Self-storage has long been known for its superior collections rate formed through the ability to auction off unit contents if rent is not received. However, this process has new hurdles created by the national Covid-19 pandemic, and every storage owner needs to be aware of potential changes in policy.
Federal, state and city restrictions on foreclosures and evictions
While the initial push to ease hardship during the pandemic revolved around residential evictions and foreclosures, some areas are not expanding this to include commercial evictions that may include self-storage units. While this varies state to state and city to city, be careful not to pursue self-storage lien sales, overlocks or imposing late fees without knowing that you are 100% in-line with current statutes.
Understanding the terminology
Self-storage lien sales are a form of non-judicial foreclosure. As a result, an order that imposes a foreclosure moratorium may actually apply to self-storage lien sales, even though most people may consider it strictly a residential protection. It’s a game of semantics that you don’t want to unknowingly step into and get into trouble, despite your best efforts.
Additional problems
The whole purpose of many governmental restrictions during the pandemic is to keep people in self-quarantine. It understandably stands in opposition to the intent of the orders if a landlord creates a situation that forces a storage customer to leave home for a non-essential purpose. Some tenants may make the case that you have threatened their well-being by your actions.
Poorly written rules
It has never been the strong point of bureaucrats to write clear rules. Their orders are often hastily put together and vague and do not define the term “eviction”, “foreclosure”, or other essential terms in the orders, leaving a huge grey area for actual businesses to try and figure out. It is possible that the term “eviction” or “foreclosure” is meant to cover any unilateral action by an operator that terminates a rental agreement – it is left open to interpretation.
The optics are not good, either
Playing hardball with customers right now just looks wrong to many observers, who will accuse you of taking heartless actions during these troubled times. We have all seen television and youtube clips of businesses that are caught in the crossfire of trying to maintain revenues while fighting a new society of endlessly woke individuals who take offense at every action, legal or not.
Plus many courts are closed
Even if you want to enforce your lien sale right now, you may find that the courts are closed anyway. In many of the pandemic hotspots the court system is still off-limits except in criminal cases (and not even then). Plus many courts are now playing a monumental form of catch-up and this will delay your legal action for a significant period of time.
A better plan right now
Perhaps the better plan right now is to use this period as an experiment as to your abilities to collect money in a less forceful manner. Call customers and see what the problem is. Make allowances where needed and see if a win/win can be reached. Remember that it will be very hard to replace any lost customers during these unprecedented times. Try your hand at being a diplomat rather than an enforcer.
Conclusion
With some new orders issued daily, it is extremely difficult to track all current rules regarding self-storage collections and lien sales. However, you must take action to stay 100% in compliance with the law and try to steer your storage facility through these unique times successfully. This may be a great time to expand your learning on how to collect money in a friendlier fashion, and to take customers who can’t pay and make them paying customers for life.