Why can't I just keep an item of value found?

Mini- Storage Messenger - Why can't I just keep an item of value found?

QUESTION: This month’s question comes from an owner who opted for lien sale of the unit after exhausting all other options. The owner finds an item of extraordinary value (for the purposes of this article, the item is a painting) well in excess of the amount due to the self-storage facility on the lien. The reader’s state statute provides that any funds in excess of the amount of the lien are turned over to the state’s unclaimed funds division. Why, queries the reader, can the owner not take the painting in lieu of auction and avoid unclaimed funds? Specifically, the reader identifies that his state’s statute does not require the self-storage owner to go to auction and therefore it seems to the reader that the owner of the facility should be able to keep the painting, particularly since this owner has had so many sales over the years that have fetched much less than what is owed. Thus, the question is: Why can’t this item of value be used to “even out” the other losses from other sales?

Answer: First, let me start by saying that my answer to the question is that you should not be selling or taking the picture. An item of that kind of value (and not a vehicle) indicates to me that eventually the owner of that painting will come back to claim it. It is extremely rare, even when an occupant looks like he has fallen off the earth, lost forever, that someone walks away from an item with that kind of value, unless it is stolen property. That means, that unless it is stolen property, you will eventually get paid, even if you wait several years and rent continues to accumulate on the unit, if there is one item in the unit worth $20,000.00 when you go to sell, if you have to sell, you will get paid. In these cases, I urge my client’s not to rush a sale because they are “secure” that they will be paid and you avoid the risk of selling when inevitably the owner will claim it.

There is a rather extensive set of laws in every state about unclaimed property and what becomes unclaimed property. You will need to check your individual state’s laws. However, please make sure you are looking at unclaimed property and not the rights and remedies for lost, unidentifiable property. For example, in many states if you find a wallet or money lying along the side of the road, it is yours to keep. The wallet example is different than what a fur-storage business has to do if an occupant fails to come pick up a mink coat or pay rent on the mink storage (yes, I know many of you have mink coats), the fact of the matter is the mink coat is unclaimed property, governed by a different set of laws than the laws for lost property.

Further, let us say you did take the item home with you. You (a) have violated the unclaimed property rules in your state; (b) you could perhaps be charged with theft or conversion if your occupant ever comes back looking for the property; and (c) you do not really have title to the property (possession is not really 9/10ths of the law). You have no right to say, for lack of a better term, “finder’s keepers,” you did not find it, you have a lien on it but that does not make the property yours. It means you have the right to sell it or, in some states, otherwise dispose of it in a commercially reasonable manner. I cannot think of a state where taking the item home with you in lieu of sale would be deemed a commercially reasonable way of disposing of the liened property, especially property of value.

That is why 48 states and the District of Columbia have a lien sale statute. While a lien sale is never your exclusive remedy, in this particular instance the owner would be foolish not to go the lien sale route to sell the property (when it is finally time to sell) for more money than what is owed and be made whole. If you properly conduct the lien sale in most states, you are exonerated from any other liability for selling the property. Yes, there will be potentially excess funds and your state statute deals with what you have to do with those unclaimed funds. In some states, if they are unclaimed for a period of time the funds become your property; unfortunately this reader is in a state where the unclaimed funds must be turned over to the state. It is not worth violating the state law and exposing yourself to potential civil and criminal charges for any amount of money.

The reader certainly makes an interesting point about all of the other lost monies on previous sales, i.e. recovering ten cents on the dollar previously in so many other sales. However, you cannot use the property of one to satisfy the debts of others. Thus, while the reader has lost on sales previously on other occupants who were not so kind as to store valuable items of property and then default, you simply cannot “make up” or “even up” with someone else’s property. Obviously, if you have the money and it is in excess of the amount of your lien (the amount owed) then your state statute will speak to what you have to do with that excess money. Let me remind you that you have probably also previously deducted this bad debt in previous years.
Be careful, not all self storage statutes explain what to do with the excess proceeds from the sale. That does not mean there is not law on the subject. Many states have an Unclaimed Funds Act that simply, as an umbrella, applies to any situation where there would be unclaimed funds. Do not just read your self-storage statute and see there is no mention of unclaimed funds and assume the money is yours to keep, that may not be true.

Finally, please do not ever assume that the property stored in your self-storage facility is yours in the event of a default. You are, in a sense, violating the entire basis of self-service storage as a business – you rent space, thus, you have a lien on the property stored in the space. If an occupant does not pay, you are permitted to sell or otherwise dispose of the property to satisfy your lien, not commit an act of conversion.

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.