Self-storage operators have great power when it comes to reclaiming their space from customers in lien. But this also comes with great responsibility. Consider the following advice to avoid a wrongful sale.

Murphy Klasing

March 26, 2022

7 Min Read

We’ve all heard the adage, “With great power comes great responsibility.” Heck, they even used it in a “Spiderman” movie. It’s simple, yet profound, and applies in numerous contexts—including self-storage lien sales.

Recently, an independent self-storage owner called me in a panic. He’d had two units in lien status, one right next to the other, and on auction day, the facility manager accidentally sold the wrong one. Of course they didn’t realize their mistake until three days later, when the owner of the sold unit paid her rent in full, only to find that “all her stuff was missing.”

The owner wanted to know what they should do. Luckily, I had just invented time travel, so we went back in time and fixed the entire mess! Actually, the owner attempted to reach the person who won the auction, but the items were already long gone. And sadly, those items had belonged to the tenant’s dead grandmother. They weren’t worth much in terms of money, but they were treasured because of the memories they carried. Of course, the sale wasn’t intentional or malicious, but the law has another word for it: negligent.

As a self-storage operator, you’ve been given a great power by your state legislature. Under the right circumstances, you can seize a tenant’s personal items, sell them at auction and collect the proceeds against rent owed to you. You have this power without the intervention of a court or a judge. While police must obtain warrants to even search a person’s home—and then they can only confiscate evidence, if there is any—you can grab and sell it all!

But with that power comes legal responsibility. That’s why, if a self-storage lien sale is handled incorrectly, a tenant may be able to obtain significant damages before a judge or jury. In fact, many states have laws that allow a tenant to receive not only damages, but possibly punitive or treble damages, which means the court could triple the amount of compensation awarded. The following guidance will help you avoid this fate.

Know Your Statute and Have a Checklist

Every state has slightly different self-storage auction requirements. The number of days before sale, the method and frequency of publication, the contents of a notice letter, and the ability of a tenant to redeem property even on the day of the sale all vary. If you don’t have a solid grasp of the law or are even a bit unsure about how it should work, hire a lawyer to review the statutes and ask them to develop a lien-sale checklist for you.

This list should include each lien-sale requirement and the number of days before it’s triggered. Keep track of each event by writing in the date and initialing. If handled correctly, this method yields two benefits: You won’t miss anything, and you can be confident you’ve handled the process correctly; plus, it makes a great trial exhibit to show the jury you did everything “by the book.”

Don’t Cut Corners

To take advantage of this incredible legal privilege in self-storage, you must do it correctly. There’s no room for error. So, if you ever think to yourself, “This is not exactly right but seems close enough,” stop the lien-sale process.

Some states require that notice of the sale be sent to the tenant by Certified Mail. Bulk mail, email, regular mail and FedEx are all close but not exactly right. Follow the statute. Some states have specific requirements for the contents of the notice letter. Again, follow the statute. Some states require a signed lease agreement. If you don’t have one or lost it, go through the eviction process, not an auction. Any cut corner provides an opening for a tenant’s attorney to drive his truck right through to the damage award.

Go The Extra Mile

Juries and some judges are uncomfortable with this power self-storage companies have. Even if a sale is handled correctly, some are looking for a reason to help the tenant once they learn all of that person’s stuff has been sold at auction over a few dollars in rent. To give a little more comfort to those decision-makers, it isn’t a bad idea to do a little extra.

For example, you might not be required in your state to call the alternate contact on the self-storage tenant’s lease, but do it anyway and make note of it. You may only have to send the notice letter via Certified Mail, but if you have an email address, send it that way as well and keep a record that you did. You may only have to call one or three times. Call five instead. It’s a good argument to a jury that you did everything exactly right. It’s a better argument that you went over and above the call of duty.

Make Ledger Notes

It’s vital that you have a system for recording notes for each self-storage tenant and unit. Most facility-management software allows for this. When attempting to communicate with a delinquent customer, keep notes of every call and all events that occur. If your software prohibits anyone from changing or deleting these notes, that’s even better because it shows the system has integrity.

Make sure your facility staff are trained to state factual representations in the notes, not personal opinions. Here are some examples:

  • Good: “01/31/22: Made call to tenant at 321.456.7890 and left message about upcoming auction on 02/15/22.”

  • Bad: “01/31/22: Made call to tenant. Tenant answered and was a real jerk.”

Juries will have a lot more faith in the written notes of events taken at the time they occur than a witnesses’ oral representation of a memory of what occurred. It’s just human nature.

Use Witnesses

In Biblical times, a person could be convicted of a crime on the testimony of two independent eyewitnesses. The two-witness approach is simple psychology. He-said/she-said testimony is hard to figure out; but if two people are on the same page, that’s credible.

To avoid facing a wrongful-sale lawsuit, have at least two witnesses present when you cut a lock on a delinquent self-storage unit and perform the inventory. Have one person sign off on the inventory list, and a second person double-check your lien-sale checklist and verify that everything on it has been done. Also, have two people present at the auction to confirm it was handled properly. It makes a much more airtight case if multiple people can corroborate the events.

Be Willing to Compromise

Finally, there may be lien-sale situations in which you notice red flags, or you just feel in your gut that something is off. Maybe a self-storage tenant has been with you for 10 years and never been late, then all a sudden stops paying. It might be worth a call to one of their family members before you jump to auction. Perhaps a tenant is willing to sign a release of the unit, allowing you to sell it without notice and publication. Speak to an attorney about whether that’ll work in your state. Maybe a tenant is willing to allow the auction but would like to get their family photos from the space.

There are many situations in which it makes sense to compromise, even if it isn’t required under the self-storage lien law. Sometimes it’s just the right thing to do. By doing so, you might avoid a claim of wrongful sale and leave the tenant feeling they were treated fairly.

Murphy Klasing is a partner with Weycer, Kaplan, Pulaski & Zuber P.C. He has a wide range of appellate, arbitration and trial experience, successfully handling numerous litigation matters. With more than a decade of experience in the self-storage industry, he serves as counsel for Public Storage Inc. in Oklahoma and Texas, and has defended matters involving allegations of breach of contract, code violations, employment issues, fraud, negligence, personal injury, premises liability and theft. To reach him, call 713.961.9045; email [email protected].

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