Legitimate Lien Sales: Special Units Need Special Auctions
Unlike what you see in reality TV shows, most abandoned units stored at self-storage facilities are not filled to the brim with gold bullion and the rhinestone cape Elvis 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. Occasionally, sales even bring in enough that the tenants receive the excess proceeds.
Commercially Reasonable 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.
Per the Uniform Commercial Code, 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.”
California code mentions that a “commercially reasonable manner of sale includes a sale on a publicly accessible internet website 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 located or advertising in a “commercially reasonable manner.” The manner is deemed reasonable if at least three independent bidders attend the sale.
Special Units As storage owners, we want our units back. Usually, we don’t get even a fraction of the past-due rent, late fees, and auction fees owed. 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 inconvenient. Who has a dumpster at home?
But sometimes, literally one out of hundreds and hundreds of units, really has “the goods.” The goods could be anything even mildly interesting. Maybe a tennis shoe collection that bring 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’ve shined so much, in fact, that even the late adopters of technology have decided that maybe the new way is better—just maybe this internet thing is here to stay.
Then there are the extra special units; the ones when the manger opens the lock, he/she calls the district manager, who then proceeds to call the regional manager and the owner. These special units can contain things like a dragster, a wrecked plane, a Model T, or a tricked out vintage Cadillac with Louis Vuitton seats and the biggest hood ornament you have ever seen. These are the units where I think we are most likely to have a ticked off tenant and maybe his “Cousin Vinny” looking through and at our sales process, trying to get us for any reason that they can concoct.
Of course, documented collection efforts, a strict adherence to the “Demand and Notification” portions of our state statute requirements are the obvious parts. However, in my opinion, this is where the commercially reasonable efforts we put into our sale, the marketing and location, could be the difference a lawsuit being thrown out or gaining traction.
For example, a Super Cub airplane with the wings off can easily fit into a 10-by-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, the 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. Oftentimes, the owner buys it back from the insurance company with the intention of rebuilding, then lets the plane sit, maybe even for years, in storage. Then the owner doesn’t pay, will not respond to your facility’s calls, emails, or text messages. At this point, you enforce your lien. However, most storage bidders don’t know anything about wrecked planes, and you receive $700 for a smashed-up pile of airplane parts. That doesn’t 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. And it may have if it had been marketed to the airplane folks.
You may say, “Wait a minute, my manager now needs to know how and where to auction an airplane now?”
The tenant’s cousin Vinny doesn’t care; he’s bringing a charge, and your insurance company will be asking you some hard 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. If your brother-in-law bought it and he’s a certified airplane mechanic, things are not looking good for you.
So, what do we do when it’s not household goods in that unit? (Besides using online auctions providers that will at least show the unit to a larger audience than traditional live auctions could ever provide.)
More Favorable Conditions There are a few steps your auction company and your managers can take in order 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 owners to conduct 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’d be hosting an on-site auction, online you have access to thousands of bidders regardless of the climate’s conditions.
One of the best draws of online auctions is being able to see just how many bidders look at your unit as well, which makes for a great argument if your insurance folks had to talk to Vinny. Now it’s not the same three bidders at every one of your auctions. Instead, there are hundreds of bidders from all across your area—and maybe even outside your area if you marketed correctly.
Gone are the days where you have to wait months and months in order to build up enough units to ensure 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 turnouts than your live auctions of old. Recently, on StorageAuctions.com, we had an RV sell in Georgia. 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. As for the plane, Craigslist actually sells plenty of planes on a regular basis. Craigslist also hosts thousands of ads for anything from slightly worn music equipment to grandma’s creepy collection of porcelain dolls to Super Cub airplanes. Other sites could be Trade-A-Plane.com or eBay, both of which actually sell a lot of nice planes.
Outside of Craigslist, the internet offers hundreds of websites solely for advertising your upcoming auctions. There are websites like AuctionZip.com, GotoAuction.com, and GlobalAuctionGuide.com, but you could even check with your local SSA chapter, because they may offer you the ability to list your upcoming auctions on their website. On top of these broad websites, there are 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 than its actual value.
Social media platforms offer an ever-growing buy-sell-trade community. These groups can be as broad as “Household Furniture in Louisiana” to as niche as “Plane Enthusiasts in East Baton Rouge, La.” Facebook Marketplace, and other specialty groups on Facebook, are great locations to put your units out there to the public. More times than not, you or your manager already have a Facebook account that’s ready to be utilized.
Maybe there is a unit full of kayaks, skis, and bicycles. Now I’m not talking about a couple bikes or two kayaks; we’re talking 100 bicycles or 200 pairs of skis. Specialty groups on Facebook are a great 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 couldn’t 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 don’t think I’ve seen a unit spark so much interest. Shares, likes, and comments multiplied overnight. And lo and behold, our office noticed one of the comments was from a friend of the Cadillac’s owner, stating the owner was currently in jail. Soon after that, we got a call from the store that the unit was canceled; the owner paid that past-due rent and desperately wanted his Cadillac taken off the internet. Unfortunately for him, that is not how the internet works. Fortunately, not only did the facility collect the past-due rent, 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 above and beyond 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 show their buddies as well. If you followed the statues, and a little more, it puts you in a good position if trouble ever comes, and that extra effort may turn into higher net auction proceeds.
Titles And Liens Now, as you may have noticed, 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 personal 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’s not so easy when the owner of the property cannot be located and the title must be transferred through legal means.
Generally, 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 likely 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’re 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 percent 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, thus reducing your profit significantly.
Ultimately, the end goal of every lien auction should be to sell the stored goods at a top market price, making back the past-due rent and fees while not get sued. It’s up to us to make sure things get done properly and right. Following the timeline prescribed by state’s lien laws, documents each step of 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.”
Lonnie Bickford is the president/owner of Appletree Storage and StorageAuctions.com and the founder of StorageGives, an organization devoted to supporting charities that impact the lives of those in need. With over 25 years of experience in the self-storage industry, Bickford has owned nine different self-storage-related businesses. He’s also the current president of the Louisiana Self-Storage Association, where he works to improve lien laws across the country and is a regular presenter at state and national industry conferences. He works rigorously toward his goal that StorageGives.org will continue to make a positive impact on those who need help both in the U.S. and globally