Michigan’s legislature has passed Senate Bill 204, amending the lien procedures for self-storage facilities in the state. The bill was sent to Michigan Governor Jennifer Granholm on December 7. When Granholm signs it, it will become law. The Self Storage Association of Michigan and the national Self Storage Association both lobbied on behalf of the bill, which sets special rules for self-storage tenants if they are deployed military personnel. The bill was originally introduced into the Michigan legislature by Democratic Senator Dennis Olshove on Feb. 10, 2009. The same language being used in the Michigan bill is also being considered in legislation that is pending in Arizona, California, and North Carolina.
As currently written, Michigan’s self-storage lien laws allow storage operator’s to sell, at a public sale, the goods that they find inside a unit when the unit’s rent is not paid. SB 204, which is being referred to as the “self-service storage facility act,” makes deployed military personnel exempt from having their units foreclosed on, and the contents auctioned at a public sale, if they are unable to pay regular rent payments on the self-storage units they occupy. According to the new rules set forth in the bill, a self-storage facility owner cannot enforce a lien against a armed services member who is currently serving overseas on active duty and who will be on duty overseas for at least 180 days. When service members return from overseas assignments, self-storage facility owners must wait at least 90 days after the end of the overseas service before they can begin lien enforcement proceedings.
SB 204 also changes the methods that self-storage facility owners and operators can use to notify tenants that they have been foreclosed on and that their liens are being sold. Instead of requiring lien sale notifications to be made through expensive methods such as certified mail, SB 204 allows self-storage owners to instead make lien notifications by email or by ordinary First Class Mail. The bill also changes the allowed methods for advertising lien sales, making it possible for them to be advertised electronically, rather than in print newspapers.
Although self-storage owners are legally allowed to foreclose on storage units if the rent is not paid, in Michigan and other states, most facility operators prefer not to do so and consider foreclosure and lien sale to be a remedy of last resort. It is much more advisable to contact the tenant and find a way to resolve the matter short of foreclosing. If it is impossible to resolve the matter in any other way, and it becomes necessary to foreclose on a unit and sell its contents, the self-storage operator must be very careful to follow the laws precisely, so that a tenant whose property has been sold cannot later claim that the sale was conducted improperly.
There are many ways to settle the issue of unpaid rent with a self-storage tenant, short of having a lien sale. Self-storage owners and operators often prefer to agree to one of the following solutions:
- Instead of paying the rent that is due, the tenant may reclaim the property in the unit and remove the property immediately.
- Before a sale date, the owner may agree to allow a tenant who makes a partial payment to reclaim his or her property and move it out immediately.
- The owner may agree to let the tenant reclaim the property and move out, in return for an agreement to pay the money that is owed at a later date.
- The owner may agree to accept the property in the unit in lieu of payment.
- The owner may agree to allow a tenant to reclaim property and move out, in return for making a partial payment and setting up a payment plan for the remainder of the debt.
- The owner may agree to allow a tenant to move property to a smaller, more affordable unit, in return for a partial payment and setting up a payment plan for all or part of the remaining debt.
According to Scott Zucker, an Atlanta attorney who specializes in real estate litigation, it is important that any agreement arrived at between a self-storage facility operator and a tenant be put in writing. “If you’re going to negotiate a deal that includes the tenant moving out,” says Zucker, “you need to consider how you will deal with the tenant who does not hold up his end of the bargain.” In his March 7, 2009 column for Inside Self-Storage, Zucker provides a sample settlement and release agreement that can be used by self-storage operators and tenants to resolve unpaid rent problems. It is advisable, however, to consult an attorney who is familiar with your state’s consumer protection laws before entering into any agreements with tenants.
SB 204 is one of the first bills to be lobbied for by the Self-Storage Association of Michigan (SSAM), which has only been in existence since spring of 2007. SSAM was formed to improve the business climate for self-storage operators in Michigan and to facilitate industry growth in the state, through lobbying efforts, education, and marketing.