You probably don’t want to be in the business of selling people’s property—otherwise, why would you be in self storage?
That said, it’s almost inevitable that you’re going to have to get involved with auctions and understand your state’s self storage lien laws at some point.
At the end of the day, there will be people who don't pay, or people who abandon their unit entirely. There are different schools of thought on how to handle this, but the end game is to resolve the delinquency and open the storage unit for a paying tenant to move in.
While you're bound to encounter this one day, there are a number of ways to reduce the chances of reaching that point, and there are also ways to make the whole process easier on you if it gets that far.
The first step to making the lien process and storage auctions easier to handle is keeping it from happening in the first place.
If you’ve tried everything and the lien sale is inevitable, don’t worry—we’ve got advice on that in a bit.
First, let’s look at ways we can keep tenants from reaching the point of auction.
In a perfect world, all of your tenants would pay on time. You’d never have to worry about lien laws and auctions, and all of your time and effort could be devoted to more pleasant aspects of the business.
The reality, of course, is that this doesn’t always happen. Very often, you’ll end up with at least a few tenants paying late or not paying at all.
Here are three ways you can help reduce how often you need to initiate the self storage lien process:
Have you ever had a bill and no idea when it was due?
The biggest reason for unclear due dates is a misunderstanding of whether the payment is due a month from the start of service or on a set date each month.
The best way to keep this from becoming an issue for your self storage tenants is to set these expectations right at the start.
Don’t just expect your explanation in the rental agreement they signed to be enough notice, either. Sure, that may be enough legally, but the vast majority of people will not read all of the information in their agreement.
If your goal is to reduce confusion and late payments, then deliver that information in another way alongside the rental agreement. This could be in a welcome package, texted, or even emailed to them.
Make sure the information is clearly expressed regardless of your delivery method!
These days, we’re all suffering from ridiculously busy schedules.
The fact of the matter is that many people who aren’t on autopay simply forget to make a payment because they’ve got so much else going on.
Reduce your number of late payments—and help out your self storage tenants, leading to a better customer experience—by sending payment reminders!
The best part is that these reminders can be automated.
There are different services that allow you to automate payment reminders, but the likelihood is that you’re already using some self storage software that accomplishes this task: your self storage PMS.
You can make these reminders especially effective by choosing to set up text reminders. Text reminders have a 98% open rate, and this means that people are less likely to forget about their payment!
Be honest: How many times have you received a late notice and immediately completed the task the notice was for?
Late notices light a fire under us.
Through some combination of reminding us (and maybe making us feel a bit of shame!), they are extremely effective at getting us to do what we were supposed to do days ago.
This works on the same principle as payment reminders—sometimes, people just need a reminder that they were supposed to pay.
Simply sending these reminders, which are easy to automate with self storage software, you can significantly reduce how often you need to worry about self storage lien laws and storage auctions.
You can't always avoid initiating the storage lien process.
Eventually, you're going to run into a tenant that won't pay, or a tenant who stops communication altogether. When this occurs, you should check on thing before you begin the process of lien enforcement.
You should verify if the tenant if an active duty military member.
Tenants who are deployed may not be able to pay for their storage unit or contact you to let you know. In this event, you cannot evict them without a court order.
Active duty military members are protected by SCRA (Servicemembers Civil Relief Act), preventing storage operators from selling their items if default occurs. If you want to pursue an eviction, you will have to get an approved court order.
You can find out if your tenant is on active duty by asking them on the rental agreement, checking the USA.gov website, requesting a record from SCRA, or by paying a company for this service.
If you sell a military member's unit without court approval, you could face severe consequences, including paying thousands in damages or civil penalties.
No matter the reason for the tenant's inability to pay, it's extremely important to follow your state's laws and regulations before initiating the lien process.
There are few steps that will need to take place before lien enforcement begins:
After you've exhausted those avenues, what do you do?
Your business's individual processes should both adhere to all relevant laws and work for you and your market. Each state has it's own set of lien laws. Those are ultimately your "minimum requirements".
Lien laws vary state by state, but most of them follow a similar process.
The majority of states require a notification to the tenant that the lien will be enforced if their dues are not paid. These notifications should be sent by verified mail, but some states do allow email.
On top of the notification, most states have a waiting period before an auction or disposal can take place. For many states, the wait period is at least 30 days. However, there are a few states with a waiting period as long as 90 days.
During this period, you can continue to send out notifications in hopes that the tenant will pay their dues and avoid an auction. If your tenant wants to abandon their storage unit entirely, you could even propose an abandonment agreement.
This agreement allows you to dispose of the items however you see fit without going through a proper auction. It's an easier and often less complicated way to get your unit back.
While that does means you won't make any money off the sale, you'll get your unit back faster and with less effort. Most storage unit auctions don't make operators much money anyways, so many opt to forgo the process when they can.
You can create a lien process that is more lenient for the tenant than the law requires, but you need to provide, at minimum, what your state's lien laws demand.
For example, storage lien laws in Tennessee state that you cannot auction a tenant's unit any sooner than 60 days after default. You can choose to give your tenant more than 60 days, but you cannot start the auction before that legally-established minimum.
Also, make sure your lien processes are outlined in your rental agreement and follow them as outlined!
Pug Pro Tip: You should never rely on advice from the internet or other unlicensed sources of information regarding lien laws. Always consult an attorney and/or your state self storage association to stay in compliance with state laws!
So, how do you make it easier for yourself to follow the lien process through to the end?
Two words: Utilize technology.
There are all kinds of ways that software can help you manage these processes and stay compliant with all applicable self storage lien laws, even if you don't use any of the very few self storage lien software programs:
The list goes on, but these are three key ways that properly-utilized self storage software can make your life easier.
For example, SiteLink sends its users reminders for each step of the lien process. Even though much of the process is physical and can’t be handled automatically—such as overlocking units, listing them for auction, and so on—the property management software reminds you to do what you need to!
These settings are often set to a default in the software for the timing of each step, but you should be able to edit the settings to customize it for your own business as needed.
So, you’ve made it as far as auctioning off the storage unit.
Your state laws will define exactly what the entire auction process looks like, from announcements to the platform.
Once upon a time, in-person auctions were a common part of the self storage industry. These days, online self storage auctions—on sites such as StorageAuctions.com or StorageTreasures—are increasingly the chosen route for self storage owners and operators. With some property management systems, you can even automate your online self storage auctions!
StorageTreasures reported 17,000 online auctions in 2013. By 2023, that number increased to 950,000 auctions.
Many states have even gone out of their way to list online auctions as legal ways to auction a self storage unit.
When it comes to using online auctions, the process will be very similar to live auctions: follow all state laws regarding notice, ads, and other requirements. You should also keep a record of the sale for future reference.
For the location of the auction, you would direct bidders to the online auction site of your choice instead of a physical address. On the website, you can include a picture of the storage unit along with a brief description of what you think is in it (furniture, clothing, etc).
Once the auction is complete, you can inspect the storage unit for any leftover items, get it cleaned up, and have it ready to rent again!
While nobody wants to auction a tenant's unit, sometime's it's unavoidable.
Self storage lien laws are complicated, and you open yourself up to a lot of liability if you don’t follow them to the letter.
By taking steps to reduce delinquencies, you can reduce how often you are forced to recover overdue rent via auction. With the average online auction recovering just barely half of the overdue rent, there’s no doubt that taking every measure to avoid that outcome is the best plan of action for self storage owners.
Whether it's automating payment reminders and late notices, or digital record keeping - there is software that can help. However, when all else fails and it's time to auction, double-check your state laws to ensure that you're following the process the legal way. The last thing you need during an auction is legal trouble!
Check out these other great posts for advice on running your self storage business!
At StoragePug, we build self storage websites that make it easy for new customers to find you and easy for them to rent from you.
