Although the expectation of having proceeds from a lien sale (defined as funds remaining from a sale after all outstanding tenant debts have been paid, including rent, late fees, lien fee, and sale fees) has dwindled over the last few years, a storage operator must still follow the law of the state where the facility is located to properly comply with how any proceeds after a lien sale should be handled.
The laws vary by state from those that require that the proceeds be held for three years and, if uncollected, be paid to the State, to those that allow the facility owner to keep the proceeds if the money is otherwise abandoned by the tenant. Further, some states require that a post-sale letter be sent to notify a tenant if there are proceeds from a sale; there are other states that do not require any post sale notice at all. Again, since each state has its own rules for lien sales and proceeds, operators must take the time to review and implement the process required for the handling of proceeds for the state where the facility is located.
As examples, here are a few states to show the variety of rules that apply:
Alabama: If the
occupant, lienholder, or other person in interest does not claim the balance of
the proceeds within three years of the date of sale, it shall become the
property of the owner without further recourse by the occupant, lienholder, or
other person in interest.
Arizona: If the
occupant does not claim the balance due to the occupant within 90 days of
the sale, the operator shall pay the balance to the department of revenue. If
the occupant, at any time within two years from the date of payment to the
department of revenue, establishes the occupant’s right to the money to the
satisfaction of the director of the department of administration, it shall be
paid to the occupant. After two years, all unclaimed monies shall be deposited
in the permanent state school fund.
California: Any excess
proceeds of the sale over the lien amount and costs of sale will be retained by
the owner and may be reclaimed by the occupant or claimed by another person at
any time for a period of one year from the sale and that thereafter the
proceeds will escheat to the county in which the sale is to take place.
Florida: A notice
of any balance shall be delivered by the owner to the tenant in person or by
first-class mail with a certificate of mailing to the last known address of the
tenant. If the tenant does not claim the balance of the proceeds within two
years of the date of sale, the proceeds shall be deemed abandoned, and the
owner shall have no further obligation with regard to the payment of the
occupant or any person authorized by the occupant or by an order of the court
may claim the excess proceeds or the portion of the proceeds necessary to
satisfy the person’s claim at any time within one year after the date of the
sale. After one year, the owner shall pay any proceeds remaining from the sale
to the treasurer of the county where the sale was held for deposit in the
general fund of the county.
New Jersey: All
property that is held, issued, owing in the ordinary course of a holder’s
business and has remained unclaimed by the owner for more than three years after
it became payable or distributable is presumed abandoned and is subject to the
custody of this State as unclaimed property.
Ohio: The owner
may satisfy the owner’s lien from the proceeds of any sale, but shall mail the
balance, if any, by certified mail to the occupant at the occupant’s last known
address. If the balance is returned to the owner after the owner mailed the
balance by certified mail to the occupant or if the address of the occupant is
not known, the owner shall hold the balance for two years after the date of the
sale for delivery on demand to the occupant or to any other person who would
have been entitled to possession of the personal property. After the expiration
of the two-year period, the balance shall become unclaimed funds, as defined in
division (B) of section 169.01 of the Revised Code, and shall be disposed of
pursuant to Chapter 169.01 of the Revised Code.
Pennsylvania: In the event of a sale, the owner may satisfy his lien from the proceeds of the sale but shall hold the balance, if any, for delivery on demand to the occupant. If the occupant does not claim the balance of the proceeds within six months of the date of the sale, such balance shall be deemed to be abandoned and the owner shall pay such balance to the Secretary of Revenue who shall receive, hold and dispose of same in accordance with Article XIII.1 of the act of April 9, 1929 (P.L. 343, No. 176), known as “The Fiscal Code.”
Scott Zucker is a partner in the law firm of Weissmann Zucker Euster Morochnik & Garber, P.C. in Atlanta, Georgia.