Auction or Sell It Myself?

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Auctioneer Or Sell It Myself?
QUESTION: When I conduct a lien sale am I required to use an auctioneer or can I conduct the sale myself?
ANSWER: Let me start by saying that even if you determine through this column that you do not have to use an auctioneer to conduct your lien sale, I strongly recommend you consider using an auctioneer for reasons I will discuss later.

The definitive answer to your question depends on your lien sale statute, i.e. it depends on what state your facility is located in. Most lien sale statutes discuss the concept of sale. Some state statutes give light treatment to the concept of the sale merely by mentioning in their lien right section of the statute that you have to send out a notice that discloses that if the lien is not paid that the property may be sold. Other state statutes go into much greater detail about the requirement of the sale, right down to the days of the week that you may not conduct a sale.
Lets back up, most state statutes say, and I am paraphrasing, if the occupant does not pay and you give certain notices, you may sell the property. Some statutes say you may sell at auction, some use the term public or private sale. The term auction is often defined in your state statutes; however it is never defined in your self-storage statute. Most states have an auctioneer statute which defines an auction, again loosely paraphrasing, that an auction is a sale conducted by a licensed auctioneer or a licensed auctioneer’s apprentice. Thus, if your state statute uses the word “auction” in it, for example in Ohio, it is my belief that you must use a licensed auctioneer to conduct your sale. You cannot simply ignore the term in your statute and conduct a public sale if the word “auction” is used in the statute.

There are several states that do not have a self-storage statute. In states that do not have a self-storage statute you are generally bound by the Uniform Commercial Code (“UCC”) to exercise your lien rights. Generally speaking, under the UCC, if a sale is challenged you would be required to look at the UCC rules for what constitutes a reasonable sale or the absence of those factors that make a sale potentially unreasonable. The UCC considers, as one of the factors in a reasonable sale, to be whether or not you have used an auctioneer. That is, if you have used an auctioneer your sale is more likely to be deemed reasonable than if you did not use an auctioneer.

There are other states, such as Michigan and Indiana, which state that a sale may occur publicly, privately, or by other disposition/disposal. We will not be dealing with the “other disposal” issue in this column. However, as you can see, some statutes do not mention the term auction, but use the term sale, which would imply that a licensed auctioneer is not necessarily required by your statute. Before you conclude that an auctioneer is not necessary, remember that judges can look at the UCC when interpreting a self-storage statute to determine whether or not you conducted a “reasonable” sale. If the reasonableness of your sale is challenged, for example, you sold $25,000.00 worth of antiques for $200.00, the judge can, for reference, look at the UCC and the factors considered under your state’s UCC for reasonableness of sale. If the judge looks and sees that one of the factors in the UCC is whether or not you used an auctioneer.

Without sounding like I am shill for the auctioneer industry, there are other reasons to use an auctioneer. Most importantly, as already cited, an auction has the best chance of helping you establish that you sold the goods for the highest possible price based on the market in your community. With an auctioneer you have an independent expert, who could come in and testify that in his/her opinion you did everything right to try to raise the most money from the sale, the auctioneer did everything in his power to try to raise the sale price, and the fact that the property sold for less than full value becomes less relevant and less of a risk of exposure to you. Further, an auctioneer knows how to sell goods. An auctioneer will be able to look at a unit and decide whether or not there are people he could notify that might be more interested in bidding at this sale more so than you might find just running your ad in a newspaper as required by your state statute. Your auctioneer will help you decide whether or not to sell by item or lot, and your auctioneer will help you keep control of the sale. An auctioneer will help you avoid the bidding getting out of control and knows how to stop a sale and when to stop a sale if something is going wrong. For example, if your occupant shows up at the last moment with money in hand and wants to redeem their goods. This right to redeem is retained until the “gavel falls.” By dealing with an auctioneer you also have a little more freedom to reject a bid if it is necessary. Again, if you have never had an auction go out of control, you are probably not as concerned. But if you have ever been at an auction that has not gone well, or there has been some kind of problem, you know an auctioneer could have handled it better for you. The auctioneer probably understands the UCC better than you ever will have an opportunity to. Having this knowledge of the UCC will help preserve the concept of a reasonable sale and help preserve a good clean sale that is not subject to challenge.

Finally, many of you, particularly if your occupant or a family member of your occupant shows up at the sale, want to be able to bid on the unit yourself. It is a bit of a conflict of interest for one employee to be running a sale while another employee of the same company is bidding on the sale. By having an auctioneer as the intermediary running the sale, presuming your state law does not forbid you from bidding on the sale of the property, you will be free to bid and claim that you did nothing to affect the results of the sale by your bid.

For all of these reasons, even if an auctioneer is not required, it may be worth the few dollars you pay to have an auctioneer regularly conduct your lien sales.
You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at info@selfstoragelegal.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721-5151, or visit his website at www.selfstoragelegal.com.