Eventually, every self-storage operator will face it. Either a lock will be missing from a unit you know had one just a day or two ago, or you’ll try to reach a delinquent customer, calling and sending notices in vain, until you have no choice but to cut the lock to see what’s going on inside. In either case, you may open the door to find what appears to be trash: old newspapers, broken boxes and furniture, dirty tube socks, you name it—all bits of personal property you believe was left by the tenant. Without being able to reach the customer and determine if the goods have been relinquished for disposal, you’re left with the eternal question: Is this property abandoned?
I’ve spent a good bit of my legal career reminding storage operators that abandonment isn’t something to be taken lightly or declared with glee. It also isn’t a shortcut for handling units you don’t feel like selling through the lien process.
The problem begins with the word “abandon.” When used as a verb, it means to leave or give up with no intention of ever returning. But how do you know the tenant doesn’t intend to return and claim this property? You really don’t, though it may be easy to make assumptions based on the type or quality of contents left behind.
Some state self-storage statutes help determine what constitutes abandoned property by defining some sort of value. For example, the law may state that if the property is worth less than “X,” it’s unnecessary to go through the lien-sale process and it may be discarded. This type of statute is more rare than common, but either way, you’re then stuck deciding between the property’s value and the customer’s intent.
If you have any hope that the property will sell—even if it’s for less than what it costs you to conduct a lien sale—you’re better off selling it. Many statutes contain a provision stipulating that once you properly sell the property, your liability is greatly limited, often reduced to the sale price. It basically buys you an inexpensive insurance policy, reducing your claim exposure from $2,500 to $5,000 to the $5 or $10 the property wound up fetching at auction.
So, when can you declare property to be abandoned? There’s no definitive answer in most states. It basically has to be your professional opinion that if the sales process was followed, no one in his right mind would pay money to buy the unit contents. But even in states where the statute sets a multi-hundred-dollar limit for property “of value,” a lien sale is the smarter choice. Though you likely won’t make up the lost rent, or the time you spent working through the sale process, or the money you spend to conduct the sale, you also won’t regret having taken the abandonment shortcut if you’re faced with a wrongful-disposal lawsuit from the former tenant.
I always encourage self-storage operators to be extremely weary of abandonment claims because you always have another remedy. The lien sale often gives you additional protection if you spend the time and energy to go down that path.
In the Case of Records
Sometimes the items left in a unit make your course of action an easy call. Business records, such as those from a doctor’s office, law firm or accountant that contain clients’ personal information obviously can’t be sold at auction. In these cases, your only choice is destruction. The bad publicity from selling goods of this kind would be immeasurable, not to mention other damage you could inflict on your business and the people whose records are left behind.
For this type of scenario, most state statutes have a few extra words buried in the sale provisions that discuss “other disposition.” This term applies when you know there’s no legal way to sell goods without potentially destroying people’s lives and privacy. If you know good and well that no one should want this property except with nefarious intent, the records need to be destroyed. This is an abandonment that’s actually recognized by most state statutes, allowing you to dispose of the property rather than sell it.
Though the law may be different in each state, in general, the tenant-default notices you send should indicate you intend to “sell or dispose of” the personal property (e.g., the records) stored in the unit. When the time comes for the sale, you don’t advertise your intent to dispose. Instead, you proceed to have the records properly destroyed, generally by a shredding company.
Don’t treat the abandonment of records the same as you would used Kleenex or dirty tube socks. While the business owner could eventually come back looking for his records, it’s much less likely that he’ll have a valid claim against you if you followed your statute and properly disposed of the property, since it was your only option.
This column is for the purpose of providing general legal insight into the self-storage field and shouldn’t be substituted for the advice of your own attorney.
Jeffrey J. Greenberger is a partner in the Cincinnati law firm of Greenberger & Brewer LLP. Licensed to practice in Kentucky and Ohio, he focuses primarily on representing the owners and operators of commercial real estate, including self-storage. His website, selfstoragelegal.com, contains legal opinions and insights as well as an article archive. To reach him, call 513.698.9350; e-mail [email protected].