How do you prevent a significant other from buying back confiscated property?

Mini- Storage Messenger - How do you prevent a significant other from buying back confiscated property?

QUESTION: This month’s question: “How do I stop a boy or girlfriend from coming to a sale to buy back their significant other’s property? I have an occupant who wants me to auction his property off now because he thinks he is going to have someone (his girlfriend) buy it back for him for less than he owes. How do you prevent something like this?”

Answer: The first question I want to ask is, whether or not you want to prevent something like this from happening? It is always best to avoid the sale, if possible. Make certain your emotions are not getting in the way of good business sense, which is that at the end of the day you want your unit back to rent to a paying occupant. If the occupant has the idea that his girlfriend will buy the unit back (for some amount of money) consider whether or not it is in your best interest to just allow that buy-back to happen privately, without a sale. The fact that you turn the unit for less than the amount owed does not necessarily mean that you have to write off the balance and you can send that person to collection.

Why do I advocate that it is always in your best interest, if possible, to get the unit back without a sale? When you sell, you are setting yourself up for liability for having done something wrong in your sale. The statute in your state, if you have one, is loaded with terms that you may not recognize as requirements it may be too late when you realize that you have done just one thing wrong, and that you have given the former occupant the opportunity to sue you.

It is always my position that the best way to avoid a lawsuit is to end up with the occupant getting their property back, whether it be for full value or not. If you can stomach giving the occupant their property back for less than full value, at the end of the day it is really hard for the occupant to claim that you have done anything wrong and caused them damages (which is how you end up with a lawsuit, remember damages must be demonstrated), if the occupant ends up with their property back.

If the occupant ends up with their property back for even less than full value, then the occupant should not be able to claim, if you have done everything properly, the kind of things that give rise to a lawsuit, such as: missing property, emotional damages, sentimental items lost, and etc., and of course you avoid the lawsuit for a wrongful sale.

That being said, if you do not want to follow this advice and you want to avoid having the occupant’s friend or family member show up and bid at the sale, in most states, you may bid on the property. Make sure you have a solid set of lien sale rules that are pre-written, handed out, and signed by every buyer before they come on to the property. If you are going to bid on sales yourself, it needs to be stated in the rules; if there are going to be minimum bids, that also needs to be stated. But remember, you are defeating yourself if you start with a minimum bid on the unit for the amount owed, because if you win, you really did not recoup any of your money and the idea of turning the debt over to collection on speculation that you may some day collect it, is a bit penny wise and pound foolish.

There is a lot to be said for getting the most you possibly can out of an auction or lien sale and just having the difference left over and sent to collection. It is money in hand rather than money in the bush. With that thought, you can always have sale rules that say the operator may bid instruct your employees to bid consistently. You can even have instructions that change the bid if the employees are suspicious that someone (a family member or friend) is bidding on the unit. For example, many of my clients have in their policies and procedures that a representative of management may bid up to “x” % of the amount owed before they must stop and then if there is a higher bid that higher bid wins. Thus, you recover some of your money, minimizing your actual out-of-pocket damages. You get some money whether it is from the occupant or not and yet the occupant should, in this case, get their property back, and you could defeat the whole theory of liability that the occupant had to sue you now, as they have no damages.

What percentages that your employee may bid is up to you. I recommend it be consistently applied in all lien sales, because to do otherwise may expose you to some emotion that you do not want to get into the way of a commercially reasonable and proper sale of the occupant’s goods. If it were my facility and I found an occupant or their boy or girlfriend bidding, I personally would stop the sale and say “how much money do you have in your pocket” and sell the unit for that amount of money and pull the unit from sale, however, that is certainly your choice of how you want to operate.

The answer to your question, the way to stop the sale to a boy or girlfriend is to have a good set of written sale rules and a minimum bid that makes it impossible for someone to buy without paying the full amount due. While that is the answer, I want to continue to emphasize that we consider this to be a poor choice of action for the operation of your business and for mitigating your damages from unpaid rent.

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.