Self storage auctions take place all the time. When you rent units to hundreds or thousands of people, a few are bound to stop making their payments. What about when a tenant renting storage for their vehicle neglects to pay their rent?We have a sense that vehicles are in a different class than most items. That’s because of ownership. Many of us purchase cars new and have to make payments. During this time, the lender actually owns the car and holds the lien on it until the loan is paid in full.
Because of this, self storage facility managers need to follow slightly different procedures when it comes to vehicles.
The rules for what to do with stored vehicles vary from state to state, but in most cases, it works something like this:
When a tenant does not pay their self storage rent and the facility has gone through the proper legal procedures to inform the tenant with no results, the facility contacts the Department of Motor Vehicles (DMV). In some states this is called the Bureau of Motor Vehicles (BMV). With the help of the DMV, they complete a lien on the vehicle, a process that can take up to four months, during which the facility has to keep the vehicle on their premises without receiving rent.
The DMV may attempt to contact the owner, which may be the lender. The DMV will send a letter to those with an ownership stake in the vehicle informing them of the upcoming storage auction. Any such people or businesses could then come to the facility and pay the rental balance in full to be allowed to remove the vehicle.
Once that process completes, if no one has come forward to claim the vehicle, the facility can sell the vehicle at a self storage auction. As a self storage operator, this entire process can cost your facility a lot in lost revenue, which it may not make back at the auction.
In some states, like California and Washington, new laws have given self storage operators a simpler, less time-consuming procedure to follow that involves having the vehicle towed.
“We no longer go the lien route but use the tow option as it costs less and is less time consuming,” said Ally Young of RV Storage Depot.
For example, in California, if a tenant is 60 days past due on rent, facilities can schedule a tow for a car, boat, or RV. The facility then contacts the tenant and lets them know about the upcoming tow. One way to do this is to send the tenant a certified letter informing them of the tow date, as well as the name of the towing company, and the address where they’ll be able to pick up their vehicle. For tenants, this can be more expensive than paying the back rent on storage. Tow yard fees are high.
“If the tenant does not make a payment in full before the tow date, then we call the local tow company and have the vehicle removed,” said Young,
In some areas where this towing solution is allowed, towing companies charge the requesting storage facility extra for RVs. Due to this, some facilities will opt to follow the former procedure instead and procure the lien, and will then auction the RV.
To find out which method you can use in your state, check the state’s vehicle codes. You may live in a state where you have to acquire the lien, or in a state where you can have the vehicle towed, freeing up the unit for a paying tenant.
It’s not fun having to bring a tenant’s unit to auction. However, you have a business to run, and the law is written to give them a chance to pay their late fees, while still protecting the financial interests of your facility. Adding a vehicle to the mix makes the process that much tougher. So, make sure you know your local laws, and find out if the towing option is available in your state.