Monday, August 22, 2016

The Rise of Class Action Lawsuits in Self Storage

A class action lawsuit is not the same as a lawsuit where one person sues another person. A class action lawsuit involves a group of several people suing one person. This “class” of people all have a similar issue for which they wish to bring suit. This type of lawsuit has become increasingly popular in the self storage industry. As of now, they are primarily being targeted at the REITs (Real Estate Investment Trusts) like Public Storage, Extra Space Storage, and Uncle Bob’s Storage. It is hard to say if and when these types of lawsuits might begin to target smaller operators.

Self Storage is a magnet for class action. Operators use the same lease for every tenant. They use the same lien enforcement procedures with each tenant. They use the same auction procedures with each tenant. They use the same tenant protection plan or insurance coverage for each tenant. Self storage operators use the same procedures hundreds of times over. That means if they have done something wrong, they have done it hundreds of times over. That constitutes a big group for a class action lawsuit.

Unfortunately, there are groups that are looking for targets for class action lawsuits. It is also unfortunate that there are people in the world looking to join themselves in a class action lawsuit. There are attorneys who know they can cash in by getting a group together for a lawsuit. They are on the internet soliciting for plaintiffs. One example is the website I did a quick Google search for “self storage lien sales class action lawsuits” and found this web page.

<img src="DIRECT IMAGE URL" alt="StorageStuff.Bid Online Auctions" />

Let’s break down that first paragraph on this page.

  • “Self-storage companies unlawfully seize the contents of their storage lockers and auction them off…” There is nothing unlawful about what self-storage operators do. In fact, they are prescribed by law to follow an exact procedure. Sure, there are mistakes made in the process, but the action of selling storage units at auction is not inherently illegal.
  • “Often at a huge profit to those companies” Self storage operators do not get to sell delinquent units for fun. They have a lien on the property in the unit to recover a debt owed to them. If the unit were to sell for more than what is owed to them, those excess proceeds are returned to the tenant. It is also important to note that it is very rare that a unit sells for even the amount owed, much less over that amount. There is absolutely no profit to a self storage operator for auctions.
  • “Without the content owner’s knowledge.” Self storage operators engage in exhaustive measures to get their tenants to come and pay. They send late notices, pre-lien letters, and lien letters via verifiable mail. They run legal ads in the newspaper. Operators often offer a settlement to tenants just to get them to vacate the property. Self storage operators do not want to auction off storage units. Doing so is the legal remedy that has been put in place for them to vacate units to re-rent.

It is also unfortunate that there are people in the world looking to join themselves in a class action lawsuit.

Those of us in the self storage industry know that the ideas presented here are not accurate, but that doesn’t really matter. This is the perception of the industry that has been created. The “big bad” self storage operator likes to take advantage of people who choose to store with them. Unfortunately, judges and other legal personnel are not immune to these ideas and this often affects self storage operators negatively. 

The most important thing an operator can do to protect themselves is to have a well written rental agreement. Leading industry attorneys write a general lease that is often distributed through the state self storage association. While they try really hard to include anything you might need to protect you, it is impossible for them to write a one size fits all lease. Operators offer different services and have different policies. If you spend the money on an attorney one time, please make it for them to review your lease agreement.

About the Author - Cheli Rosa - Director of Marketing, Auctioneer, Company Administrator, Social Media Manager, Mom, Kite Flyer, Pinterest Addict and Amateur Scrapbooker.

1 comment:

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