Delinquent tenants are a fact of life for self-storage businesses. A small number of delinquencies will eventually result in a lien sale, wherein the facility auctions the contents of the delinquent tenant’s storage unit. If you work with accounts in this industry, it’s important for you and your client to understand the risks that come with lien sales. A facility may follow every required step and still face a lawsuit from the tenant whose items were sold. And facilities that fail to comply with applicable statutes may face regulatory fines, reputational damage, and loss of business – on top of legal action from the tenant. Sound risk management practices and appropriate insurance protections are the first lines of defense. That’s where you come in.
So, how can you help your self-storage clients mitigate risk when it comes to lien sales?
A storage lien sale is a legal process that enables a self-storage operator to recover unpaid rent by selling what is inside a tenant’s unit.
The process is governed by state-specific statutes that dictate:
Overlooking a step may render the sale legally invalid, which could lead to claims of improper disposal or conversion of property. Most storage lien sale claims fall into a few predictable categories:
Before Storage Wars became a hit cable series in 2011, self-storage lien sales tended to be relatively small events with few attendees, in-person bidding, and little fanfare. Widespread public interest sparked by reality shows resulted in big changes, bringing more bidders, higher expectations, and closer scrutiny of sales. Operators have increasingly opted for online auctions, which can reduce on-site problems but don’t remove all risks. Sometimes, in fact, they introduce new issues involving documentation, compliance, and third-party vendors.
The takeaway for insurance agents working with self-storage clients is this: Lien sales today are not the same as they were 10 years ago, and insurance coverage should reflect that.
The best strategy for mitigating lien sale risk is to act before a sale happens. Advise clients to avoid sales when possible by reaching out early and solving payment problems. If a sale is needed, following state law exactly is critical. Being “almost” compliant is not enough – and virtually an invitation to legal action. Automation can be helpful, and facility management platforms can be an asset when it comes to tracking deadlines and creating the right notices. Regular staff training and audits also help prevent errors that can lead to regulatory noncompliance.
This quick check can help you see where extra support or expertise might help before a routine lien sale becomes a dispute.
To stay current on state lien sale laws, relevant litigation trends, and best practices, it’s beneficial to seek out a self-storage specialist who handles lien sale risks every day.
Are storage lien sales covered under general liability?
Not always. Many lien sale claims require sale and disposal liability coverage.
Does conducting lien sales online eliminate risk to the business?
No. Online lien sales reduce the risk of claims resulting from an on-site sale (such as slip-and-fall claims), but they still require strict compliance and vendor oversight.
What’s the biggest driver of lien sale claims?
Failure to comply with state lien sale laws and poor documentation.
Lien sales might make for interesting reality TV, but in real life, they’re serious business. MiniCo has focused on self-storage since 1974, so our underwriters and claims team are highly experienced when it comes to real-life lien-sale situations. We work with insurance agents to provide information and resources that you can share with your clients, in addition to offering a wide range of coverage solutions for self-storage risks. Our team is ready to support you when you need it. Contact us to learn more.