Most people involved with the storage business would agree the most challenging part of the business is how to handle the 7 to 10 percent of tenants who don’t pay rent as agreed.
Like all areas in life, there is no one right answer for every situation. In the storage business, they have a process designed to answer from a legal point on how to proceed. These answers can be obtained by looking at the California Statues 21700 or you can talk to a lawyer (preferably one who belongs to the CSSA) to know the correct way to do the lien.
Assuming all the legal paperwork is accurate, now decisions must be made on how to get these non-paying units empty so they can be replaced by tenants who will pay for their unit.
Some Mangers are worried if they auction a tenant’s goods off, they will end up in court with huge lawsuits. If the paperwork trail is followed to the letter of the law, this won’t happen. Most people are aware that Paris Hilton had her items auctioned in November of 2005. For whatever reason, payment between Paris and the storage site did not happen. After the auction, she hired the best lawyer money could buy to try and get her items back. Since all the paperwork was correct and the person conducting the auction was bonded, she was not able to get any of her property back.
Another common misconception about auctions is they don’t bring enough money and it would be better to settle with 20 percent and get the tenant out. Occasionally this is the best method, especially after doing inventory and the contents have value only to the tenant. However, usually it is better to your bottom line to stand firm and get 100 percent on what is owed to you. Why would this action be better? Let’s look at some basic math. For example, from the thousands of units we sold over the years, three out of five units the people will pay in full. Should these five units be $1,000.00 each, and you settle all five you would receive $1000.00. Should the average pay, you would collect $3,000.00 from the full pay, and have two units to auction.
Using a Professional Storage Auctioneer, even after paying his commissions, you will net more than a storage manger doing their own auction. A Professional Storage Auction Company will have more buyers and handle those unique situations that auctions can bring. Should an Attorney get involved for any reason, having a Professional Storage Auction Company on your side can be priceless. It also sends a message to your delinquent tenants you are serious about getting paid which brings in more “past due” money because of your auction date.
As a businessperson, it sometimes is confusing why a company that hires an attorney for their legal work, an accountant for their financial work, a groundskeeper for their yard work, a computer tech for their computer work and then try to do their own auction because they think it saves them money. (It doesn’t) The bottom line is what is most important in business is to make a profit (and not get sued) and not settling just for settling sake is something everyone should reconsider.
John Cardoza, CAI, BAS, CES
Storage Auction Experts