Archive for May, 2012
An Auction Price Greater Than What is Owed (Including Costs) Does Not Benefit a Self Storage Operator
The TV show “Storage Wars” has greatly increased interest in sales and auctions conducted at self storage facilities. Interesting characters and active bidding makes the show a lot of fun to watch. But who gets the money? Does the storage facility owner get to keep the money? Do you have to turn any of the money over to the tenant? What if a unit owner owes $500 (including unpaid rent plus costs and expenses associated with collection) and the contents are sold for $2,500? The Pennsylvania lien law is clear on this point and provides:
§1913. Excess balance from sale
In the event of a sale under this section, the owner may satisfy his lien from the proceeds of the sale but shall hold the balance, if any, for delivery on demand to the occupant. If the occupant does not claim the balance of the proceeds within six months of the date of the sale, such balance shall be deemed to be abandoned and the owner shall pay such balance to the Secretary of Revenue who shall receive, hold and dispose of same in accordance with Article XIII.1 of the act of April 9, 1929 (P.L. 343, No. 176), known as “The Fiscal Code.”
So what does all that mean? It means that any monies paid over and above the amount owed the self storage operator (unpaid rents plus costs and expenses associated with collection) is owed to the unit tenant. In our example, the self storage operator cannot pay itself more than $500 and has to hold the $2,000 initially for the benefit of the unit owner. That begs a couple of questions. First, do you have to track down the occupant? I think the answer to that is no, but you do have to hold the money. Second, what do you do with the money? After six months, you pay it to the Commonwealth of Pennsylvania Secretary of Revenue as abandoned. The bottom line is that driving up the price at auction over and above what the self storage operator can legally claim is not a windfall for the operator.
“Easement” is a term you may have come across in acquiring or developing a self storage facility. What is an easement? In short, an easement is an interest in land which is in the possession of another person. The longer definition is as follows:
An easement is an interest in land in the possession of another which,
(a) entitles the owner of such interest to a limited use or enjoyment of the land in which the interest exists;
(b) entitles him to protection as against third persons from interference in such use or enjoyment;
(c) is not subject to the will of the possessor of the land;
(d) is not a normal incident of the possession of any land possessed by the owner of the interest, and
(e) is capable of creation by conveyance.
Why would someone have an easement? If someone needs to cross your property to access their property or if you need to cross someone else’s property to get to your property, that is an easement. Easements can be created and they can be extinguished. In certain circumstances they can arise by necessity for example in the case of a land locked parcel. They need to be taken seriously. If you are acquiring a parcel, make sure you know whether it is subject to any easements.
Who bears the “risk of loss” during storage? The short answer is the occupant of the unit. The exception is for loss due to the negligence of the owner of the self storage facility.
Okay, so what is negligence? Negligence is a legal concept that assigns responsibility for the breach of a duty owed to someone where that breach results in damages. So, if the roof leaks from failure to maintain it properly and ruins stored contents, who do you think is responsible? I would argue that is the responsibility of the self storage facility owner, because the owner had a duty to properly maintain the roof. The failure to adequately maintain the roof was, in fact, a breach of a duty owed to the tenant. If unit contents were harmed as a result, the breach of the duty resulted in damages and the self storage operator is responsible.
On the other hand, if stored items are harmed for any reason other than the negligence of the owner, the risk of loss is on the occupant. To read the language of the Pennsylvania lien law statute that covers this issue, take a look at §1914.