What is a storage auction?
After a storage unit goes unpaid for a long enough time the facility owner can auction off the content in an effort to recoup some of their lost profits. The auction could be like the ones you might have seen on TV, or it could be an online auction like eBay. The exact type of auction will be determined by the preferences of the facility owners. We’ll talk more about the types of auctions later.
Many of the specific details of how an auction works and what the exact timeline is before a storage unit goes up for auction will be listed out in the renter lease that was given to you when you originally rented your storage unit. Of course, that will be written in “legalese” and may be difficult to understand. This article can help break things down into more detail.
It is important to note that any exact values or dates given in this article are examples. You should check your rental lease for the exact details of your rental agreement. We’ll point out some of the common values that Heartland Storage uses, but even then some things are determined by state law and will vary from state to state.
What causes a unit to end up in an auction?
Self-storage owners can’t just go auctioning off whatever they like, and they wouldn’t want to anyway. Storage owners aren’t happy about selling the belongings of someone who has fallen on hard times. Besides, storage auctions don’t generate as much income as the unit itself would under normal operation. Additionally, there are a few laws that determine what owners must do before an auction can take place and what timeline they must follow. In the end, the auction is a means of last resort for the owners to recuperate some of their lost income. The process starts when the renter misses a payment, but there are opportunities for the renter to make it right and either continue renting or collect their belongings and stop renting.
Most storage facilities will extend some amount of grace period after the due date to give renters a chance to pay their rent without penalty. This is an optional benefit that facilities are not required by law to provide, but many do because it helps the renters stay in their units and keep paying rent long term. That’s a win-win. Renters keep their units and the owners stay in business. Some facilities will only offer a limited number of times a renter can go into the grace period, but many will offer this period as a blanket benefit for all renters every month. As an example, Heartland Storage offers a 5 day grace period every month for all renters. Rent is typically due on the first of each month and renters have until the 5th to pay without any late fees or penalties. Some states do require different rent due dates and grace periods. It is important that you check your rental lease for the exact details for you.
What happens if you miss the grace period? That’s when the late fees begin. There are some laws that vary by state as to how much this fee can be. The goal of this first late fee is not to set a high fee, but instead to set a low fee that is geared toward motivating renters to pay on time so owners can rely on a steady income. If renters don’t pay on time then owners can’t rely on their income and that’s when the service starts to decline. It’s in everyone’s best interest to keep things flowing smoothly.
The exact amount of the late fee will be listed in the renter’s lease. For most of the Heartland Storage locations, our late fee is $20 or 20% whichever is more. This also helps to offset the cost of having management do the extra paperwork involved in the process.
It is also at this point when a unit will be “overlocked”. That means the owner will place their own lock over top of the renter’s lock preventing renters from taking out their belongings and skipping out entirely on the rent they owe. Any gate passcodes will likely also be disabled at this point.
Some renters will try to ask if they can just get a couple of things out of their unit real quick, but a good owner won’t fall for that. More than likely the renter will take their most precious things and leave the rest, never paying, and also reducing the value at auction. This leaves the owners high and dry.
Renters will be notified at every step of the process and told how many days until the next step. When renters enter into the agreement there was an exchange of contact info so owners have a method to contact them as needed. Notifications might be sent via Mail, Text, or Email and there is some variance in the laws about this by state. Not every state currently allows for Text, or Email to be used, but as we continue to move into the future that is changing. Many renters prefer to be notified electronically because it is faster and easier. Renters can also be reached electronically no matter where they might be, even if they are on vacation and away from home.
Second Late Fee
Also known as a pre-lien fee, this second late fee is one more step toward delaying the auction. Owners don’t enjoy going to auction, but they also can’t stay in business if renters are skipping months of rent. A second late fee might be used in between the first late fee and finally going to auction. If the process has gone this far it means that the unit has been sitting this entire time without generating any income for the owners, and the renters have not had access to their belongings either. Depending on the size of the unit that could be a considerable amount of money and belongings. At this point, both the renters and the owners are expected to be unhappy about the entire process. It is important to try to be considerate of each other as you attempt to move toward the solution.
Some states require public notice to be made for a time before a unit goes to auction. This can be published in a local newspaper or on an online public forum such as Craigslist or sometimes on the online Auction website. This will be determined by the local law and by the preferences of the storage facility owners.
Generally, from the time of the first past-due payment to the storage auction will be somewhere between 30 and 90 days depending on state law and depending on how often a storage facility wants to operate an auction. Owners have to hire a third-party company to handle the auction and these companies must be paid for their services. This means that the owners may want to schedule multiple units to be auctioned at the same time and yours could be among the first or last in the group.
At Heartland Storage the original owner of the unit can always stop the auctioning of their unit by paying off the total debts due to the facility before the auction has ended. This is not always true at every facility and for some, once the auction begins there is no going back, so if your stuff is going to auction you don’t want to let it get this far.
Your storage facility might allow renters to pay off their balance in full and collect their belongings even after the auction has begun. But, any good owner will not allow a renter to extend their lease once they reached this point. If there is time left on the current lease the owner may be required to allow a renter to continue renting until the lease is ended, but it would not be wise for them to extend any longer knowing that the renter has already been so close to auction once. So any renters who make it this far will want to make arrangements to place their belongings somewhere else soon or work closely with your storage managers/owners to convince them that this was a one-time mistake.
Also at this point, the owners may exercise their right not to extend their month-to-month lease by sending the renters a written notification.
By the end of the auction, the facility owners have now paid the auctioning company for their service. There has been a significant investment made by the owners in an attempt to cut their losses. There is generally no profit generated from the auction. Some states require all or part of any extra profit above what was owed by the renter to be paid back to the renters. However this rarely ever happens since auction-goers are looking to spend the least amount possible when they attend auctions.
Traditionally auctions have been held in person and they operate much like you might have seen on TV. Bidders get a chance to look at the unit from outside the door. They cannot touch or move anything. The bidding takes place and the highest bidder wins. No closed or secret bidding is allowed. Renters and family members are not allowed to bid on their own units. Once the bidding is closed payment must be made immediately.
Online auctions happen much like an eBay auction. The bidding is open for a set amount of time and in the end, the highest bidder wins. Pictures are taken of the units by the auction company and available for viewing by the bidders. Once again, payment is to be made immediately after the bidding is complete.
What’s Not For Sale?
Private documents like birth certificates or medical files will be removed from the auction if they are seen by either the storage facility owners or the auctioning company. If found, every attempt to return these documents to the rightful owners will be made. These types of documents are not illegal to auction per se, but they are difficult to spot when inventorying the unit, however, owners and auctioneers do make their best attempt to ask the bidder to keep a lookout for these types of items and if they are discovered when the unit is being cleared out, facility owners will try to reclaim these documents and attempt to return them to the original renter.
Vehicles left in units fall under different rules as there is no title of ownership to transfer as well as other laws governing vehicle sales. Junk vehicles may simply be towed to a junkyard… adding to the cost of the auction for the storage facility owners. More expensive vehicles may be auctioned separately, but without a title transfer, they can only be used for parts and cannot be driven. Some states do have means of legally correcting the title paperwork, but that is a lot of red tape and beyond the scope of this article. If you are interested in learning more on that topic we suggest searching articles about how to register a vehicle without a title. Further reading: https://www.insideselfstorage.com/archive/selling-vehicles-lien-sale
Firearms cannot be sold at auction and in most cases, they are not legally allowed to be in storage in the first place. If found they will be turned in to the local authorities.
Any other illegal or otherwise prohibited items that are seen before the auction will be removed and actions taken accordingly. Any items that cannot legally be sold cannot be auctioned off.
Do Owners Take Items Before the Auction?
Generally speaking, no, it is illegal for a storage operator to enter the unit to remove items per the rental agreement, other than the previously mentioned items that cannot be sent to auction. Other than the previously mentioned items that cannot legally be auctioned off, owners are not in the habit of picking out items before an auction. Remember that auctions are not a means of making a profit for storage facility owners, but instead a means of recouping some of their losses. Owners will take a quick look at the items to get a general idea if they think the unit will even be worth auctioning off. Remember that the auction requires paying a third-party company and facility owners are not willing to pay more than they think they can get back. If a unit has very few items in it or it looks like it won’t sell then the items may just end up in a landfill.
What Happens to a Unit if the Renter Dies?
If a renter dies the owners will make every attempt to contact the next of kin to either continue renting or to come and collect their belongings. If no contact can be made then the unit will go up for auction. The owners will still follow all the normal procedures and required laws before selling the renter’s belongings. For example, if the deceased has left items from the unit in their will then the person who is willed those items will be required to pay the unit’s debt before they can access the contents. Facility owners want to make every effort to avoid any possible future legal battles with family members and they will follow the letter of the law as closely as possible while respectfully handling the belongings of their former renter.