What you need to know if you're running an unpaid storage auction (2023)

Holding an on-site or online auction when a storage tenant hasn't paid rent for a period of time isn't new, but addictive TV shows.mStorage Warsto havehe paid more attention to practice than ever before. In this series, and similar series, people try to take ownership of the contents of an unpaid storage space, without knowing what objects are in it (to date, theStorage Wars biggest paydaywent to a man who spent only $3,600 on the contents of a unit and discovered it contained an entire series of paintings by artist Frank Gutierrez, worth about $300,000). What do you need to know if you run an unpaid storage auction? In this blog, we look at how storage auctions work, laws and regulations governing storage auctions, and more.

Auction of unpaid storage units

Storage auctions look great on TV, but for storage owners and operators, they're usually a last resort after a tenant ignores payment requests or simply "disappears." When can a storage unit be auctioned? At some point, the self-storage company has the right to sell the contents of the unit at public auction to the highest bidder. Otherwise, they're just housing someone's stuff for free (and losing the space to re-rent to someone else).

Of course, there are specific laws in each state regarding the sale of the contents of storage drives (called retention laws and they vary from state to state). This can include notification requirements, ad placements, the actual process and regulations during the auction, and more. It is important to understand the self-storage laws and follow the requirements and procedures closely to avoid any legal complications. Having a detailed, written set of auction rules for storage units protects you from potential lawsuits in two main ways:

• It prevents former tenants whose property has been sold from claiming that you did not follow proper retention procedures.
• Prevents lawsuits from buyers who claim your auction was unfair or handled improperly.

When can a storage unit be auctioned?

Holding an auction is sometimes the only legal way for a self-storage facility to remove a delinquent tenant's property from a storage facility. When can you actually hold an auction? In most states, tenants have 30 to 90 days to pay in full to avoid auctioning their apartment. Tenants of the storage unit must usually receive a pre-notice prior to an auction letting them know that their unit has passed due to the auction (be sure to have proof of postage via certificate of mailing or certified mail). This notification should also include the details of when the unit acquired the status of 'liable bond'.

If the tenant still doesn't pay or can't arrange to pay, the facility must send a final notice giving the tenant another chance to pay the rent owed and late fees, followed by a lien notice (again, use a certified mail or certified mail correspondence to cover yourself). The lien sale notice should usually include the following:

• Detailed statement of the financial requirement of the storage facility
• Description of the property within the unit (if any)
• Demand payment within a certain time
• A statement that the property will be sold at public auction if the defaulting tenant does not pay
• Details of the auction, including date, time, website or website location

If the tenant still does not comply, the facility may advertise and publicize the sale at auction. You may be wondering, can I just email the delinquent tenants? Some states allow notices to be sent by email, while others require physical mail. In addition, some states require that lien notices be sent to both the tenant and an alternate contact at another mailing address in the event there is a problem with delivery.

Laws and Regulations for On-Site and Online Auctions

So how do you keep your nose clean? While individual state laws vary, here's an overview of what to do and expect before, during, and after your unpaid storage unit auction.

Before the self storage unit auction starts

Before the unpaid storage auction starts, you need to set the rules and all disclaimers to avoid legal problems later. A few things you'll want to specify:

• If bidders can only bid on the entire section content or individual items in a section.
• Payment procedures, minimum bids, sales tax rules and the period allowed for content clearance.
• Whether bidders can inspect the unit or simply view the contents through the door if the auction is being held on site.

Make sure each bidder signs a copy of the written rules (either in person or digitally) and ask the auctioneer to review them before the auction begins. Additionally, if the auction is conducted on real estate, it is a good idea to have your rules include an indemnification clause for any injuries or damages that a bidder may cause. If a bidder does something to the property that leads to a lawsuit, you want to be compensated by that bidder, who hopefully is insured. A lawyer can help you draft these rules.

During the Self Storage Unit auction

It varies by state, but some require self-storage owners to use a licensed auctioneer when selling unpaid storage units. In the past, sales had to take place at the facility and the warehouse door had to be opened for bidders to see the items in the warehouse. Today, however, many states such as California, Florida, Texas, Washington, and Montana now allow online auctions, which can be a much more efficient way to auction off the contents of unpaid storage.

Whether onsite or online, an auction usually begins when a minimum bid is submitted. Other bidders then throw their hats in the ring, raising the stakes until the unit's value reaches a price that no one wants to overbid.

In the end, the highest bidder wins the auction and pays the amount they bid for the contents of the device. It is important to remember that until the hammer falls, the tenant has the option to stop the auction and keep their property (in online auctions, they have the option until the self-storage property receives payment).

Once payment is made in person or online immediately after the auction ends, the winning bidder is given a set period of time to remove the contents of the unit (usually 24-48 hours). Generally, storage facilities allow the bidder additional time to fully clean and vacate the space, subject to agreement.

After the auction of storage spaces

You might think everything is settled after an auction, but then the delinquent tenant walks in, ready to pay. Of course, they will probably be angry that their stuff was sold, which could lead to a possible lawsuit. While self-storage facilities have the right to legally sell a delinquent tenant's personal property at auction, that doesn't mean the tenant will take too kindly to it. So it's important that all your t's are crossed and i's are dotted. If you have proof that you notified the tenant of their late payment and then sent a lien notice, you can protect yourself from potential lawsuits. Of course, each state has different laws, procedures, and retention requirements regarding self-storage unit auctions, so it's always a good idea to check with your state's local Self-Storage Association.

Always check the applicable law regarding unpaid storage auctions

Before holding an auction, you should always check the latest laws and storage rights laws, as they change frequently. For example, some states require that an authorized auctioneer be present at the auction, while other states are exempt. Another example is that some states require that if the auction raises more money than what the delinquent tenant owes, the extra money must be given to the tenant. Many of these laws further state that if the tenant is unaffordable, the extra money must be handed over to the council's property department.

By checking the latest laws, following notification procedures, and enforcing a clearly defined set of rules, you can unload the contents of an unpaid storage space just like the kids atStorage Wars!

Note: this blog does not serve as legal advice. As a storage owner (or renter), you need to understand the laws that are unique to your state. Storelocal members can also contact our partnerSaving treasuresfor more information about conducting an auction. Not a Storelocal member yet?Get involved today!