In a perfect world, all self-storage customers would pay their bills on time and in full. Unfortunately, no self-storage owner (that I know of) lives in this world. For a variety of reasons, self-storage tenants become late. I’d like to start this post by mentioning we are not lawyers here. We are people in the industry providing some guidance and advice, but we are not telling you how to run your self-storage facility. That being said, let’s get started.
The last thing any self-storage operator wants is a civil suit brought against them for sloppy or incomplete handling of delinquent tenants. Make sure to double check your state lien laws, follow them accordingly and keep a record of everything you do.
Each state has different laws that govern how you handle late customers. Check your state laws out for specifics in terms of dollar amounts, days, etc. For the most part, however, states dictate lien laws in similar ways. Because we need to pick a state, we are using Arizona as a guideline. Not in Arizona? (As 99% of you are not going to be… a simple Google search of your state + “storage lien laws” will give you several resources).
The Contract – Dot Your I’s
Before that customer ever sets a single personal item in a storage unit at your facility, make sure they have signed a contract that covers all necessary information as outlined by your state. Some states are more specific than others on what needs to be in the rental contract. The rental agreement in Arizona, for example, must advise the customer on the day rent is due, the date it becomes late, the amounts of the late fees, along with several other specific agreements between the self-storage operator and the tenant.
Sending notifications – Cross your T’s
Essentially, the tenant needs to be notified at least three times. Some states require two notices with the date and time of sale so be sure to double check your state to be certain. The important thing to take away from this is that you notify the tenant at least the minimum amount of times required. Have you only sent out two notices so far? Do not hold a sale. In Arizona, for example, you can email the first late notice, then send by first class mail specifics (at least 7 or more days after the original email), and then finally send by verified mail a letter with date and time of the public sale (this letter must go out at least 10 days before the public sale date).
Tip: Make sure to use the term “Public Sale” (or the term outlined in your lien laws) throughout all of your advertisements because “Auction” typically means with a licensed auctioneer.
Why this is significant: Within the last couple of years the medium of notification has changed. Electronic communication has become acceptable in most states and Certificate of Mail is now acceptable in at least 17 states (replacing the former, more expensive Certified Mail with return green card). Both of these new methods of approved communication mean savings for you. While it can be scary to change your process, especially if you’ve been handling delinquency the same way for quite some time, it can be financially responsible to do so.
Not sure what Certificate of Mail is?
Until recently, many states required that notifications be sent via Certified Mail. While it is important to meet state lien law requirements, notifications sent by Certified Mail are expensive, running up to $7 dollars per letter in some states. In the last year, however, several states have adopted verified mail or the Certificate of Mail as an approved method of mailing letters. Each legislative period, more states are signing bills that allow for this type of notification.
According to the United States Postal Service, a Certificate of Mailing provides evidence that mail has been presented to the USPS for mailing. The certificate of mailing quantifies the number of letters mailed on that specific date. The price of a letter sent by Certificate of Mail runs significantly less than Certified Mail at around approx. $1.60 per letter.
Advertising
Each state requires different forms of advertising to occur prior to sale (if they require advertising at all). Many states require advertisement of the sale in a newspaper of “substantial circulation” in the area where the self- storage facility is located. They must be published at least two different times within a period of at least ten or more days. What does this mean? If you only have the chance to run one ad, do not hold the sale.
Read Here: Since 2011, many states have abolished the newspaper-publishing requirement surrounding lien sales. Find out if your state is one of them that no longer requires ads if so, you could be in for significant savings.
What to Take From This:
After working with many affiliates throughout the U.S. and Canada, it is always surprising how many of them don’t have written rules regarding their delinquency policy. If you take one thing from this article it should be to reread your latest lien laws. Make sure you are following the rules dictated by your state. Look into whether electronic communication (e-mail) and Certificate of Mail are legal, and check to see if you still need to advertise in a newspaper.