Auctioning Delinquent Storage Units: Things to Consider
When tenants don’t pay their rent, your self-storage business’s finances take a hit. A storage unit auction is a last-resort option that facility owners can take to recoup their losses and free up the unit so a new tenant can rent it.
When to Auction Delinquent Storage Units
In most states, tenants have between 30 to 90 days to pay the dues they owe before the contents of their storage unit can go to auction. The specific amount of time after which you can auction off a delinquent storage unit varies from state to state. Many states also have specified time frames for storage owners to place advertisements and hold the auction.
At Investment Real Estate, LLC, we help you navigate your state’s storage unit auction laws to ensure you follow all the necessary timelines.
How Does the Auction Process Work?
When rent goes unpaid, a self-storage facility owner can place a lien — a legal right to a person’s property — on the contents of the delinquent storage unit. Typically, storage facility owners send the tenant a pre-lien notice, letting them know their unit is set to be auctioned. If the tenant still fails to pay after receiving the pre-lien notice, the facility owner can move forward with sending the final auction notice.
Most states require facility owners to send the final lien notice via certified mail. The lien sale notice must include the amount owed and the auction details, including the date, location and time. Tenants can make their payment at any time up until the auction begins.
What Happens During the Auction?
In a storage unit auction, bidders must bid on the entire contents of the unit, not just a single item. Before the auction begins, interested bidders may look at the items inside the unit. Bidders typically aren’t allowed to enter the unit or touch any items inside, though this may vary from state to state. Some states also allow auctions to be held online.
Whether the auction is in-person or online, the contents of the unit go to the highest bidder. The auctioneer begins the auction with a minimum bid, and auction participants increase their bids until no one wishes to bid any higher.
What Happens After the Auction?
The winning bidder must pay in cash, usually immediately following the auction. Then, they have a set period to remove the contents from the storage unit — typically within 48 hours.
If the auction doesn’t raise enough money to cover the past due rent and fees, the balance remains the tenant’s responsibility. In the event the auction raises more than the balance due, some states require the overage to be sent to the tenant. If the tenant can’t be located, the overage goes to the state’s unclaimed property division.
How IRE Can Help
IRE is here to help with your delinquent storage unit situation. Our team of experts can help advise what to do when confronted with delinquent units and how the auction process works.
Reach out to us today to learn more about our storage property management experience.