Texas Self Storage Association has served its self-storage industry members since 1986.  Headquartered in Round Rock, Texas, TSSA is the leading expert in self storage in the state of Texas.  Whether you're an owner, operator, manager or employee,  TSSA's blog will provide you with the latest tips, advice and knowledge for running your self-storage business. 

What If the Contents Are Owned by Others? Mortgaged to Others? Or Stolen?
by TSSA Legal Counsel

Can a Chapter 59 foreclosure sale by a self-service storage facility cut off ownership rights of the tenant whose contents are in the storage unit? Can ownership rights be cut off if the items being sold are owned by persons other than the tenant and the tenant had lawful possession of the property at the time of storage? Can community property ownership rights of a spouse who didn’t sign the rental agreement be cut off by a Chapter 59 foreclosure sale? Can ownership rights be cut off if the items being sold are stolen? Can lien rights of a seller or lender be cut off if their lien was recorded with the Texas Secretary of State or the Texas Department of Motor Vehicles (TDMV) or the Texas Parks and Wildlife Department (TPWD) before the property was stored under a self-service storage facility rental agreement containing a Chapter 59 lien? These are tough questions, and the answers are not always clear, so let's look at some scenarios.

On the basis of the foregoing, legal counsel for TSSA has reached the following conclusions and makes the following recommendations to TSSA members:

1. If a foreclosure sale is held by a self-service storage facility under Chapter 59 and if the purchaser had no reason to believe that the property being sold is mortgaged or owned by others, such purchaser acquires title free and clear of all third-party ownership and lien claims—even if:

• the property is community or separate property of a spouse who did not sign the rental agreement;
• the property is owned by a third party (friend, relative, business customer, etc.);
• the property is being stored by the tenant as a bailee for the true owner;
• the property is stored in the self-service storage facility by a non-tenant, without the tenant’s knowledge;
• the property is a motor vehicle, provided the procedures of Section 59.0445 have been followed;
• the property is a motorboat, provided the procedures of Section 59.0445 have been followed;
• the property is a vessel, provided the procedures of Section 59.0445 have been followed; or
• the property is an outboard motor, provided the procedures of Section 59.0445 have been followed.

The facility owner has no duty to investigate or determine whether property is stolen. For example, the owner might discover it was stolen when the owner obtains from TDMV or TPWD the names and addresses of the registered owner and lienholders of a motor vehicle, motorboat, vessel or outboard motor. Or the owner might simply be told by a law enforcement officer that it was stolen.

The law is not clear on whether a self-service facility foreclosure sale would convey title to stolen property that was: (1) found in the unit; (2) not known by the facility to be stolen at the time of foreclosure; and (3) bought by a good faith purchaser for value. Nonetheless, TSSA legal counsel believes that such a sale conveys good title to stolen property if: 1) the property was a motor vehicle, motorboat, vessel or outboard motor registered with TDMV or TPWD; 2) the owner or lienholder of the property received verified mail notice that his property was in the possession of a self-service storage facility; 3) the notice stated that the property was being sold for non-payment of charges by the tenant in whose space it was stored; and 4) the notice stated the time, date and place of sale.

TSSA legal counsel also believes that a self-service storage facility foreclosure sale of stolen property not registered with TDMV or TPWD probably conveys title to a good faith purchaser for value; but no case authorities have decided the issue.

2. At all times prior to a foreclosure sale by a self-service storage facility under Chapter 59, the facility’s lien for unpaid charges is superior to the lien of any prior lienholder and superior to the ownership rights of any third-party owner of the property. Therefore, when law enforcement authorities demand that the self-service storage facility turn over stolen property to the rightful owner or to law enforcement authorities, it is TSSA legal counsel’s opinion that:

• the self-service storage facility can legally refuse to allow the law enforcement officer to open or inspect the property unless he has a search warrant;
• self-service storage facility personnel should not try to forcibly interfere with a law enforcement officer who decides to break the lock and enter and/or remove the property without a search warrant; and
• the self-service storage facility may lawfully foreclose on the contents of the unit for any unpaid charges—even if the facility has been informed by a law enforcement officer, a lienholder or the true owner of stolen property that the property is not owned by the self-service storage tenant or that the property is subject to a prior lien. Of course, pre-sale notice to owners and lienholders as required under Section 59.0445 applies to motor vehicles, motorboats, vessels and outboard motors.

3. The remedy for lienholders and true owners of property who discover that their property or collateral is stored in the self-service storage facility is to:

• convince the facility that they are the true owner or lienholder of the property being stored; that they did not transfer their title or lien to the tenant; that they will sign an affidavit of their ownership or lien (see sample TSSA form “Affidavit and Indemnification Agreement of Non-Tenant Who Claims Ownership or Lien of Vehicle, Trailer, Boat or Outboard Motor” on TSSA form L-5); that they will indemnify the facility for any lawsuit or damages arising from turning over the property to them; and that the facility should therefore turn the property over to them; OR
• obtain a court order to recover the property, subject to their obligation to pay the self-service storage facility for any unpaid charges due on the unit; OR
• pay the accrued unpaid storage charges and redeem the property prior to foreclosure under Section 59.0445 if the property is a motor vehicle, motorboat, vessel or outboard motor; OR
• show up and be the highest bidder on the property when the self-service storage facility forecloses on the contents. The rightful owner or lienholder of the property can then get a judge to impound any excess proceeds and return them to the rightful owner or lienholder, who may have ended up having to bid more than what was owed by the tenant to the facility owner or lienholder (which very seldom happens).

The latter three procedures eliminate proof-of-ownership problems and the risk that the facility owner would be sued if they turned the property over to persons wrongfully claiming to be the owner or lienholder.

Additional Advice from TSSA Legal Counsel

1. Don’t let law enforcement authorities bully you into opening a storage unit without showing you a search warrant. They will sometimes try to threaten you, but they legally cannot force you to open a unit without a search warrant and they cannot charge you with any crime or put you in jail for refusing to open a unit without a search warrant.

2. If law enforcement authorities have a search warrant and if they try to remove property they deem to be stolen or property on which a lender or seller has a lien, you could consider objecting orally to such removal and following up with a letter to the law enforcement agency insisting that none of the contents should have been seized without your being paid.

3. What if the property is stolen? Occasionally, motor vehicles, motorboats or outboard motors discovered in a storage unit are indeed stolen. In that event, you absolutely need to report it to the local law enforcement agency as directed by TDMV or TPWD. Chapter 59 does not preclude a self-service storage facility lien from attaching to property owned by third parties who are not tenants on the rental agreement—unlike Section 54.042 of the Property Code, which specifically exempts any third-party-owned property and lienholders from the residential landlord’s lien. TSSA legal counsel has been unable to find any case law that definitively states whether or not the Chapter 59 lien is valid against stolen property. (However, a 2020 Amarillo Court of Appeals decision involved a claim of conversion against an owner/lessor of a storage facility by the owner of a Jeep, who alleged it had been stolen by a self-storage tenant and then subsequently sold at a public auction by the owner/lessor due to the tenant’s failure to pay rent on the storage unit. Fortenberry v. Birkenfeld, 2020 WL 1146710 (Tex. App.—Amarillo 2020). The trial court entered a directed verdict in favor of the owner/lessor. The Court of Appeals affirmed the trial court’s decision based on the Jeep owner’s failure to present the necessary evidence on appeal. The issue of the validity of the lien itself was not addressed by the Court of Appeals.). As such, that issue does not seem to have been decided yet by the courts.

Of course, if the property is stolen and no charges are due to the facility by the tenant, there is no problem in allowing an officer with a search warrant to remove or allow the true owner or lienholder to remove the stolen property. See TSSA legal counsel’s article on “What if Police or Other Governmental Officials Want Information or Access?” behind the “Legal Articles” tab in this Goldbook©. It is suggested that you photograph any removed property, keep a photocopy of the search warrant, and make a record of the date of the removal, along with the name and badge number of the law enforcement officer.

 

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Contents Owned by Others

Bankruptcy of a Tenant: What You Need to Know

by TSSA Legal Counsel

Bankruptcy is a no-win situation for a landlord. In general, when a tenant files bankruptcy, a landlord’s hands are tied for at least a few months when it comes to collecting overdue amounts. Once a bankruptcy is filed, unless you have received permission from the bankruptcy court, or unless a certain time period has passed, you cannot file for eviction, begin foreclosure or exercise any collection remedies. If you have started either of these procedures, you must “freeze” your effort until the law allows you to continue. Bankruptcy results in an “automatic stay”—this means that until this “stay” is lifted, you cannot take any actions against a bankrupt tenant such as eviction or foreclosure.

What if you have received no paperwork, but the tenant comes to your office, or calls you, to tell you that he has filed for bankruptcy? If you knowingly violate the automatic "stay," you are subject to sanctions and potentially punitive damages if you move forward with your action (e.g., foreclosure) and a bankruptcy has indeed been filed. It is therefore likely not a good idea to ignore someone's statement that they have filed. However, while you should not disregard your tenant's claim of filing, you should, in TSSA legal counsel's opinion, do your best to confirm (or refute) the tenant's claim. If the tenant is not being truthful, and has not filed, you may move forward with your action. You can ask the tenant for a case number and/or the name and phone number of his bankruptcy attorney. It is easy to verify bankruptcy filings with the bankruptcy court, especially with a case number.

You can verify/lookup the status of a bankruptcy at https://www.pacer.gov/ and you can also check the Texas District Court website at https://www.txs.uscourts.gov/. If you act reasonably in attempting to verify the filing, you may avoid punitive sanctions if you elect to go forward in absence of verifiable information as to the filing. But clearly, the most cautious approach, and the recommended one, is that if someone tells you that they have filed for bankruptcy, stop ("freeze") any ongoing collection activity (for example, if you have already overlocked, you can leave the overlock on, but do not proceed to foreclosure), until you can verify the bankruptcy filing.

There are a lot of steps and possible decisions and solutions to a bankruptcy situation. This article outlines, in sequential order, some of the most important steps that you may take in TSSA legal counsel’s judgment. You may also want to consult your own attorney with regard to bankruptcy matters. But first and foremost: act quickly. The quicker you start to act, the quicker you can get a paying lessee.

1. Stop all collection activity. Your first step should be to immediately stop all collection activities against the tenant once you receive notice of a legitimately-filed bankruptcy. Failing to stop collection efforts upon notice may lead to severe monetary penalties.

2. Note the date of notice. Make a note in your files of the date upon which the bankruptcy was filed: any late fees not already assessed on amounts owed as of that date cannot be assessed. If you do not have a written notice (i.e., the notice was oral), then insist on a copy of the notice and/or a case number.

3. Strike a deal. Try to negotiate a deal with the tenant if the tenant has filed under Chapter 11 or 13. If a tenant of yours has filed for Chapter 11 or Chapter 13 bankruptcy, you might want to consider forgiving his debt or even paying him a token amount to come and take his things away. In a Chapter 11 or 13 bankruptcy, you may lawfully agree to forgive all of the tenant’s debt in exchange for voluntarily vacating the unit. The tenant will probably need this agreement in writing to show to his lawyer so his bankruptcy plan can be amended. You cannot legally make a deal to forgive only part of the debt in exchange for immediate payment—even if it is partial payment. A debtor (tenant) does not have the authority to pay you anything except what a court approves under a bankruptcy plan. It may also be worth the effort to call the trustee’s number (listed on the notice of a Chapter 7 bankruptcy) and make the same move-out offer deal.

Forgiving a debt entirely or even paying a tenant to move out is difficult to do when you know a tenant owes you money, but on the other hand, you are otherwise looking at going for months without payment, spending attorneys’ fees, and possibly getting 50 cents on the dollar or less as repayment under the tenant’s bankruptcy plan.

If a tenant has filed for Chapter 7 bankruptcy, the law prohibits you from making any type of agreement directly with the tenant. In a Chapter 7 bankruptcy, the items in the unit now legally belong to the tenant’s bankruptcy trustee and not the tenant. Any “deal” would have to be approved by the Chapter 7 bankruptcy trustee. The bankruptcy notice you receive will tell you what chapter the tenant filed under.

4. File a Proof of Claim with the bankruptcy court. When you receive notice of the bankruptcy in the mail, you should file a document called a Proof of Claim with the bankruptcy court (however, if it is a Chapter 7 bankruptcy, normally no Proofs of Claim are allowed to be filed absent court request). In a Proof of Claim, you list all debts the tenant owes you that were due before the bankruptcy was filed. Normally, the court will send you a Proof of Claim form that you can fill out. Otherwise, your lawyer can submit a Proof of Claim on your behalf. There is a deadline for filing the Proof of Claim, so make sure you read the court’s documents and comply with that deadline.

When you file your Proof of Claim, make sure you file it as a “secured” claim rather than an “unsecured” claim (there will be a check box on the form where you can indicate that it is a secured claim). Your claim is secured by a lien on the contents of the unit. The lien is described in paragraph 22 of your lease and in Chapter 59 of the Texas Property Code. You will need to attach a copy of your lease to the Proof of Claim that you submit.

If a debtor has listed you as a creditor, you should receive a Proof of Claim form from the court in which the debtor filed bankruptcy. If not, and the debtor did not file for bankruptcy in the Western District, you may get a copy of the proper Proof of Claim form by calling the clerk for the appropriate court (most courts have a website, and the clerk can tell you how to download the appropriate form or how to get a hard copy if you don’t have internet access). The clerk’s contact information should be on the notice of bankruptcy you receive.

5. Hire an attorney to “lift” the bankruptcy stay. When the court “lifts” the bankruptcy stay, it means the court is allowing you to go forward with your self-help on judicial remedies. Paying attorneys’ fees may only be worth your while if a tenant owes you a considerable amount of money. It is most likely going to cost you several hundred dollars to hire an attorney to petition the bankruptcy court to allow you to foreclose or file for eviction. However, if the tenant owes you a considerable amount of money and shows no sign of paying any rent that has become due after he filed for bankruptcy (post-petition debt), it may be worth your while to hire an attorney and act quickly.

6. Take action yourself 60 days after the bankruptcy is filed. The tenant’s bankruptcy trustee (in a Chapter 7bankruptcy) or the tenant (in Chapter 11 or 13 bankruptcies) must assume or reject the tenant’s lease within 60 days after the bankruptcy is filed under Section 365(d)(4) of the Bankruptcy Code. If the trustee or tenant decides to “assume” a lease, he must cure any default and show adequate proof to the court that future rent will be paid.

The tenant’s bankruptcy plan (which you should receive a copy of) should tell you whether the trustee is accepting or rejecting your lease. If you have a question and the 60-day time period is nearing, you should call the trustee or the tenant’s bankruptcy attorney and find out if the trustee is going to accept or reject the lease. The trustee’s name and contact information should be on all court documents. If the trustee does not accept the lease within the 60-day period after the tenant files for bankruptcy, then the lease is deemed to be rejected, and the trustee must immediately surrender the property.

Rejection of a lease does not mean that the lease is terminated, but simply means that the trustee or tenant has decided that the lease will not be part of the bankruptcy estate. If the lease is rejected, the obligations of the lease simply become obligations of the tenant again—without being subject to the bankruptcy. The ball is in the landlord’s court at this point to terminate the lease, give an eviction notice or begin the foreclosure process. Once you have confirmed that a lease has been rejected, you can exercise your remedies just as if the bankruptcy did not exist.

If the tenant owes you a considerable amount of money, you may file a petition with the bankruptcy court requesting that the court shorten the 60-day time frame in which the lease must be assumed or rejected. Your bankruptcy attorney can do this for you if this action is appropriate.

7. What about rents that become due after the tenant declares bankruptcy? What if the tenant was current in rent before bankruptcy was declared, but since the time he declared bankruptcy, he has not paid any rent or has missed certain payments? Under bankruptcy law, the tenant is required to keep “post-petition debt” (debt that has become due after the bankruptcy was filed) current. If the tenant doesn’t do this, the first thing you should do is call the tenant’s bankruptcy attorney. Tell the attorney that his client is not keeping post-petition debt current and that you will turn the matter over to a lawyer if payments are not made immediately. The tenant’s bankruptcy attorney should then instruct the tenant to get the debt current. If the tenant does not bring post-petition debt current, then in order to enforce your claim for rents, you (your lawyer) must file a motion with the bankruptcy court asking the debt to be classified as an “administrative claim,” which is given a high priority for payback.

8. Tips to keep from getting “burned” by a tenant’s bankruptcy. There are several things you can do to prevent yourself from being hurt by a tenant’s bankruptcy. Probably the most important thing is to make sure you don’t let a tenant get too far behind in rent payments. Exercise your foreclosure rights quickly or evict the tenant quickly before the tenant has the time to declare bankruptcy. Bankruptcy is a very specialized area of the law, and if you find yourself on the other side of an increasing number of tenant bankruptcies, in TSSA legal counsel’s opinion, you would be well-advised to retain an attorney specializing in bankruptcy to assist you.

 

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Tenant Bankruptcy

Gaining the Authority to Dispose of ‘Valueless,’ ‘Junk’ or ‘Nuisance’ Vehicles

by TSSA Legal Counsel

 At a recent TSSA legal seminar, a member mentioned the topic of disposing of old, abandoned vehicles and their town’s involvement in that endeavor. Here, attorney Will Farnsworth, part of TSSA’s legal team, addresses the question at hand.

Member Question: We have a number of old, abandoned vehicles parked outside at a facility we purchased. I’ve heard there is a process for getting my town to consider these vehicles a nuisance so that they take over the burden of getting rid of them. Can you tell me if this is true, and if so, what the process would be for that?

The Lawyer Answers: Generally speaking, for self-storage facility purposes, there are three potential options for handling “abandoned” or “junked” vehicles on your property or, alternatively, as part of a delinquent tenant’s property that you’ve seized for foreclosure:

1) A self-storage facility may seek a Certificate of Authority (“COA”) to dispose of a motor vehicle by a demolisher if the motor vehicle is deemed “abandoned” (i.e., it has remained on your private property without your consent for more than 48 hours);

2) A municipality or a county may apply for a COA and dispose of a junked vehicle by a demolisher if the municipality/county deems such “junked vehicle” (or parts) to be a public nuisance and desires to dispose of the junked vehicle or parts; or

3)The self-storage facility may seek a COA to dispose of a motor vehicle by a demolisher if the facility has conducted all of the required foreclosure notification requirements under Chapter 59 of the Texas Property Code and the facility determines that either (a) the motor vehicle’s only residual value is as a source of parts or scrap metal, or (b) it is not economical to dispose of the vehicle at public sale.

Each of these options involve the party applying for a COA with the Texas Department of Motor Vehicles (“TDMV”). Upon issuance of a COA, a motor vehicle demolisher who acquires a motor vehicle for dismantling or demolishing may dismantle or demolish such vehicle upon its receipt of the COA (in lieu of the vehicle’s Certificate of Title). (See Section 683.056 of the Texas Transportation Code.)

Abandoned Vehicles

For the first option, a self-storage facility may apply for a COA when a motor vehicle has remained on private property (in this case, the self-storage facility’s property) without the consent of the property owner or person in charge of the property for more than 48 hours (and, therefore, the motor vehicle is considered “abandoned”). Once the TDMV has received the COA application, TDMV is required to send a notice to any owner(s) and lienholder(s) of the abandoned vehicle (and, if no record owners/lienholders are found in the TDMV’s system, TDMV is required to publish a notice on its website). If the motor vehicle’s owner or lienholder has not claimed such vehicle by the 20th day after such notice, the TDMV will issue the COA to the applicant, which will be sufficient for a motor vehicle demolisher to demolish or dismantle the abandoned vehicle.

All-in-all, it may take up to 30 days for the issuance of a COA by TDMV following application. While a self-storage facility would legally have the right to begin this process 48 hours after a motor vehicle has remained on its property, this option would be most practical in the scenario where a motor vehicle has been left at the property for a lengthy period of time, when multiple attempts have been made to identify and/or contact the owner of such vehicle, and when the vehicle is clearly inoperable/abandoned. The form for this application is known as “VTR-71-2” and can be found on the TDMV’s website at: https://www.txdmv.gov/sites/default/files/form_files/VTR-71-2.pdf.

Nuisance Vehicles

With respect to the second option available to a facility (which is similar to the scenario the member asked about), a municipality or a county may notify the TDMV of the abatement of a public nuisance vehicle AND apply for a COA to dispose of a motor vehicle by a demolisher ONLY IF the motor vehicle is considered a junked vehicle and abated and removed from public or private property as a public nuisance pursuant to the provisions of a procedure established by the municipality or county.

Under Section 683.074 of the Texas Transportation Code, a municipality or county may adopt procedures for the abatement and removal of a junked vehicle or part of a junked vehicle from private or public property or a public right-of-way as a public nuisance if such procedures: (1) prohibit a vehicle from being reconstructed or made operable after removal, (2) require a public hearing on request of a person who receives notice if the request is made not later than the date by which the nuisance must be abated and removed, and (3) require that notice identifying the vehicle or part of the vehicle be given to the TDMV not later than the 5th day after the date of removal.

Additionally, the procedures must provide that at least 10 days’ prior notice (personally delivered, sent by certified mail with a 5-day return requested, or delivered by USPS with signature confirmation service) that states that the nuisance must be abated and removed not later than the 10th day after such notice was personally delivered or mailed to (a) the last known registered owner of the nuisance, (b) each lienholder of record of the nuisance, and (c) the owner or occupant of (i) the property on which the nuisance is located, or (ii) if the nuisance is located on a public right-of-way, the property adjacent to the right-of-way. If such procedures are properly followed, the application has been approved by the TDMV, and the agency has issued a COA, the municipality or county must assign the COA to the metal recycler and, after permanently destroying the vehicle, the metal recycler will surrender the COA back to the TDMV and notify that agency to mark the vehicle record as “crushed.” This remedy is only available to the municipality/county where the junked vehicle is located (but nothing prohibits a self-storage facility from contacting the municipality or county in order to move forward with this remedy). The form for this application is known as “VTR-71-4” and can be found on the TDMV’s website at: https://www.txdmv.gov/sites/default/files/form_files/VTR-71-4.pdf

Demolishing a Foreclosed Vehicle

Finally, a self-storage facility has the option to apply for a COA in order to dispose of a motor vehicle to a demolisher if (1) the motor vehicle is subject to a self-storage facility lien (as opposed to merely a vehicle being abandoned in the parking lot of a facility), (2) the self-storage facility owner has complied with all notification requirements under Chapter 59 of the Texas Property Code, including sending the “special foreclosure” Notice to Owner(s) and Lienholder(s), and (3) the facility determines either that (a) it is not economical to dispose of the vehicle at a public sale or (b) the motor vehicle’s only residual value is as a source of parts or scrap metal.

After the notification requirements have been fulfilled and the TDMV’s Self-Service Storage Facility Lien Foreclosure form (Form VTR-265-SSF) has been completed and submitted and after the facility has determined the vehicle’s only value is for parts or scrap metal or it is simply not financially feasible/economical to dispose of the vehicle at public sale, then the facility may apply for a COA with the TDMV to dispose of the motor vehicle in lieu of a public sale. The application for the COA may only be submitted on or after the 31st day after the Notice to Owner(s) and Lienholder(s) has been made. The form for this application is known as “VTR-71-6” and can be found on the TDMV’s website at: https://www.txdmv.gov/sites/default/files/form_files/VTR-71-6.pdf.

In summary, there three available avenues for a self-storage facility to take for dealing with “abandoned” or “junked” vehicle on its property. In all cases, the facility should follow the guidelines and forms promulgated by the TDMV with respect to properly applying for a COA prior to disposing of the vehicle.

 

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Disposing of Valueless, Junk or Nuisance Vehicles

An Acquisition Nightmare: How to Clean Up the Books and Get Back on Track

by Mallory Scott, TSSA

Picture this—you just purchased an existing facility that was previously owned and operated by someone else. You assumed the facility was a well-oiled machine with pristine documentation and sound business practices, but instead you inherited an operational mess that needs some cleanup. Although you may have walked into an acquisition nightmare, it’s never too late to get your facility back on track. Let’s review some scenarios.

TENANTS ON A NON-TSSA LEASE—HOW TO MAKE THE SWITCH

A tenant is delinquent and you discovered that the previous owner used a non-TSSA lease. If your tenants have signed a non-TSSA lease that may or may not have the proper statutory language for foreclosure and Texas-specific laws affecting self storage, you should consider having your tenants sign a TSSA lease. If you do not want to switch your existing tenants to a new lease, you should contact your attorney to review your current rental agreement to ensure that you can (legally) pursue appropriate remedies should a tenant stop paying rent.

To switch to the TSSA lease, you can use TSSA form BUS-4, “Notice of Switch from Non-TSSA Lease to the TSSA Lease,” which can be found in the Members Only section of txssa.org. You can either: 1) Mail the notice, along with a paper copy of the TSSA lease and a return envelope to your tenants’ last known address on file so that they can sign the new lease and return it; 2) Contact your tenants via phone, email or mailed notice requesting that they come into your office to sign a new lease; or 3) If you are subscribed to the TSSA e-Lease, depending on your management software’s functionality, you may be able to email your tenants new leases to e-sign and return electronically.

If your tenants refuse to come in and sign or return a signed copy of the TSSA rental agreement, then you can send them a notice with a gentle reminder stating that if they do not sign a new lease by a specified date, that you will be forced to terminate their contract and they will have to move out. If they still do not sign a new lease, you can hand deliver, mail or email TSSA form E-1, “15-day Notice of Termination of Storage Space Rental Agreement.” Please note: If you do not have a lease, you should give your tenant a minimum of 30 days to vacate the space. You can still use form E-1, but you'll need to extend the date of move out to 30 days instead of 15 days. This is obviously a last-ditch effort as you don’t want to have to ask a paying tenant to move, but sometimes that is your only option. You do not want to end up in a situation where your tenant becomes delinquent, but you can’t exercise your lien because you don’t have the required statutory language in your lease.

NO LEASE, NO NAME, WHAT TO DO?

After an acquisition, you may find a unit that is locked, but you are not receiving rent and have no record of who is leasing the space.

The practical solution is to follow a set of steps to find out who the tenant is and to document a case for “abandonment” by the tenant. TSSA legal counsel recommends: 1) Ask previous owners, managers, employees or tenants who rent near the unit if they know who the tenant is. 2) After at least two months of delinquency, overlock the space and leave a notice in an all-weather sleeve attached to the door asking the tenant to come to your office to discuss the matter. 3) If the tenant shows up, ask them to sign a lease and pay any back rent. If the tenant refuses to pay back rent, you can hand-deliver TSSA form E-2, “Notice to Vacate Storage Space for Non-Payment of Rent or Other Sums.” Since the tenant does not have a written lease, you should alter the form to remove any references to a “written” lease, as it is technically an “oral” agreement. Refer to the Eviction tab in the TSSA Goldbook© for step-by-step eviction instructions. 4) If the tenant does not show up to your office after you have left a notice on the door of the unit, you can cut the lock to take an inventory of the contents. You should either have a witness with you or record yourself cutting the lock and entering the space. If you find any clues as to the identity or contact information for the tenant, you should pursue them. 5) If you don’t find any clues (such as documents or mail), overlock the unit and keep it locked for at least three months. As a practical matter, you can move and store the contents in another unit with other property as long as it doesn’t get mixed up. 6) At the end of three months, if no one has come to claim the property, it can be considered “abandoned” property under the common law definition, in TSSA legal counsel’s opinion. 7) You can now donate the contents to a charitable organization. Obtain a receipt. Please note: If the contents appear to have great value, consult an attorney prior to donating to charity.

SOME TENANTS HAVEN’T PAID IN MONTHS OR YEARS

You have three options…foreclosure, eviction or abandonment.

Let’s start with the safest and simplest remedy, which is foreclosure. There is one question you MUST ask yourself before starting the foreclosure process—do I have a signed lease with the required statutory lien language for this tenant? The TSSA lease (all versions) contains the necessary lien language, which consists of 1) a reference to Chapter 59 of the Texas Property Code, 2) a reference to Lessor’s priority lien on the contents of the property to secure unpaid fees by your tenant, and 3) the text in conspicuous bold or underlined font. If you have a non-TSSA lease and are uncertain if your rental agreement fits all the criteria, you should consult with an attorney prior to proceeding with foreclosure. If you use a TSSA lease or are sure that your non-TSSA lease checks all the legal boxes, then you can follow the step-by-step foreclosure procedure, which is detailed in a legal article in the TSSA Goldbook.

If you find out that your non-TSSA lease does not contain the required statutory lien language, then a viable option is eviction. The eviction process starts with notifying the tenant that you are terminating their contract. You can use TSSA form E-1, “15-day Notice of Termination of Storage Space Rental Agreement.” (See previous note about 30 days notice for a non-TSSA lease.) Hopefully the tenant will move out and you can rent the unit to a new paying tenant. However, it doesn’t always work out that way. So, if the tenant does not move out within the allotted timeframe, you can send one final notice for holding over. You can use TSSA form E-4, “Notice to Vacate Storage Space for Holding Over.” If the tenant does not move out after the three-day notice expires, then the next step is to file for an eviction at your local justice court. To learn more about eviction, read the legal article in the TSSA Goldbook that details the step-by-step eviction process.

There are several other situations when eviction is the best option including, but not limited to:

*You don’t have a signed rental agreement for a tenant who stopped paying rent.
*You have a tenant sleeping in their unit.
*You have a paying tenant who is engaging in illegal activity or causing trouble at your facility.

ABANDONMENT

Abandonment is another option if you have a tenant who is severely delinquent. Using this option hinges on whether the tenant is willing to communicate with you or not. If the tenant is responsive, you can send them TSSA form BUS-23, “Authorization and/or Release by Tenant.” You’ll want to check box number five, which states that by signing the form, the tenant is abandoning all contents to you/your facility. If the tenant is willing to sign this form, you can then dispose of the contents of the unit as you see fit. You can donate the items, sell them in your next auction (without having to pay for the newspaper ad, etc.), sell them at a garage sale or have them hauled off and thrown in the trash.

There is another type of abandonment, which is detailed in Paragraph 26 of the TSSA lease. The tenant has “abandoned” the storage space if ALL the following occur: a) the tenant has given written or oral move-out notice; b) the lock has been removed by someone other than the Lessor; and c) the move-out date or termination date must have expired. The tenant has also “abandoned” the storage space if ALL the following occur: a) the tenant has not paid rent or other sums due; b) the lock has been removed by the Lessor during the foreclosure process; and c) the space contains nothing of value to the ordinary person. This one can be tricky. Something you might not see as having value may hold great value to the tenant, so proceed with caution in deeming contents as having no value to the ordinary person. A good practice is to ask yourself if you would donate the items to Goodwill or The Salvation Army. If the answer is yes, then there is some value you are assigning the contents, but if the answer is no (i.e., the contents are clearly “junk” and have no value, sentimental or otherwise), there is probably minimal risk involved in considering the items abandoned. The next step is to send the tenant TSSA form MISC-3, “Notice of Abandonment,” and give them a reasonable amount of time to come and retrieve the contents. If the contents are not removed by the allotted timeframe, then you can dispose of them as you see fit.

RAISING RENT

It is typical for new owners to raise the rent and other fees after acquiring a previously owned facility. The previous owner may have been charging the same amount for rent since 1982, and in that case, it’s just a good business practice to raise the rent to an amount that is reasonable within your local market. The previous owner may have a minimal late fee that you feel should be increased. They may have also not been assigning fees to all the items listed in paragraph 4 of the TSSA lease. You may not think you need a fee for having to judicially evict or a charge per hour for cleaning or removing contents left behind today, but you may one day. To increase the rent and/or other fees, you can use TSSA form BUS-5, “Notice of Rental Increase and Switch to the Most Recent TSSA Lease.” You MUST give at least 30-days notice to your tenants prior to raising the rent or other fees. If you are using the TSSA lease the tenant does not have to sign or accept a new lease for these changes to take effect.

PREVIOUS OWNER WASN’T COLLECTING SALES TAX

You should be collecting sales tax on the rent for applicable spaces, including those that contain vehicles and trailers, whether the space is designated for vehicles or just a regular self-storage unit. The exception to this rule is a trailer with a boat on it—you should NOT collect sales tax on a trailer if it has a boat on it. You should also be charging sales tax on personal property sold at your facility, such as boxes, locks, keys, packing materials, etc. If the previous owner was not collecting sales tax, it’s quite simple to get back on track. Apply for a sales tax permit with the state Comptroller at https://comptroller.texas.gov/taxes/permit. You can call (800) 525-5555 with questions. For more detailed information on sales tax, see the legal articles in the TSSA Goldbook.

DOCUMENTATION ISSUES

Maybe the previous owner or manager just didn’t keep good records, or maybe there were even some questionable business practices going on behind the scenes. Cleaning up messy documentation can be a process, but it will be well worth the work because precise records can help you stay out of legal trouble.

Signed Lease, Wrong Unit Number
Scenario: You have a signed lease, but then discover that the unit number is incorrect. It’s possible that when the tenant originally signed the lease, they moved into the correct unit, but then moved into a different unit later on and the lease was not updated. You have a few options: 1) Contact the tenant and ask that they come to the office to amend the current lease. You can change the unit number on the lease and have the tenant initial and date next to the changes, and then have a facility representative initial and date next to the changes as well; 2) Complete TSSA form MISC-7, “Rental Agreement for Change in Unit(s)”, and put the signed form in the tenant’s file; or 3) Execute a new lease. Any of these options will work just fine, so choose the one that works best for you. If you are using the TSSA e-Lease, executing a new lease and having the tenant e-sign is probably the safest option.

Multiple Units on One Lease
Scenario: You notice that there are multiple units listed on a single lease. This can actually work in your favor. If the tenant stops paying on one of the units, but continues to pay on the others, you can deny access to all the units listed on the lease until the balance on the account is paid in full. Sometimes tenants will stop paying on a unit containing items that aren’t of great value but continue to pay on units that they need to access frequently. Because all units are listed on one lease, any amount left unpaid is considered a balance on the account, and until paid in full, access can be denied, and the foreclosure process can begin.

There are endless scenarios that you can face when purchasing a facility that has been run by someone else. The main thing to remember is that there are resources available to you through TSSA.

 

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Acquisition Nightmare

Everything You Need to Know About Online Auctions

by Sarah Cole, Oakcrest Management

As technology continues to advance, the self-storage industry is advancing with it. One of the most recent changes is with online auctions. Thanks to the hard work of TSSA, Matz & Co. and Connie Heyer pushing new legislation through, online auctions are now part of the Texas Property Code. Many companies started making this switch over the last few years, but the rest have been watching the industry to find out what is going to benefit their facilities the most. One of the best ways to figure out what will work for your facility is to weigh the pros and cons of both in-person and online auctions.

The concept of online auctions has been around for quite some time. Online auctions started with individuals selling and auctioning personal items on sites such as eBay. Now we have the ability to utilize online platforms to auction off the contents of storage units. 

Online auctions are not just another fad or trend.

When the TV show “Storage Wars” aired, self-storage auctions started get- ting some publicity and now the general public finally knows storage unit auctions are an actual thing. So why did the market start shifting to online auctions?

“Online auctions seem very interesting,” says Ashley Montessoro of Lockaway Self Storage. “It is something new, gets the property name out to a new group of people and seems like it may be easier on our managers.”

Lower attendance at more rural properties is the reason Ryan Rogers, managing partner at Store  Here Self Storage, started looking into online auctions. Online auctions open the door to more potential bidders, the bidders have more time to view the items in the unit and they have more time to bid.

Another reason is the amount of time it takes to conduct an in-person sale on auction day. “It is a disruption of the property’s normal business day,” says Rogers. “Especially if you have more than one location to visit, it takes up your entire day.”

April Young of Ultimate Properties says, “When traveling from property to property on auction day, the number of bidders dwindles and by the time you get to the last property, you’re lucky if you still have one or two people show up for the auction.”

Liability, liability, liability is what we hear at every legal session we go to when it comes to onsite auctions.


It is the overall liability of a group of people walking the property on auction day. What if someone trips and gets hurt?

“With online auctions,” Montessoro states, “There is also the bonus of not having a large crowd walking around the property once a month.”

Also, the worries we have about having to handle altercations are now gone when you use online auctions. “You also don’t have people coming onto the property and causing a stir with the customers,” notes Ann Parham of Joshua Management Corporation.

Buyer collusion can also be a problem with onsite auctions. “The people who follow the auctioneer know each other and they start to negotiate with one another before the unit is even up for auction. It causes price setting,” explains Parham.

Online auctions seem to solve a lot of potential concerns and issues we face every month, but still many of us are hesitant to make the switch.

“I’m not so sure it is hesitation that has kept us from switching as much as it is us wanting to keep those hands- on, face-to-face relationships with our bidders,” Young explains. “There is also a sort of comfort in knowing all of your paperwork is right and the auction was processed correctly.”

Even though they have only been doing online auctions a short time, Montesorro has noticed, “There is the potential to make simple mistakes when setting it up online. Your managers really need to pay close attention to detail or the auction may have to be cancelled.”

Some locations have a great auction crowd. Some of us like using an auctioneer who has their own following, which also gives us a second pair of eyes on our lien paperwork to ensure the sale is conducted properly. And some of us like to just get these auctions done and over with. Instead of waiting several days for online auctions to run, and then potentially another 24 to 48 hours for the highest bidder to come in and pay (unless they pay online); in-person auctions are all over in one day.

“Buyers not showing up to pay after bidding” is an issue Rogers has seen with online auctions. “With in-person auctions,” Rogers says, “We know right away if a buyer does not have the money and can sell it again quickly.”

Once you’ve weighed all the options and you’ve decided online auctions are the way to go, where do you begin to look to find the right online platform? When looking at all of the different options, put yourself in your customer’s shoes. What is most important to you? Is it price or customer service that is the deciding factor? You want to know that the platform you use will back you up if there is a mix up or any issue with the auction. Here are a few of the platforms available to you (some of this information is taken directly from the company’s website).

IBID4STORAGE.COM


According to their site, iBid4Storage. com has managed self-storage locations and been involved in the self-storage auction process in Canada and the United States for the past 22 years. “We continue to be innovators and leaders in the self-storage industry and have created a marketplace where both sellers and buyers of storage auction units can benefit and prosper.

“If you’re a storage unit owner or manager who is looking to recover your losses, online storage auctions are a great way to find bidders and to advertise your auction without the crowds and inconvenience that come along with having a physical storage auction at your facility. Research has shown that owners get three to five times more for foreclosed storage unit contents with an online sale.”

“We chose iBid4storage because they were friendly, acted like they were interested in gaining our business, were willing to negotiate rates and followed up consistently, even after gaining our business,” says Rindge Leaphart, COO of Oakcrest Management, Inc.

SELFSTORAGEAUCTION.COM


From the founder of Storage Battles, SelfStorageAuction.com is ready to revolutionize the storage industry. From their site: This new website for online and live self-storage auction listings is built to “provide the most safe, manageable and efficient platform for online self-storage auctions to be held.”

Most self-storage auctions are now being held online. “Our site not only speeds up the sales process, it completely eliminates the need for live, on-site auctions. Facilities can easily prepare auctions in advance and increase profits by expanding their customer base.”

STORAGEAUCTIONS.COM

Owned by Lonnie Bickford, StorageAuctions.com is a robust online auction site for foreclosed units. According to the StorageAuctions.com site, you can find the best storage unit auctions as a bidder and reach a faithful audience of bidders as a seller.

Storage facilities can also streamline their auction process by listing their inventory in one place for both live auctions and online auctions. Storageauctions.com reduces the hassle and you can list with confidence knowing your unit will be viewed by a much larger bidder base than those who might show up in person for a live auction.

STORAGESTUFF.BID


According to their site, StorageStuff.Bid is made up of a combination of self- storage owners, licensed and experienced storage auctioneers and a team of technology partners who specialize in internet marketing and web design. “Together, we have more than 50 years of experience in the self-storage industry.

“We understand the needs and goals of storage owners and operators. We understand the consequences of accounts receivable and bad debt. We also know that storage operators are in the business of renting storage units, not selling them. We offer storage operators a quick and easy way to empty units that have gone through the lien and foreclosure process.”

STORAGETREASURES.COM


StorageTreasures is a free, social site to find live onsite storage auctions or online auctions at any self-storage facility across the United States and Canada.

StorageTreasures.com was founded by SSA members and self-storage professionals who have more than 60 years of experience in the self-storage industry.

StorageTreasures has revolutionized the way in which the contents of self- storage units are marketed and publicly auctioned after the tenant has failed to pay rent. The site fills the gap between the operational systems that the industry currently utilizes and the public buyer who may be interested in the contents of a unit going to auction. The tools StorageTreasures provides allow the storage industry not only to comply with, but also exceed the intent of state laws governing the self-storage industry, protecting tenants and bidders alike.

“We use storagetreasures.com,” says Montesorro. “Another branch of our company has been using them for a couple of years now. Plus the customer service response, we have received from them is really nice.”

TIPS FOR TRANSITIONING TO ONLINE AUCTIONS

You’ve decided to give online auctions a try. You did your research and picked the online platform that suits your business. Now you ask yourself, how am I going to transition this new process?

What procedures should I follow to make sure I don’t miss selling a unit? Since several of us have been doing them for a while now, we have some suggestions. Remember everything up to your notice of sale and auction ad are the same:

1. Seize the unit

2. Send out the Notice of Claim

3. Inventory the unit for the auction ad

Now this is where the changes come into play.

4. When you publish the Notice of Public Sale in the newspaper, it must contain the following:

  • Statement that property is being sold to satisfy a landlord’s lien
  • Address of the facility (where the unit is located)
  • Website address for the auction
  • Start date/time and the end date/ time for bidding (and any other terms of sale)
  • Tenant’s name
  • General description of the property

5. Mailing a printed Notice of Public Sale to the Tenant is optional and not required by statute.

Next, list your units on the auction website. Most people take additional photos for the online auction in addition to the standard lock cut photos. Some supervisors find it easier to wait approximately five to 10 days before the auction starts to go back to the facility to get the additional photos they need.

“This is a great time to thoroughly review the auction file and make sure all of the notices were sent correctly,” says North Texas district  manager for Storage Depot Jay Hoger.  “The week before the auction starts is a great spot in the timeline to take the additional photos and upload them to the auction site because there are a lot of tenants who pay between lock cut and auction. Therefore, the closer you wait to the auction date to take the photos, the fewer units you will need to photograph.” Uploading the photos to the site a week before the auction is supposed to start will give prospective bidders the opportunity to preview the unit.

Double check… no… triple check that the photos match the unit you are listing. You don’t want to have an upset buyer come in and pay for a unit and then open the door to find out it does not contain the items pictured. Nor do you want to have to pull a unit from auction because you didn’t upload the photos or forgot to schedule a unit online for the auction.

When the auction ends, the auction site will notify you as well as the highest bidder with all of the pertinent information on the sale.

We have found it is best to wait until the buyer comes in to pay before closing out the sale. There is the occasional no-show and most of the auction sites will give you the second-place bidder’s information, so you can contact them to purchase the unit. However, TSSA legal counsel  Connie Heyer’s opinion is that the bidder is not required to pay at the facility—they can simply pay online. It is important for your auction rules to list all terms, including what will happen if the original bidder defaults on the sale. It is also important that the online auction site rules don’t conflict with your facility’s auction rules.

There are pros and cons with online auctions and a lot to consider when you are switching to a new procedure. As self-storage advances into the technological age, are you ready to advance with it by making the transition to online auctions?

Sarah Cole joined Storage Depot seven years ago as the audit manager. In addition to overseeing the audit process for the entire organization (32 stores and growing), she provides support to the management team regarding auctions, process improvements and general day-to-day operations. Sarah is also a degreed paralegal.

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Everything You Need to Know About Online Auctions

When a Tenant Dies

by TSSA Legal Counsel

Do you know what to do when a tenant dies? With the help of this blog post, you may be better prepared for such a tragic event. These suggestions reflect the realities and risks to be avoided in Texas.


1. Who is liable for the deceased tenant's rent? 

The estate of a deceased tenant continues to be liable on the rental agreement for payment of rent, damages, late charges, etc., throughout the remainder of the rental agreement term. Technically, the representatives of the deceased tenant’s estate must give 10 days’ notice of rental agreement termination, just as the tenant himself would have had to do.

2. Can you exercise your contractual lien?

If rent is delinquent at death or becomes delinquent thereafter, you can still exercise your landlord’s lien under either circumstance (if you are using the TSSA Self-Service Storage Rental Agreement). But do not do so without first consulting your attorney. There may be a waiting period before you can exercise your foreclosure rights. The probate process may be rather lengthy depending on the case (i.e, several months), so consulting with an attorney on the proper procedures is recommended.

3. Is it risky to turn over the deceased tenant’s property to others?

Turning over the deceased tenant’s property to third persons can be dangerous. What if such persons are not who they say they are, or what if they are not lawfully entitled to the property? In Texas, sometimes even surviving spouses and children are not entitled to the deceased tenant’s property. The law says that you are liable if you give the property of a deceased tenant to the wrong person.

4. Use the TSSA Rental Agreement.

Use the TSSA Rental Agreement, which contains a provision in paragraph 1 authorizing you to turn over the tenant’s property to a specifically named “emergency contact” person upon the tenant’s death, serious illness, accident or incarceration if that person signs an affidavit (see TSSA form MISC-2). Additionally, regardless of whether the tenant named a specific “emergency contact” person in the lease, if one of the following persons signs this affidavit, you may also, at your option, provide them access: Tenant’s brother, sister, spouse, parent, child over 18 and (only in lease forms dated 2012 or later) estate executor. It would be a good idea to ask for a death certificate or newspaper obituary article to be sure the tenant has, in fact, died. Remember, it is your right, not your obligation, to turn over the property to the emergency contact. If former girlfriends, boyfriends, ex-spouses, estranged spouses, or “friends of the family” show up to claim the property, BEWARE. Unless they are listed as the “emergency contact” person in paragraph 1 of the TSSA Rental Agreement, do not make a move without checking with your immediate superior or your lawyer. A handy excuse to use for not turning the property over to a claimant is to tell the claimant, “I could be held liable if I give it to the wrong person.” Indeed, this is the truth, especially if a tenant bequeathed his belongings to another person under a will to another person or if his will is contested.

5. What if the tenant had a will?

Even if you are given a copy of the tenant’s will, it is still not safe to turn over the property to anyone except the “emergency contact” person named in paragraph 1 of the TSSA Rental Agreement. The reason is that the will may have been revoked, forged or contested. Exercise restraint and care in relying on a will. When in doubt, call your lawyer or insist on a copy of a court order probating the will.

6. Should you insist on an indemnity agreement?

If the person to whom you turn the property over has not been named in paragraph 1 of the TSSA Rental Agreement, it is always advisable to require such person to indemnify you against all claims of others regarding the property, using a form like TSSA form MISC-2. Be sure to get any indemnity agreement dated and signed. If the claimant is not willing to indemnify you, do not give him the deceased tenant’s property. If you are turning the property over at the request of someone’s lawyer, demand that he also sign an indemnity agreement. If he won’t sign, something is amiss.

7. What if non-tenants have access after the tenant’s death?

Even if the facility owner knows that the tenant has died, the facility owner cannot and should not prevent access to the storage unit by anyone who has the facility access code and a key to the deceased’s tenant’s storage unit. The facility owner is not liable to the tenant’s heirs or surviving spouse, etc., if property is removed after the tenant’s death by such third persons.

8. Can you insist on identification?

The “Ground Rules” in paragraph 37 of the TSSA Rental Agreement give the facility owner the right to insist upon proper identification of anyone on the premises of the storage facility. If the facility owner is concerned, he should notify the emergency contact person listed in paragraph 1 of the TSSA Rental Agreement.

9. How to give notice to a deceased tenant’s estate.

Address any letters to the “Estate of [tenant’s name], c/o Administrator or Executor of the Estate.” On the inside address of the letter, show that it is being sent to the tenant’s address and to the address of the administrator or executor. Also, show a copy going to the emergency contact person shown in paragraph 1 of the TSSA Rental Agreement.

 

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When a Tenant Dies

Powers of Attorney: When Can/Should You Accept Them?

by TSSA Legal Counsel

A power of attorney is a document that gives someone else the legal power to act on behalf of someone. The person who is given the power of attorney is called the agent or attorney-in-fact. It is not necessary to get an attorney in order for someone to give you a power of attorney. For example, relatives might give them to each other temporarily, when one of them leaves the country and wants someone local to be empowered to act on their behalf in the event of an emergency. This blog post will answer basic questions about powers of attorney.

WHO CAN GRANT ONE?

Any adult (age 18 or older) of sound mind.

WHAT IS THE PURPOSE OF A POWER OF ATTORNEY?

To show other people that an agent has been legally appointed to act on behalf of the person who made the appointment.

WHAT ARE THE TYPES OF POWERS OF ATTORNEY?

Typically, they are broad (granted to do most anything on someone’s behalf) and special (granted for a particular purpose; for example, limited to selling a certain house). There are also subcategories of durable (the power of attorney is still valid even if the person granting the power of attorney becomes incompetent or becomes valid only upon someone becoming incompetent) and non-durable (the power of attorney is automatically voided if the person granting it becomes incompetent).

AM I REQUIRED TO ACCEPT POWERS OF ATTORNEY?

You are not required to allow someone to enter into a new lease using a power of attorney, just like you are not required to lease to anyone and everyone who walks in your door. In other words, you are not required to initiate a new customer transaction with a power of attorney holder. However, if the holder wants to take action the tenant would otherwise have the right to take (for example, give a 10-day notice of lease termination), then in cases of a durable power of attorney, you must honor the power of attorney holder’s right to act (this is relatively new law in Texas, meant to assist with administering estates of the deceased). In lieu of automatically honoring the durable power of attorney though, you have the right to first require the power of attorney holder to issue you an agent’s certification (Texas Estates Code §751.203) in which the power of attorney holder certifies to you under penalty of perjury that the power of attorney is genuine. You may, in lieu of this certification from the power of attorney holder, request an attorney’s opinion (§751.204).

WHAT SHOULD I DO IF I’M PRESENTED WITH A POWER OF ATTORNEY?

It is up to each facility to establish this protocol. You don’t want to be unaccommodating to legitimate needs for power of attorney, nor do you want to be defrauded into accepting a fraudulent one. If you are presented with a durable power of attorney (the powers continue after someone becomes incompetent, or only spring to life when someone becomes incompetent) and are hesitant to accept it, the reply can be “Please present me with an agent’s certification, or an opinion of counsel, prior to my acceptance of your power of attorney.” If you are presented with a non-durable power of attorney (it does not contain language confirming its validity should someone become incompetent), then you may, but don’t have to, accept it. The authorization is a durable power of attorney if, and only if, it has the following language, “This power of attorney is not affected by subsequent disability or incapacity of the principal” or “This power of attorney becomes effective on the disability or incapacity of the principal.” A durable power of attorney also must be signed and acknowledges under oath (very similar to signing before a notary). In summary, powers of attorney are legitimate legal documents. In some cases (with durable powers of attorney when you already have an ongoing relationship with the granter of the power of attorney) you are legally required to honor them. However, even in these cases, you may ask for further legal documentation.

 

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Powers of Attorney: When Can/Should You Accept Them

Answers to Your Legal Questions Are Hiding in Plain Sight in the TSSA Lease

by Mallory Scott, TSSA

TSSA members frequently reach out to the association staff with what they consider “legal questions” about scenarios involving tenants. We don’t have any attorneys on staff so we can’t give legal advice, but often, just getting instant validation about the way they interpreted something they read in the Goldbook© from the person on the other end of the phone is what members are looking for. Sometimes, members just want a “quick answer” about what the lease contract says. Many of those straightforward answers are hiding in plain sight within the TSSA lease, where many might not think to look.

Pro tip: There is a lease word index in the TSSA Goldbook© to help you find just what you’re looking for—look for the tab in the back of the book.

Am I liable if a tenant complains that the contents of his/her unit are damaged due to vermin, flood, fire, theft, etc.?


Paragraph 20, Nonliability and Release for Loss and Injury; and Insurance, states: Lessor is not liable for any loss, damage or cause of action of any nature, including bodily injury and damage of property stored in or transported to or from tenant’s space, regardless of who owns such property and regardless whether the loss or damage is caused in whole or in part by fire, smoke, dust, water, weather, insects, vermin, explosion, utility interruption, equipment malfunction, unexplained disappearance, negligence of lessor or lessor’s agents, theft by others, or any other cause—to the fullest extent allowed by law.

This statement is echoed in Paragraph 27, Indemnity and Subrogation, and again in Paragraph 35(c), Tenant Responsible for Locks, Insurance and Losses.

Does my tenant need to obtain tenant insurance, or do I need to require that they have insured the contents of their unit?


Paragraph 20, Nonliability and Release for Loss and Injury; and Insurance, states: Tenant will purchase fire, theft, and casualty insurance on all of tenant’s property if its value exceeds $1,000. The purpose is to protect Tenant, other tenants, Lessor, and others in the event of loss by theft, damage, fire, flood, explosion, natural disaster, or other harm caused by weather, accident, or negligence of such parties or their animals.

Tenant will self-insure all contents not covered by tenant’s insurance. Self-insurance means that Tenant will bear the entire risk of loss in the event of damage or loss to such contents from crime, casualty or other harm or loss listed above. Lessor does not and legally cannot carry insurance on the contents of Tenant’s space.

Can I enter a tenant’s unit if there is an emergency or if I need to make repairs inside a unit?


Paragraph 18, Lessor’s Right of Entry, states: Lessor may enter the space under any of the following circumstances:

1. Lessor has express written or oral authority from Tenant to enter;
2. Lessor reasonably believes there is an “emergency,” including without limitation an imminent danger or health hazard to persons or property because of danger of fire or water damage, broken doors, broken locking mechanisms, ammunition, spoiled food, carcasses, volatile chemicals, or fuel not in containers approved by Lessor. Lessor will promptly notify Tenant after entry for emergency purposes;
3. Lessor has reasonable grounds to believe that criminal activity is occurring in the space;
4. Lessor has made written request to Tenant for access to the space for relocation of contents after casualty loss or for inspection, repair, or improvement, and Tenant has failed to provide such access at the time and date requested, which may be no sooner than 7 days from the sending of such request; or
5. Lessor is exercising Lessor’s lien under paragraph 24. Otherwise, Lessor may not enter the space.

Am I liable if my security camera or gate isn’t functioning for a period of time? What temperature is considered “climate controlled”?


Paragraph 15, No Warranties, states: No express or implied warranties are given by Lessor. Lessor disclaims and Tenant waives any implied warranties of suitability, merchantability, security, safety, or fitness for a particular purpose.

Lessor does not promise safety or security of persons or property on the premises, and Lessor has no duty of safety or security of same under any circumstances. Video cameras may be non-operational or unmonitored. Access control devices may be unmonitored and may occasionally malfunction.

If your unit is climate controlled, climate controlled for the purposes of this lease means that Lessor will use reasonable efforts to avoid temperature extremes in a unit by keeping the unit warmer than the outside temperature in cold weather, and cooler than the outside temperature in hot weather, through HVAC or other system. As with any mechanical system, it is subject to failure or malfunction. The facility makes no representations regarding humidity control or safety of contents stored in the unit.

If I want to terminate a tenant’s contract and ask them to vacate, how much notice am I required to give?


Paragraph 9, Termination and Move-Out Notice, states: Lessor may terminate this Agreement by providing written notice to Tenant 15 days in advance of termination. If the space is substantially damaged due to fire, windstorm, or other casualty in Lessor’s sole judgment, Lessor may terminate this Agreement by emailing, mailing or hand delivering 5 days advance written notice of termination to Tenant. Lessor may terminate this Agreement sooner under paragraphs 24(4) and/or 25. Tenant may not holdover after termination of possession or termination of the lease by Lessor.

The police are requesting access to a tenant’s unit. Can I let them inside a unit?


Paragraph 19, Law Enforcement Directives, states: Upon presentation of a search warrant by a health or law officer, Lessor may open the space or allow such officer to open the space for inspection by such officer; and such officer may lock the space (if the space is lockable) but is not required to do so.

When can I safely consider a unit abandoned?


Paragraph 26, Abandonment, states: Tenant has “abandoned” the storage space if ALL of the following occur: (a) Tenant has given Lessor written or oral move-out notice; (b) Tenant’s lock has been removed from the space (if the space is lockable) by someone other than Lessor; and (c) the move-out date or termination date has expired.

Tenant also has “abandoned” the storage space if ALL of the following occur: (a) Tenant has not paid rent or other sums due; (b) Tenant’s lock has been removed (if the space is lockable) by someone other than Lessor OR has been removed by Lessor when exercising a statutory seizure; (c) Tenant’s space contains nothing of value to the ordinary person.

My tenant moved out in the middle of the month and wants a refund. Do I have to provide a refund?


Paragraph 28, Refunds, states: Tenant must satisfy paragraph 38 for refunds. Unless a longer period of time is stated in an addendum or in supplemental rules at the time of signing, Tenant is liable for rent for the remainder of the month of move-out or for 10 days after move-out, whichever is longer.

Paragraph 38, Refunds and Moveouts, states: Unless an addendum to the Rental Agreement provides otherwise, conditions for refunding prepaid rent and deposit are as follows:

1. Tenant must give Lessor 10 days written move-out notice;
2. Tenant must give Lessor written notice of actual move-out within 24 hours after moving out;
3. Tenant’s lock (if any) must be removed on or before move-out date; or if the lock belongs to Lessor, the lock must be returned to Lessor;
4. Tenant must not leave trash in the space, halls, or driveways;
5. Tenant much stay minimum term length in paragraph 3; and
6. Tenant must be current in all obligations at time of move-out.

Do I have to give my tenants notice when I want to increase their rent? If so, how much notice should I give?


Paragraph 30, Rules and Agreements, states: Lessor may change any part of this Agreement, including rental rate, due date, late charge dates, and charges listed in paragraph 4 by hand delivering to Tenant, or providing written notice to Tenant via any method of written contact provided by Tenant at least 30 days prior to the effective date of the changes.

summary


Sometimes, when searching for an answer to your question, your best bet is to go directly to the source—in this case, the TSSA lease. It contains many of the answers to the most frequently asked questions. Strange scenarios will pop up from time to time, and those may warrant a bigger conversation. Please feel free to reach out to TSSA at 888-259-4902 or info@txssa.org if you have questions that are out of the ordinary…or if you just need validation that you are on the right track.

 

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Answers to Your Legal Questions Are Hiding in Plain Sight in the TSSA Lease

What's Required to Utilize the New Towing Option?
by TSSA Legal Counsel

 

Effective as of September 1, 2021, Texas law now permits self-storage facilities an additional remedy for operators in the event their tenants have defaulted on their self-storage leases (they have stopped paying rent): the ability to tow certain vehicles away from self-storage facilities in lieu of holding a public auction.

While a facility’s lien on property that will be towed will be extinguished the moment the vehicle is towed away from the facility, you will receive the benefit of (a) no longer having the storage space at the facility taken up by such vehicle, and (b) not being liable for any damage that occurs to the vehicle while the vehicle is being towed or after the vehicle has been towed from the facility.

What Items Can Be Towed?

  1. A motor vehicle, trailer or semitrailer titled or registered under Texas law;
  2. A motorboat, vessel or outboard motor for which a certificate of title is required under Texas law; and
  3. A motor vehicle, trailer, semitrailer, motorboat, vessel or outboard motor registered or titled outside of Texas.
Vehicles may only be towed to “vehicle storage facilities,” meaning a garage, parking lot or other facility that is (a) owned by a person other than a governmental entity; and (b) used to store or park at least 10 vehicles each year.

Click here search the online TDLR (Texas Department of Licensing & Regulation) database for a vehicle storage facility/licensed towing operator. You can search by company name, license number, city or ZIP. Please note: Select 'vehicle storage facility' from the dropdown menu when searching by city or ZIP.

What You'll Need to Utilize New Towing Option

  • Signed rental agreement (with required towing law language) between the tenant and the owner/lessor of the facility authorizing the transfer of possession and towing of the applicable vehicles;
  • A Notice of Claim must be given to the tenant, containing certain statutory information (See TSSA’s updated Notice of Claim form);
  • The tenant must fail to satisfy the claim on or before the 14th day after the claim notice is sent;
  • A vehicle storage facility must agree in writing to accept possession of the towed property; and
  • The owner/lessor must transfer possession of the vehicle and tow it to the vehicle storage facility (Bullets three and four are satisfied by using form VTR-265-SSF).

Completing Form VTR-265-SSF

The Texas Department of Motor Vehicles (the “TDMV”) has updated their form VTR-265-SSF (the “Self-Service Storage Facility Lien Foreclosure” form) that TSSA members should use to satisfy the requirement of the vehicle storage facility accepting possession of the vehicle. This form requires a self-storage operator to complete certain information relating to the vehicle, including:
  • Vehicle Information (e.g., VIN, Year, Make, Model, License Plate, etc.);
  • Lease/Rental Information (e.g., Facility Name and Facility Address, Tenant Name and Address, Date of Lease, etc.);
  • Foreclosure/Public Sale (or Transfer) Information (e.g., Date Possession of the Vehicle was taken, Name and Address of Purchaser or Vehicle Storage Facility, Vehicle Storage Facility Transfer Information); and
  • An Odometer Disclosure Statement.

Additionally, the last page of the TDMV form provides information summarizing the process and procedures for initiating a public auction of the vehicle or the towing of a vehicle to a vehicle storage facility.

Documents Required to Provide to the Vehicle Storage Facility

  • Signed and notarized copy of form VTR-265-SSF;
  • Signed rental agreement/lease with required towing law language; and
  • Revised 2021 TSSA Notice of Claim form with required towing provision.

Links to Towing Forms

The updated Self-Storage Facility Lien Foreclosure Form VTR-265-SSF can be found here. The updated 2021 TSSA Notice of Claim, which now includes the required towing provision, is available for purchase in a print version or as a free download from the Members Only section here. Please note: You will need to log in to your TSSA account to view Members Only resources.

If you are using the TSSA e-Lease with your management software and have not updated to the 2021 lease, click here to put yourself on the update list. Printed leases with the statutory language are available for purchase in the TSSA Shop.

 

 

 

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The Texas Towing Bill

TPWD Requiring Serial Number or TX Number in Ads for Boat Foreclosures

by Rigby Slack, PLLC, TSSA Legal Counsel

The Texas Parks and Wildlife Department (“TPWD”) recently provided TSSA with important guidance as to newspaper advertising requirements when selling vessels or outboard motors at a foreclosure auction. Per Section 59.044(a) of the Texas Property Code, a newspaper advertisement giving notice of a public sale must include (1) a general description of the property, (2) a statement that the property is being sold to satisfy a landlord’s lien, (3) the tenant’s name, (4) the address of the self-service storage facility, and (5) the time, place, and terms of sale. While this section of the Texas Property Code merely requires a “general description” of the property when identifying the property in an advertising notice, the TPWD has interpreted this to mean that the “TX or serial number” of each such boat/vessel should also be included in each notice. More specifically, the TPWD has confirmed that a “general description” of the property should include the “make, TX or serial number, AND year built” of the vessel and/or outboard motor

WHERE CAN I FIND THE “TX NUMBER” FOR THE VESSEL?

The TX number is assigned by the TPWD. The TX number of a vessel is required to be painted on or affixed as stickers to each side of the forward half of the vessel in BLOCK characters. The TX numbers are generally in the following formats: “TX 0001 GG” or “TX-0001-GG.”

WHERE CAN I FIND THE SERIAL NUMBER FOR THE VESSEL?

With respect to boats, all boats manufactured since November 1, 1972 must include a hull identification number (“HIN”) which effectively serves as the boat’s serial number. The HIN is a 12-character identifier usually found on the transom of the boat on the right starboard side of the transom within 2 inches of the top of the transom, gunwale, or hull/deck joint, whichever is lowest. HINs are formatted as follows: “ABC 12345 D6 78.” For outboard motors, an outboard motor identification number (“MIN”) is the appropriate identifier. Each engine maker uses a different placement point and code identifier for MINs. However, the MIN is typically found on the side of the motor on a plate which identifies the make, model and serial number.

CONCLUSION

While the Texas Property Code merely requires a “general description” of the property when identifying the property in newspaper advertisements, the TPWD has interpreted this to mean that the (1) Make, (2) TX or Serial Number, and (3) year built for such boat/outboard motor be included in such notice. The TPWD has confirmed that either a TX number or a serial number will suffice. Additionally, the TPWD has stated that “since TX numbers typically have fewer digits than serial numbers, then it is usually cheaper to place an advertisement with TX numbers than with serial numbers.” Moving forward, TSSA members should include this information when advertising a foreclosure auction of a vessel and/or outboard motor to the public. Otherwise, there is a risk that the TPWD will not let the new buyer re-register the vessel/outboard motor following the auction.
 

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TPWD Requiring Serial Number or TX Number in Ads for Boat Foreclosures

Legal Q&A: Abandoned Records, Break-In Disclosure, Increasing Tenant Rent, Re-Numbering Units and Employment Issues

by TSSA Legal Counsel

Abandoned Business Records


Question:
I have a tenant who is an attorney and has abandoned a unit full of boxes of legal documentation. Do we have to shred the documents to dispose of them?


Answer:
According to the TSSA lease, a unit is only abandoned by a delinquent tenant if the unit contains “nothing of value to the ordinary person.” If there are filing cabinets or nice boxes that would have value, the unit is not abandoned. Abandonment is a case-by-case analysis. The tenant is the one who is violating the record disposal laws because these records are your tenant’s business records. So, if they contain sensitive personal information, he has a duty to dispose of them in compliance with state law. You might try calling or emailing the tenant’s office, reminding him of his legal duty to properly dispose of his own business records. If you ultimately must go to auction, however, it would be best in my opinion to have a third-party buyer purchase them at auction. It would make sense to make clear to buyers, ideally in a bidder agreement signed by the buyer, that the buyer is responsible for legally disposing of any records found in the unit that contain sensitive personal information, and that he must properly dispose of them in a responsible manner. If there are no buyers, probably the best alternative is for you to buy the records and ideally dispose of them carefully, by shredding, etc. Safeguarding duties for a business are limited to “business records.” In the statute, “business records” is a defined term, and it means records that are “recorded in the operation of a business.” You do not record (generate) your tenants’ business records in the operation of your business; you only record your own business records. So, you don’t have a duty to properly dispose of someone else’s business records. That being said, it would be preferable to shred these documents before disposing of them. I also recommend getting a security deposit, if possible, from tenants who will be storing nothing but documents, as their unit contents are normally not very valuable in a foreclosure sale. The security deposit can help with costs for an eviction or foreclosure, as well as costs associated with document disposal.

Disclosure of Break-ins


Question:
When renting to a new tenant, if they ask if there has ever been a break-in on the property, are you required to tell them if there has been one?

Answer: The only requirement in this regard is “don’t lie.” You may reply, “We don’t keep those statistics.” You may reply, “I have never had a tenant report a break-in to me [if that is truthful].” Something along those lines is fine—it may be worth discussing with all employees what the company’s policy is on answering questions like this. TSSA lease paragraph 15 expressly provides that “Tenant is not relying on any oral or written representation, statement, or other assertion or omission made by Lessor or Lessor’s agents relating to the space and facility. Instead, Tenant is relying on Tenant’s own inspection and this written Rental Agreement.” Regardless, you certainly should never knowingly make a false representation. Bottom line: You make the call between “fess up” and “no comment,” or something in between.

Increasing Tenant Rent

Question: We are planning to raise our rental rates soon because they have not changed in the past few years. Is there a legal limit to the rate we can charge? Is it legal to charge different rates for different tenants?

Answer: There is no legal limit to the rate that you can charge as rent. It is a matter of contract—a matter of what the market will bear. As far as charging different rates for different tenants, you can certainly give discounts for students, senior citizens, long-term leases, long-standing clients, etc. In a nutshell it is legal to charge different rates for different tenants, but take care not to charge different rates on the basis of traits that are considered protected traits, such as race, ethnicity, religion or other matters of that nature.

Re-numbering Units


Question:
We purchased a facility and would like to re-number the units in a way that makes more sense. Are there any additional steps we need to take other than notifying tenants of their new unit number?

Answer: I would recommend that you use your rights under paragraph 30 of the TSSA lease to make an amendment to the lease. For example, the original lease might have listed the tenant’s unit number as unit 101. If you want to change the unit number to unit A-100 for example, you can mail your tenants (or email if your lease version is 2012 or later) a notice of the lease change. Your notice would notify a tenant, for example, that the unit number under the lease is changing from Unit 101 to Unit A-100. Under the TSSA lease, if the changes you are making do not affect dollar amounts and apply to all tenants, then you do not have to give a 30-day notice; the change is effective immediately upon the mailing or emailing (if allowed) of your notice. I recommend that you legally change the lease because if you ever need to foreclose, ideally you want to make sure that the unit number on which you are foreclosing is the unit number on the lease. Alternatively, you can fill out TSSA form MISC-7, Rental Agreement Amendment for Change in Unit/s, and have your tenant sign at the bottom. This will serve as an official amendment to your TSSA lease. You can find this form and many others in the Members Only section of the TSSA website. 

Employment Issues


Question:
Do I need a lease with my onsite manager for her onsite apartment? What else can I do to keep from being burned by a bad employee?

Answer: A common shortfall in any business is the lack of vetting of employees, and lack of pro-active preparation for termination of problem employees. Many employers fail to utilize all the problem avoiding tools available to them, e.g. employment applications and employment pre-screening procedures.

If the employee lives on-site: When a self-storage facility employee lives on-site, the employer should require the employee to sign a rental agreement prior to moving into any on-site dwelling unit. It is recommended that you use the TSSA dwelling lease and appropriate addenda, available at no charge to TSSA members in the Members Only  section of the TSSA website. A primary purpose of this lease is to make it clear in a binding contract that the employee’s right to live there is only for so long as he or she is an employee of the facility owner, or management company. The TSSA dwelling lease also contains a provision that enables management to quickly force a fired employee to move out. This clause also makes the employee liable for rent if he or she does not move out right away after termination.

Other employment-related tools: A good place to start is to read all the TSSA Goldbook© legal articles related to employment (see the latest Goldbook© “Legal Articles” tab).

The TSSA Goldbook, employment-related articles include:

  • Why Use the TSSA Employment Application Forms?
  • Is it Wise to Prescreen Prospective Employees for Criminal History and Honesty?
  • Employment Disclosures and Consents Necessary Under the Federal Fair Credit Reporting Act
  • The Importance of Drug-Free Workplace Policies
  • Drug Abuse Policy (sample only)
  • Checklist for Hiring and Firing Employees of a Self-Storage Facility
  • Sample Letter for Firing an On-Site Manager
  • Practical Solutions to Common Employment Problems

Using the TSSA employment application will help ensure that you are not asking questions that by law may not be asked. Review all the TSSA employment forms on the TSSA website (the forms beginning with the initials “EM”) to see which forms make sense for you to use in your business.

Some of the Available forms include:

  • TSSA Employment Application
  • TSSA Supplemental Employment Application [may be used if employer has 15 or fewer full-time employees]
  • Employment Contract
  • Manager’s Dwelling Lease
  • Pet Addendum
  • Security Deposit Deductions Addendum
  • Inventory Condition Form
  • Notice to Vacate Dwelling Because of Employment Termination
  • Notice That Employment Has Been Disapproved
  • Sample Letter for Firing an On-Site Employee

In sports, as well as in business, the best defense is a good offense. Be slow to hire, quick to fire. If you think an employee needs to go, that is almost always a sign that she needed to go six months ago. Trust your instincts. Try to always have a Plan B to fall back on so you can fire immediately if need be. Take the time to vet your prospective employees, and make sure you educate yourself enough to do it legally.

 

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Legal FAQs Abandoned Records, etc.

Sensitive Records Found in Unit—What to Do?

by Connie Niemann Heyer, TSSA Legal Counsel

 A doctor in Longview recently made the news when thousands of his medical records were found in a storage unit for which rent was unpaid. This is not a common occurrence in self-storage, but if it does happen to you, what do you do?

Duty to Safeguard Records

The duty to safeguard a tenant’s business records that contain sensitive personal information is NOT yours! These are not your business records; they are your tenant’s business records. Obviously, the first step is to contact the tenant and demand that he bring rent current and vacate the unit, including removing all records (lock the dumpster that day!). But if the tenant is non-responsive, and you initiate the Chapter 59 lien process, and discover sensitive files—then what?

Security Deposit; Shred

Ideally, get a security deposit from anyone you know is storing records. Write into your lease that in the event of eviction or Chapter 59 lien sale, the security deposit may be used to fund the cost of shredding the documents. Then put into your bidder agreement a requirement that the bidder legally dispose of all documents with sensitive information. You can have a shredder come to the facility and use the security deposit toward payment. But security deposits are the exception rather than the rule in our industry. So, then what? Sell them at auction, with conditions. Ideally you don’t want to end up with the records, so it would be better to have a third party buy them at auction. It would make sense to make clear in your bidder agreement that the buyer is responsible for legally disposing of any records found in the unit that may contain sensitive information.

Buy Them and Dispose

If there are no other buyers, probably the best alternative is for you to buy the records and ideally dispose of them carefully by shredding them, etc. A business’s safeguarding duties are limited to its own “business records.” In statute, “business records” is a defined term, and it means records that are “recorded in the operation of a business.” You do not record (generate) your tenants’ business records in the operation of your business; you only generate your own business records. That being said, it would be preferable, if at all possible, to shred these documents before disposing of them. Higher rent? It may be time to consider raising rent for commercial tenants, especially those likely to store records. Just like illegal drugs or other illegal items found in a unit, disposing of these sensitive records is sometimes a cost of doing business.

Summary

As a legal matter, you should have no liability for sensitive records that a tenant stores. But you risk bad public relations if you don’t address the issue in a manner the public would consider reasonable. Facility owners and managers may wish to consider having a protocol in place for dealing with sensitive records left behind by tenants.

 

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Sensitive Records Found in Unit