding it for free.”

SB 9075 is unnecessary because self-storage operators nationwide have largely taken steps during the health crisis to work with tenants who are unable to keep up with rental payments, including some offers of debt forgiveness if delinquent customers agree to clear out their units, according to Greenberger. “The reality is no storage owner wants to sell property because the time it takes to get the sale done, combined with the costs to send notices and advertise the sale, etc., are too high compared to what the sale achieves,” he said. “Every owner would rather get something from the tenant and get the space back to a rent-paying tenant than have it linger for two to four months before it can be sold for maybe $50.”

If passed, the measure may not live up to legal scrutiny. “The CDC [Centers for Disease Control and Prevention] moratorium on evictions is being challenged right now as an unconstitutional taking of property,” Greenberger said. “This proposed law, in my opinion, would fail that test immediately.”

The bill is currently with the Senate Rules Committee.

At the same time the legislature is set to discuss the moratorium on lien enforcement, New York City Council member Carlina Rivera is reportedly working on a measure that would limit the fees self-storage operators can charge during the pandemic. State representative Nydia Velázquez also recently called on Gov. Andrew Cuomo to impose a statewide moratorium on self-storage auctions.

Sources:
The City, New Gambit in NYC Self-Storage Wars: Some Owners Willing to Cut Struggling Customers Free as Demand Booms
New York State Senate, To Protect Personal Possessions During Pandemic, Senator Brad Hoylman and Assembly Member Jeff Dinowitz Introduce Legislation to Halt Storage Unit Auctions During COVID-19 Pandemic
New York State Senate, Senate Bill S9075
SSA Magazine Weekly 11/2/20, SSA, NYSSA Coordinate Response to Onerous Storage Legislation
The City, Lawmakers Bid to Halt Auctions of Self-Storage Customers’ Possessions During Pandemic

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