It’s not uncommon for a self-storage operator to open a delinquent or abandoned unit and discover the tenant has left behind boxes of business files. To properly foreclose on the unit, you must proceed under the state’s applicable self-storage law. Follow this advice to legally and correctly dispose of the records and reclaim your space. We’ll first address the issue of delinquent units, then abandoned units.
Dealing with business files found in delinquent storage units is completely different from a scenario in which an individual tenant has stored his own personal files in a storage space. Storage operators have no specific duty to private customers who assume the risk of loss to their own files. Those units are subject to sale and, if not purchased, public disposal. Again, when a tenant puts his own property at risk, the operator has no obligation to treat those unit contents any differently than other personal property.
The significant issue is when the tenant is a business storing records for its customers or a licensed professional (accountant, doctor, insurance agent, lawyer, mortgage broker, etc.) storing client or patient files. These are considered third-party records. It’s in these situations that you must be ready to handle the files differently from those found in a typical delinquent unit.
The concern about third-party records has been addressed via changes to some state self-storage laws over the last few years. For example, in Arizona and Nevada, operators are now required to include a provision in their rental agreements whereby tenants disclose if they’re storing any “protected property,” which is defined as “documents, film or electronic data that contain personal information, such as Social Security numbers, credit or debit card information, bank-account information, passport information, and medical and legal records relating to clients, customers, patients or others in connection with an occupant’s business.”
Pursuant to these state laws, if a tenant indicates that such items are being stored and he later falls into default, the operator must do several things before going to lien sale. First, he must contact the tenant in an effort to return the property. Next, he must reach out to any additional contacts listed in the rental agreement. If he can’t reach those people, the operator can contact “any appropriate state or federal authorities, including, without limitation, any appropriate governmental agency, board or commission listed by the occupant in the rental agreement … ascertaining whether such authorities will accept the protected property and, if such authorities will accept the protected property, ensuring that the protected property is delivered to such authorities.”
Only after those efforts are taken without result is the operator then permitted to destroy the protected property, “in an appropriate manner which is authorized by law and which ensures that any confidential information contained in the protected property is completely obliterated and may not be examined or accessed by the public.”
Using these laws as a strong guideline for any third-party records in an abandoned storage unit, operators are encouraged to use the same basic steps listed above. First, do everything possible to locate the tenant or his emergency or alternate contacts to simply return the records. Next, contact state or federal agencies for assistance. Finally, have the documents shredded or otherwise “obliterated” so they don’t fall into the hands of any parties who might wrongfully use the information.
Certainly, this removes the option of simply dumping the files. They must be destroyed by legal means. The reason shredding is commonly suggested (other than the fact that it obliterates the records) is the storage operator can secure a receipt or some “proof” that he has turned over the records to a reputable vendor to manage the destruction. He’s then released from possible liability if the vendor fails to properly dispose of the documents.
There are even states that address the issue of abandoned third-party records by profession. The law in North Carolina specifically provides that if a lawyer improperly abandons his client’s files, the self-storage operator must first contact the North Carolina State Bar before the records are destroyed. Under this law, the state bar can directly take possession of the records without a court order. This approach would be consistent with the same one referenced in the Arizona and Nevada laws in which the operator is required to contact state agencies for assistance.
Whereas the state bar is the proper agency for lawyers, you can contact your state medical board for medical records and the state board of accountancy for accounting records. As is likely true in most states, if your defaulting tenant is licensed by the state, you can go to that licensing board for help. If the tenant is one of their professional licensees, they have the right to potentially revoke the business license for failing to protect and maintain customer information.
Each delinquent or abandoned unit offers its own story and set of challenges. Finding business records in the space is just one situation in which you must move carefully through the notification and disposal process in lieu of sale. Although the property can’t ultimately be sold, proceed through the lien-sale process and provide all notices required by statute before the records are removed or destroyed. Only after the tenant or any governmental agency fails to reclaim the property can the records be demolished.
Scott Zucker is a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta, where he specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He’s a speaker at industry events, author of “Legal Topics in Self Storage: A Sourcebook for Owners and Managers,” and a partner in the Self Storage Legal Network, a subscription-based legal service for storage owners and managers. To reach him, call 404.364.4626; e-mail [email protected]; visit www.wzlegal.com.