Wednesday, September 7, 2016

Pennsylvania Now Requires Online Self Storage Lien Sales to Be Licensed by the State

It is now law that any Pennsylvania (PA) self storage operator who chooses to hold lien sales online, must use a licensed auction company. Most of the companies providing an “online portal” for self storage lien sales do not carry auctioneer licenses or auction company licenses. Citing the eBay model of business, they claim online auctions are not “auctions”; they are simply a web portal or a social sharing site where people can list things for sale. The state of Pennsylvania just answered that argument. On July 20, 2016, PA Governor, Tom Wolf, signed into law PA House Bill 325 regarding the licensing of auctioneers and the definition of an auction. In the law, the definition of an auction has been modified to include any online auctions. The natural response of the “online web portals” would likely be “we don’t conduct auctions, we are a simply a web portal.” Pennsylvania law makers must have anticipated this response because they took the definition of an auction a few steps further. They define “auction” or “sale at auction” as the following.

            A method for the sale or lease of property, or any interest in property by means of
            verbal exchange, regular mail, telecommunications, the internet, an electronic
            transmission or a physical gesture…in the form of bids, in an effort to advance     
            the amount of the bids to obtain the highest or most favorable offer. 

            This includes: live auctions, online auctions, real time auctions, and any similar
            such events as may be devised with the development of technology.

If your sale is on the internet and involves bidding, it is considered an auction in the State of Pennsylvania and must be licensed by the PA Auctioneer Association. It is true that individual owners or their agents can still conduct their own auctions without the use of a licensed auctioneer. However, if you utilize an auctioneer and auction company that engages in the aforementioned activities, they must carry auction licenses. The company providing you with the technology to hold your sales is not an agent of you. Do you employee them? Do your various insurance policies cover them? Are you actually overseeing any of the actual sales? They are not afforded the same protections you are.

The online web portals or website marketplaces might try to claim since storage auctions do not require a license, they are not required to have one either. This is not true. If you use an auctioneer to come to your facility and conduct auctions, they absolutely must be licensed in accordance with the law. The law in PA now states that any company using technology to promote bids through electronic means is in fact engaging in auctioneering and must be licensed in accordance with the law.

While it might be easy for an online web portal or website marketplace to hire an auctioneer, that will not suffice to satisfy the requirement. The law also now requires the company to have an auction company license. This will require registering as a business with the PA Secretary of State, obtaining insurance bonds only issued to auction companies, obtaining a trust bank account for auctioneers, and then finally obtaining the auction company license from the PA Auctioneer Association.

What does this have to do with you? Why do you care? It is very likely the State of PA is planning to pursue action against companies who do not comply. The language of the law is very direct and the wording is strong. Not complying could result in termination of operations and even punitive damages. That means your sale you have worked so hard to get into place would disappear from the internet and you will not have fulfilled your legal obligations as a storage operator. That would open you to liability on a wide scale.

Pennsylvania is not the only state to do this. The State of Georgia also amended its auctioneer licensing law in 2014 to include online auctions. The State of Illinois also requires that any Internet Auction Listing Service be licensed by the Secretary of State. They have defined the law in such a way that pretty much anybody facilitating the sale of goods online must comply with the requirement. If a company meets any of the following requirements, they must obtain an IALS license. Number three is the requirement directly relating to self storage sales because the property being sold is in fact in the State of Illinois.

(1) the person, corporation, limited liability company, partnership, or other entity providing the Internet auction listing service is located in the State of Illinois; 

(2) the prospective seller or seller, prospective lessor or lessor, or prospective purchaser or purchaser is located in the State of Illinois and is required to agree to terms with the person, corporation, limited liability company, partnership, or other entity providing the Internet auction listing service, no matter where that person, corporation, limited liability company, partnership, or other entity is located; or 

(3) the personal property or services offered for sale or lease are located or will be provided in the State of Illinois.

These changes are not surprising. State laws are going to continue to evolve with technology. The reason auctioneer associations exist is because there is a need to regulate the professionals in the industry and hold them accountable for how they handle your business dealings. There is no reason to think this would not be extended to online practices. It is imperative for storage operators to know about these changes and ask the right questions about the people they are doing business with. The laws in Georgia and Illinois are already in effect. The law in PA becomes effective on September 20, 2016. Is your auction provider in compliance? 

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


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