By Anita Byer and Martin Salcedo
Owners and operators of self-storage facilities understand delinquent and defaulting tenants are part of the business. When collecting money from overdue tenants, they might turn to their state lien laws for guidance to ensure they follow legal procedures for collections and eviction. However, when it comes to tenants who are in the military, operators need to tread even more carefully and follow the Servicemembers Civil Relief Act (SCRA).
The SCRA is a federal law designed to provide for, strengthen, and expedite the national defense by temporarily suspending various judicial and administrative proceedings that may adversely affect the civil rights of servicemembers during their military service. This sought-after protection is generally obtained by giving servicemembers additional benefits and safeguards during their military service than those enjoyed by non-servicemembers.
In addition to dealing with default judgments, the SCRA applies to a wide variety of commercial situations, such as evictions, installment contracts, mortgages, residential and motor vehicle leases, and telephone-service contracts. In some cases, the SCRA applies to a servicemembers dependents.
So, why should self-storage owners and operators be particularly concerned about the SCRA? Consider the following:
- The SCRA applies to servicemembers in every state and can be enforced by the U.S. attorney general in some instances.
- Violations of the SCRA may lead to imprisonment, injunctions and liability for civil money penalties, monetary damages, costs and attorneys fees.
- The SCRA includes requirements that are aimed directly at self-storage facilities.
Enforcement of Storage Liens
The SCRA affects how a storage lien may be enforced against a servicemember. Before reading the actual statute, however, its necessary to understand the following definitions.
- "Servicemember" means a member of the armed forces, as well as members of the commissioned corps of the National Oceanic and Atmospheric Administration (NOAA) and the commissioned corps of the Public Health Service.
- "Military Service" means active duty in the Army, Navy, Air Force, Marine Corps or Coast Guard; qualifying active service authorizations of the National Guard for a period of more than 30 consecutive days; qualifying active service with NOAA or the Public Health Service; and any period during which a servicemember is absent from duty on account of sickness, wounds, leave or other lawful cause. Note that members of a reserve component ordered to report for military service, and individuals ordered to report for induction under the Military Selective Service Act, are entitled to limited protection under the SCRA from the date their order is received until they report for military service or induction.
- "Period of military service" starts on the date a servicemember enters military service and ends on the date the servicemember is released from military service or dies while in military service.
- "Lien" is defined broadly to include a lien for storage, repair or cleaning of the property or effects of a servicemember, or a lien on such property or effects for any other reason.
Under the SCRA, a person holding a lien on the property or effects of a servicemember may not, during any period of military service of the servicemember and for 90 days thereafter, foreclose or enforce any lien on such property or effects without a court order granted before foreclosure or enforcement.
Simply stated, the SCRA requires a lawsuit and an order from the court before a lien can be enforced against a servicemember. Importantly, this requirement extends 90 days beyond the servicemembers period of military service.
Additionally, in a proceeding to foreclose or enforce a storage lien under the SCRA, the court may on its own motion, and shall if requested by a servicemember whose ability to comply with the obligation resulting in the proceeding is materially affected by military service: (1) stay the proceeding for a period of time as justice and equity require; or (2) adjust the obligation to preserve the interests of all parties.
While the intent of this provision is clear, the result may not be. Since the SCRA grants the court broad discretion to either delay the lawsuit or preserve the interests of all the parties, including the servicemember, its possible a self-storage operator will not obtain the desired relief.
Differences From State Lien Statutes
What makes the SCRAs provisions significant is not how they restrict the enforcement of storage liens, but how they differ from some states statutory mechanism. In Florida, for example, the first step requires the tenant to receive written notice by personal delivery or Certified Mail to the tenants last known address. This notice, which must also be posted conspicuously at the self-storage facility or on the unit, must include:
- An itemized statement of the owner's claim, showing the sum due at the time of the notice and the date when the sum became due
- The same description, or a reasonably similar description, of the personal property as provided in the rental agreement
- A demand for payment within a specified time that is not less than 14 days after delivery of the notice
- A conspicuous statement that, unless the claim is timely paid, the personal property will be advertised for sale or other disposition and will be sold or otherwise disposed of at a specified time and place
- The name, street address and telephone number of the owner whom the tenant may contact to respond to the notice.
The second step requires an advertisement of sale be published once a week for two consecutive weeks in a local newspaper of general circulation. If no such newspaper exists locally, the advertisement must be conspicuously posted in at least three places in the same neighborhood as the self-storage facility for at least 10 days before the sale. Such advertising or posting cannot start until after expiration of the time given in the notice, which cannot be less than 14 days.
The advertisement must include:
- A brief and general description of what is believed to constitute the personal property contained in the storage unit, as provided in the rental agreement
- The name of the tenant and the address of the self-service storage facility where the unit is located
- The time, place, and manner of sale or other disposition, which cannot occur sooner than 15 days after the first publication.
Note the contrast between the SCRAs need for court approval and Floridas quasi-self-help mechanism. The difference is substantial.
Waiver of Rights
A servicemember may agree to waive any of the rights and protections afforded by the SCRA. To be valid, a waiver of rights that applies to the repossession, retention, foreclosure, sale, forfeiture or taking possession of property that is security for any obligation must meet the following requirements:
- The waiver must be in writing.
- The waiver must be executed as an instrument separate from the obligation or liability to which it applies. Since this requirement doesnt allow the waiver to be included within the lease or any other rental agreement, the waiver of rights should be made a separate, stand-alone document.
- The waiver must be executed during or after the servicemembers period of military service. Requiring a servicemember to add his serial number, or other military designation number, to the waiver may serve as preliminary confirmation that this requirement has been satisfied.
- The written waiver must specify the legal instrument to which the waiver applies, such as the rental or lease agreement, and if the servicemember is not a party to that instrument, he must also be specified.
- The written waiver must be in at least 12-point type.
Given the limitations posed by the SCRA, its beneficial to obtain a waiver of rights from a servicemember. However, care must be taken to ensure the waiver not only satisfies all of the SCRAs requirements, but its properly drafted to permit a self-storage facility to take prompt and appropriate action against a defaulting servicemember. Consequently, its advisable to seek the assistance of experienced counsel.
For many owners and operators of self-storage facilities, the decision to obtain a waiver of rights from servicemembers is an easy one, especially considering the manner in which the SCRA limits collection options. For those failing or refusing to obtain a proper waiver, the need to abide by the SCRA is underscored by the penalties awaiting violators.
Regardless of the chosen course of action, self-storage operators should respect the intent of the SCRA, which is to protect servicemembers who are unable to defend against a claim because theyre occupied elsewhere in service of their country.
Anita Byer is president and CEO, and Martin Salcedo is general counsel and self-storage risk management group member of Setnor Byer Insurance & Risk. Headquartered in Plantation, Fla., the company is an independent insurance agency dedicated to developing comprehensive insurance and risk-management solutions for clients throughout the United States. For more information, call 888.253.8498; visit www.setnorbyer.com.