Posted in Blog, Commercial Litigation by

By Joseph G. Ballstaedt
801-365-1021
[email protected]

In Utah, the owner of a self-storage unit has collateral it can sell, if needed, to pay debts owed by tenants: the tenants’ property that is stored there. This does not mean that the owner can sell the property in any way it wishes. Rather, an owner of a self-storage unit needs to follow certain requirements that eventually lead up to a proper and lawful sale of the tenants’ property. (If you need detailed instructions and forms for the various notices required to properly sell property at a self-storage unit pursuant to Utah law, I can help.) These requirements are helpful. They protect the tenant, his property, third parties, and even the owner of the facility.

In an earlier article, I provide a basic overview of self-storage liens and the process of selling property through a lien foreclosure. In this article, I discuss in a little more depth a few of the preparatory requirements imposed on owners before they can properly sell tenants’ property at lien foreclosure sales.

Notice of Lien Rights

Each tenant needs to be put on notice that the his or her property is subject to a lien. This notice must be provided to the tenant in the written rental agreement between the tenant and the owner, which explains that the right to sell the property triggers when the tenants is in default for a period of 30 continuous days.

Additionally, a proper written notice of lien rights must be posted in a prominent place in the owner’s office.

The consequences of failing to provide this written notice are unclear, but it certainly provides a tenant with a basis to object to the sale of the property.

Information about Lienholders

The rental agreement must also explain to the tenant that he or she must disclose to the owner any lienholders that have an interest in the property stored at the self-storage facility. Later, if the owner proceeds with a lien foreclosure sale, it needs to provide notice to these lienholders. If a foreclosure sale occurs without a lienholder’s knowledge, and the owner had not requested information about lienholders, the owner could potentially be liable to this lienholder. This is because innocent purchasers of property at a foreclosure sale take the property free and clear of lienholders’ and creditors’ rights, even if the owner had failed to seek information about the lienholders and give notice to the lienholders of the sale.

And even if the tenant does not disclose lienholders despite a request to do so, it is a good idea for the owner to make a reasonable search for lienholders. Searches should be made of valid financing statements filed with the Division of Corporations and Commercial Code (UCC 1 statements), and records filed with the Motor Vehicle Division. Conducting these searches will further minimize an owner’s potential liabilities. The owner should conduct them regardless of what the tenant discloses (or does not disclose) about lienholder’s rights.

Limits on Value of Property

In addition to other information, the rental agreement can, but is not required to, provide a limit to the monetary value of the property stored at the facility. This limit helps protect the owner—or at least minimize the owner’s liability—because a tenant cannot make a property claim against the owner above that limit. So, for instance, if the owner sells the property from the wrong unit, sells the property improperly, or otherwise harms a tenant’s property, the tenant cannot sue the owner for more than the limit amount.

Help (and Instructions and Forms) with Self-Storage Lien Issues

This article does not address every issue that can arise in preparing for, and minimizing liability regarding, a foreclosure sale on property stored in a self-storage unit. If you have question, please give me a call. I am happy to help, and I offer a free consultation. My direct dial is 801-365-1021, and you can e-mail me at [email protected].

And again, if you need detailed instructions and forms for various notices required to properly sell property at a self-storage unit pursuant to Utah law, I can help.

joseph-g-ballstaedt

Joseph G. Ballstaedt
801.365.1021
[email protected]

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