Legal Issues – Q and A

Q: Do we need to check for liens or are they legally owned now by the winner of the auction?

A: Always good to know what you are buying at a distressed “as is” sale. However, it usually does not matter with vehicle and boats over 10 years old. You can do U.C.C. lien filings online in the name of the tenant if you are concerned.

Q: Do the Auction rules supersede the rules of the state that the auction is being held?

A: The auction rules will supersede most state rules. State laws governing auction sales are default rules and govern when there are not auction rules (a contract) that governs the issue. For example, if the facility rules state that the sale is final when the amount bid is paid to the owner and the property is removed from the space, that rule applies.

Read More: Uplifting: Father’s Portrait Returned to Son by Auction Winner

Q: If you don’t clean the room out within the time frame but instead, rent the room from the facility, can the contents still be purchased back by the original owner?

A: NO. Once the unit is paid for and possession is taken by the high bidder (especially if the unit is leased by the high bidder), the sale is completed.

Q: Normally on a sale of a unit, the amount of the normal rent would be recuperated and the additional amount would go either to the tenant or to the state. What if a unit is sold but the buyer doesn’t show up in 48 hours or whatever time allotment is given. Can the operator keep the deposit and other fees and still collect the normal rent amount from the secondary bidder, or is the amount kept by the operator limited to the amount of normal rent and everything else goes to the original tenant or the state?

A: BY Bid rules, you are entitled to keep the first deposit. You are also entitled to collect the second deposit and the purchase price for the goods. If ALL monies collected exceed ALL the expenses of sale plus rent owed, the tenant is entitled to recoup the proceeds. If the tenant doesn’t recoup the proceeds some states require that the funds be paid to the state, other laws allow the operator to keep the proceeds after a period of time.

Q: I bought a unit at a self-storage auction and was sued by the prior owner. I was disappointed that the Storage association did not offer help. I spent thousands in legal fees!

A: The SSA does not get involved in direct actions like you have described. But the law typically provides a direct defense when tenants make claims against the buyers of their property after foreclosure. I hope you won!

Q: What if unit contains a large amount of hazardous materials that a dangerous to handle does seller assume any liability in their description of contents?

A: This is a distressed sale and you purchase the contents at your sole risk. Buyers need to be aware of this. You take the risk that the property you purchase has no value or could cost you money to dispose of legally. If you determine the space contains toxic material you could just walk away from the sale. However, you may become involved in litigation over who is responsible for legally disposing of the property. If you suspect the space has a trace of toxic materials, do not bid on it.

Q: What about things like stock or bond certificates, etc.?

A: If you discover these items in an abandoned space, many time you are able to convert the abandoned certificates into your name. But it depends.

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Scott Zucker is a founding partner in the law firm of Weissmann/Zucker. Scott represents self storage owners and managers throughout the country on legal matters in the areas of foreclosure and lien sales, premises liability, loss control safeguards, ADA defense and employment disputes.

Scott is Deputy General Counsel to the national Self Storage Association, legal counsel to a number of State self storage associations, a frequent lecturer at national self storage conventions and is a contributing legal writer for trade magazines

He is also a partner with Carlos Kaslow in the Self Storage Legal Network, a subscription based legal services for self storage owners and managers, available to SSA members.

2 thoughts on “Legal Issues – Q and A

  1. I’m confused…can someone tell me once you win the bid and pay your deposit, and fee are you still responsible for catching up the past due rent on the unit that the owner failed to pay?

    1. No, if you win an auction, you only owe what you bid + tax if applicable to that particular state and any fees associated with the online auction service used.
      You do not owe the previous tenants past due rent.

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