In late December Governor Kasich signed into law revisions to the Ohio Self-Service Storage Facility Act (ORC 5321.01 et seq.). As a facility Owner or Manager in Ohio you need to be aware of these changes in addition to what hasn’t changed. The law becomes effective approximately 90 days after the Governor’s signature, for this reason, you may choose to delay some of your default proceedings until you can act under the new law.
First the good news; there were several significant changes to the Self Storage Act which make the Operator’s default process more streamlined and simple. These changes, not in order of importance are: 1) The definition of a self-service storage facility which required a minimum of 50 units was deleted; 2) A “last known address” has been defined to mean the mailing address provided by the Occupant in the most recent Rental Agreement or that address provided in a subsequent written notice of change of address (although the Statute does not define what “written notice” of a change of address means, this must be addressed in your Rental Agreement); 3) The default notice can now be sent by First Class Mail with Certificate of Mailing, and I would argue, based on the Statute it is now the only way to send your default notices; 4) A presumption of delivery of the default notice when sent First Class Mail with a Certificate of Mailing postage prepaid deposited with United States Postal Service and properly addressed was added. Please remember, First Class Certificate of Mailing must be mailed from a United States Post Office to get the “red circle” stamp. You cannot simply mail from your location and have it considered to be a proper “verified or certificate” of mailing; 5) Advertising has changed. While you can still advertise in a newspaper of general circulation you are now permitted to advertise in “any other commercially reasonably manner”. Commercially reasonable is deemed to exist if at least 3 independent bidders attend your sale at the time and place advertised. The new Ohio law does not specifically permit or call for website advertising but at least you may be able to advertise in places where you know you will draw more bidders. I still have large concerns about the ability to conduct sales online in Ohio given that the term commercially reasonable is defined as requiring bidders to attend the sale at the “place advertised”; 6) Cars and boats stored under specific circumstances may now be towed, if not redeemed by the lien holder or the tenant prior to towing but there are time limits that you must meet before towing. I would again contend Ohio now requires towing of a motor vehicle or boat.
There are no “negatives” in the new lien law, but I do want to remind you that some things have remained so that you do not forget that there are still a lot of steps to take to properly sell a unit in Ohio. 1) Please remember it is still necessary to ask about any other person who claims interest in the stored property, as those people must receive the “default notice”. 2) You still must do a lien check, particularly on vehicles and vessels stored. This requirement is nothing new however; in order to tow you are going to want to have more information about lien holders on vehicles than you ever did under the revised version of the law. 3) When sending the default notice you are required to send it either in person, by certified mail or First Class Mail with a Certificate of Mailing. Since the new “presumption of delivery” only extends to First Class Mail with Certificate of Mailing I would argue the only way to now deliver default notices is First Class Mail with a Certificate of Mailing, but remember it must be mailed from a United State Post Office, not your location. 4) While talking about the default notice remember that the default notice must be mailed to the “last known address” (as now defined under the Ohio Statute), as well as to all persons who the Owner has “actual knowledge of and who claim an interest in the personal property”; “all persons holding liens on any motor vehicle or watercraft amongst the property”; and “all persons who have filed security agreements in the name of the Occupant evidencing a security interest in the personal property with either the Secretary of State or the County Recorder of the County in which the self-service storage facility is located or the Ohio County of the last known address of the Occupant”. Thus the “net” you must cast to properly notify people of a lien sale is wider than it was under the old act or perhaps better said, the requirement to notify these people is far more pronounced then it was under the old Act.
5) An inventory is still required. The inventory is required for the default notice and the advertisement, whatever format that takes. Do not skip the inventory in your exuberance under the new Act. 6) An itemized statement of the Owner’s claim is still required for the notice, do not lump everything together. The sale of the personal property still must be held at the address of the place listed in the notice and advertisement, specifically the self-service storage facility, unless it is not suitable, and then at the nearest suitable place to the self-service storage facility where the personal property was stored. Again this demonstrates my concern about online auctions of the units because there is not a “place” where an online sale occurs and of course you still can’t just take the property to the local auction house. 7) While advertising has changed, advertising still must occur in some manner that results in at least 3 independent bidders at the sale. This seems to be subject to litigation in other states and will certainly be open to interpretation in Ohio. The advertisement, wherever you place it, still must contain an inventory and the other previously required elements of the ad. The requirement to post in lieu of advertising no longer exists under the Act because you can advertise without using newspapers. 8) Perhaps the biggest concern is still the sale of a motor vehicle or boat. It remains almost impossible to sell but my interpretation is the new Act requires towing if there is redemption. You must allow the redemption by the lien holder indicating that you must give notice to the lien holder of the potential sale meaning you must run title searches.
A new section of the Act regarding redemption was added clearly defining that any other person who claims any legal interest in the property also has the right to redeem. You are still required to remove property from the storage space at which point you can enter into a new Rental Agreement with the person redeeming. The Statute is specifically clear that the vehicle or boat must be towed from the storage space before entering into a new rental agreement with the entity or person redeeming said secured property (this assumes the redeeming party does not take the vehicle off the property when they redeem). The Occupant’s redemption right remains and has changed very little.
The right to tow arises only after certain circumstances are met. The limitations to right to tow should be read with your local counsel; however, a brief synopsis is that a vehicle may be towed if: 1) Notice was sent to all persons holding a lien on the motor vehicle or boat and 30 days elapsed since the notice was delivered without response from such person; or 2) rent or other charges related to the vehicle/boat space remain unpaid or unsatisfied by the Occupant for 60 days if there are no lien holders identified. Please notice if there are no lien holders towing should not occur until the Occupant is at least 60 days late; 3) That the Owner is planning to hold a sale and there is motor vehicle or watercraft in the unit. The motor vehicle or watercraft must be removed prior to auction. This could potentially delay your sales. You should continue to conduct the inventory early in the default so that you know that there is motor vehicle however, if you send a default notice at 45 days late and intend to sell 30 days later, you may not be able to sell due to the new time restrictions, there is some amount of time that must be added to allow for the non responsive of a lien holder, if one exists, so that you may tow the vehicle prior to the sale of the rest of the unit. There really does not appear to be the right to sell a motor vehicle or watercraft in Ohio, there really wasn’t one prior but it also wasn’t prohibited as it seems to be under the revised Act.
Finally, auctioneers are still required. The statute calls for auctions, an auctions is a defined term in Ohio meaning a sale conducted by an auctioneer. Your “public sales” still do not appear to be permissible under the revised statute.
The Act did not include email service of notices into the statute. I for one applaud this exclusion, I think email has a time and place but not as an exclusive remedy for a default notice at this time. Ohio should remain slightly conservative on this issue and allow other states to work through this issue before Ohio Operator’s jump feet first into the “email morass”.
If you are a client of our office, very few changes need to be made to your rental agreement at this time. Most of the changes are to the lien sale procedure issues.
Regardless of whether or not you are a client you should look for the following things to be changed in your Rental Agreement; 1) any reference to certified mail should be removed and replaced with language referring to “default notices” rather than certified mail so that you are not contractually obligated to send certified mail. You need to review any language in your Rental Agreement regarding advertising to make sure it is now compliant with the Act however, probably the largest change will be potentially reducing your advertising charge to reflect the cost of running advertising elsewhere. The next thing you need to look at is proper gathering of information about lien holders and those claiming “interest” in the stored property either via security interest or vehicle/boat lien. This information becomes more and more important under the Act. If you are not gathering this information, make it a priority to do so.
Remember, you cannot act under the new law as it does not become effective until late March, 2013. If you are thinking about a sale and wish to mail the First Class Mail certificate of mailing, send that notice after the effective date of the law. For assistance complying with the new law, revising your rental agreement, and/or changing the manner in which you are conducting and preparing for your lien sales, please feel free to contact me at firstname.lastname@example.org or email@example.com regarding any questions on lien sale protocols.
I would be remiss if I did not recognize the efforts of the National Self Storage Association for their time, financial contributions, and lobbying efforts for helping to bring these lien improvements to fruition.