Unlike what you see on tv shows, most abandoned units stored at self-storage facilities are not filled to the brim with gold bullion and Elvis’ rhinestone cape he wore before he became Fat Elvis, (although we have sold a gold-suited Elvis mannequin). As storage operators, we are responsible to host a sale that will generate the most money possible, hopefully paying the tenants past due rents, late fees, and any associated auction fees, and occasionally, even enough that they, the tenant, receive excess proceeds from the sale.
Most state statutes contain language regarding having three unrelated bidders in attendance of a lien auction. Many state statutes also contain the term, “commercially reasonable.” You may be wondering what the difference is between reasonable and commercially reasonable. Reasonable is the weaker standard, not requiring any action beyond what is typically expected under the circumstances. Commercially reasonable is taking it one step further.
The legal definition of commercially reasonable is as follows:
“Fair, done in good faith, and corresponding to commonly accepted commercial practices after default a secured party may sell… the collateral in its present condition or following any commercially reasonable preparation.”
– Uniform Commercial Code
California code mentions a “commercially reasonable manner of sale includes a sale on a publicly accessible Internet Web site that customarily conducts online auctions or sales.
Colorado also speaks of advertising the sale once a week for two weeks in a periodical that circulates weekly in the county where the storage facility is at OR advertising in a “commercially reasonable manner.” The manner is deemed reasonable if at least three independent bidders attend the sale.
As storage owners, we want our units back. Usually, we do not get even a fraction of past due rent, late fees, and auction fees. The other thing we want is to navigate a lien sale without the fear of getting sued. Most units are partially full of left behind “things” that the tenant does not want. Hauling the junky stuff off is not only a lot of extra work, but also, who has a dumpster at home?
But sometimes? One out of hundreds and hundreds of units really has “the goods.” The goods could be anything even mildly interesting. A tennis shoe collection that brings thousands of dollars, lawn care tools, snow blowing equipment, or even a full house of furniture and appliances! These types of units are where online storage auctions have shined. They have shined so much, in fact, that even the late adopters of technology have decided, the new way is better- just maybe this internet thing is here to stay.
But then, there are the EXTRA special units; the ones when the manger opens the lock, they call the district manager, who then proceeds to call the reginal, and then finally, the owner. These special units can contain things like a dragster, a wrecked plane, a Model T, a tricked out vintage Cadillac with Louis Vuitton seats and the biggest hood ornament you have ever seen. These are the units where we are most likely to have a ticked off tenant and his “Cousin Vinny” looking through and at our sales process, trying to get us for any reason that they can come up with.
Of course, documented collection efforts, a strict adherence to the Demand and Notification portions of our state statute requirements are the obvious parts. However, where commercially reasonable efforts we put into our sale, the marketing and where it happens, could be the difference in a suit being thrown out or getting some traction.
For example, a Super Cub airplane with the wings off can easily fit into a 10×20, non-climate-controlled unit. The wings of a plane come off and on easily. The plane comes in for an off-airport landing, one wheel hits a pothole, the plane veers into the trees, wings and rutter get smashed, and the fabric is torn on the fuselage. The plane is totaled. When you cut the lock off the unit – it looks totaled. Often the owner buys it back from the insurance company with the intention of rebuilding, and then lets the plane sit, even for years in storage. Then the owner does not pay, will not respond to your facility’s calls, emails, or text messages. At this point, you enforce your lien. However? Most storage bidders do not know anything about wrecked planes, and you receive $700 for a smashed-up pile of airplane parts. That does not pay the past due rent, and that tenant surely is not getting any excess proceeds.
Did you commercially reasonably market this unit? Who knows? A wrecked Super Cub can bring $25,000 on the market. If it was marketed to the airplane folks, it may have.
You may say, “Wait a minute, my manager now needs to know how and where to auction an airplane now?”
His cousin Vinny does not care, he is bringing a charge, and your insurance company will be asking you some tough questions. Vinny may ask why you would sell it on Sunday morning at 7:30 A.M., and only your manager, wife, and brother-in-law attended. Wait, your brother-in-law bought it? AND he is a certified airplane mechanic? Not looking too good for you.
So, what do we do when it’s not household goods in that unit? (Beside using online auctions providers, that will at least show the unit to a larger audience than traditional live auctions could ever provide.)
There are a few steps your auction company and your managers can take to put that specialty item in front of the right people. First things first – the SSA (Self Storage Association) and State Storage Associations have spent hundreds of thousands of dollars to include, by statute, online auctions as a named way for us owners to conduct our lien sales. Online auctions allow you to get the best possible conditions for your auction. Rather than worrying about the weather on the day you would be hosting the auction, online, you have access to thousands of bidders whether it is rain, snow, sleet, or sun. One of the best draws of online auctions is being able to see just how many bidders look at your unit as well. It would also make for a great argument if your insurance folks had to talk to Vinny. Now it is not the same three bidders at every one of your auctions. It is hundreds of bidders from across your area – and even outside your area if you marketed correctly.
Gone are the days where you must wait months and months to build up enough units to make sure an auction is profitable. Through online auctions, your facility can host an auction with one unit or 10 units and still expect better profits and turn-outs than your live auctions of olde. Recently on StorageAuctions.com, we had an RV sell in Georgia, and upon hearing from the bidder? We found out he was driving all the way from California to retrieve that “Vintage RV.” One man’s junk is another man’s awesome find in an abandoned storge unit.
Your auction can still be held online with an online auction provider, but you can post ads about it anywhere across the internet. For the plane, Craigslist sells a lot of planes on a regular basis. Craigslist also hosts thousands and thousands of ads for anything from slightly worn music equipment, to grandma’s creepy collection of porcelain dolls, to said Super Cub airplane. Other sites could be Trade-A-Plane.com or eBay, who sell a lot on nice planes.
Outside of Craigslist, the internet also offers hundreds of websites solely for advertising your upcoming auctions. There are websites like AuctionZip.com, GotoAuction.com, GlobalAuctionGuide.com, and even check with your local SSA chapter, because they may offer you the ability to list your upcoming auctions as well right on their website. On top of these broad websites, there is also more niche ones such as Farm World! The Midwest’s Leading Online Farm Newspaper. Now you have no excuse for that old farming equipment in that unit to make anything less.
Social media platforms offer and ever-growing buy-sell-trade community. These groups can be as brought as “Household Furniture in Louisiana,” to as niche as “Plane Enthusiasts in East Baton Rouge, Louisiana.” Facebook Marketplace, and other specialty groups on Facebook are great locations to put your units out there to the public. More times than not, your manager or you already have a Facebook account, ready to be utilized.
There is a unit full of kayaks, skis, and bicycles, now I am not talking about a couple bikes or two kayaks, we are talking 100 bicycles or 200 pairs of skis. Specialty groups on Facebook are a wonderful place to put in a little extra effort to get those units what they deserve. Even posting upcoming auctions on your facility’s public Facebook page to garner interest can be a great idea.
Take that vintage Cadillac with Louis Vuitton seats I mentioned earlier. That unit hit our site a few years ago, and we could not believe it. It was truly a one in a million unit. We had to post it to our StorageAuctions.com Facebook page. And truly, I do not think I have seen a unit spark so much interest. Shares, likes, and comments multiplied overnight. And low-and-behold, our office noticed one of the comments was from a friend of the Cadillac’s owner, stating he knew the owner and that the owner was currently in jail! Soon after that, we got a call from the store stating that the unit was canceled, due to the owner paying that past-due rent, desperately wanting his Cadillac taken off the internet. Unfortunately for him, that is not how the internet works. But fortunately, not only did the facility collect their past-due rent back, but he retrieved his tricked-out LV Cadillac.
On top of social media being a valuable resource, adding extra days for additional marketing is another way to go beyond trying to capture the most out of a lien sale. With online auctions, I would suggest keeping your auction online for at least two weeks. This gives bidders visiting the online auction provider plenty of time to not only look at your unit, but to show their friends as well. If you follow the statues, and a little more, it puts you in an outstanding position if trouble ever comes – and hopefully turns into higher net auction proceeds.
Now as you may have noticed, a some of these “extra special,” units may contain some sort of motor vehicle. The boat, motor vehicle, or RV will also likely be registered with the state in which it is operating, so the state can track it. This, of course, is significantly different from private property commonly stored at self-storage facilities. Along with special and additional marketing, you should take special consideration when hosting lien sales. Many self-storage laws are being revised around the country to make the process of handling lien sales for boats or RVs much easier. Some states now allow, after notice to the tenant, the opportunity for the vehicle to simply be towed from the premises in lieu of a sale, entitling the towing company to later handle the sale of the property. At the sale, the purchaser of the property can get a certified copy of the court order allowing the sale or a new title as issued by the DMV or DNR.
The enforcement of a self-storage lien for titled property is significantly different from the lien-enforcement action for non-titled property. A boat or RV cannot be sold at a public auction without first satisfying a transfer of title requirement. The transfer of title can be easy if the customer or owner of the property voluntarily agrees to sign the title over to the facility or to the high bidder at an auction. It is not so easy when the owner of the property cannot be located, and the title must be transferred through legal means.
When a tenant defaults and a foreclosure occurs, the self-storage owner cannot officially sell the vehicle or boat in question until he has first obtained the vehicle title. The process of getting the title can be accomplished a few ways. Title transfers are usually managed through the governmental entity where the property was originally registered. With a boat, it may be the Department of Natural Resources (DNR) or even the Department of Watercraft. With RVs, it will be the Department of Motor Vehicles (DMV).
As a facility operator, you should be aware that some self-storage statutes do not even include a lien for boats or trailers and RVs. However, even without a lien, the operator can seek a replacement title for the vehicle or boat by claiming the vehicle has been abandoned at the facility. Fortunately, most state statutes provide specific procedures for obtaining replacement titles on abandoned vehicles and boats.
If it is a nice RV, trailer, car, or other registered vehicle, like a boat if you are near a coastline or a lake, you should put forth the effort to get a mechanics lien. A mechanics lien allows you to sell the vehicle in a manner where the buyer can get a title for that motor vehicle. In all cases, 100% of the time, doing this will get you the most money possible for a motor vehicle. It may take a little time and effort, but it can make a sale legitimate. If you skip this step, you could risk having to sell this vehicle for scraps, reducing your profit significantly.
The end goal of every lien auction should be to sell the stored goods at a top market price, making back that past due rent and fees, and importantly, to not get sued. It is up to us to make sure things get done properly and right. Following the timeline prescribed by states lien law’s, documents each step of the way our collection efforts. We are responsible to host a, “commercially reasonable sale with three independent bidders.” If we do all these steps correctly, the statutes protect us and we can tell ole Cousin Vinny to, “forgetabatit”