Risk Management Considerations For Lien Sales And Auctions

Until a few years ago, the self-storage industry operated without a high level of attention from the general public. That all ended with the arrival of the reality television show Storage Wars and other programs that followed. Lien sales have always been one of the more negative aspects of the industry, but they did not garner widespread scrutiny until these programs broadcast the auction process into viewers’ homes.

Despite the media attention, most self-storage professionals would agree that conducting a lien sale is one of the least pleasant aspects of facility operation. In addition to being time-consuming and disruptive, auctions expose the business to potential liability claims. One of the potential upsides to the Storage Wars phenomenon is the anecdotal evidence that the program has educated the public to the reality of auctions and may be contributing to lower delinquency rates. It has also led to the growing popularity of online auctions, which have the ancillary benefit of limiting the operator’s liability exposure as a result of having fewer participants attending sales at the facility.

Conducting a Lien Sale

When it comes to lien sales, it is critical to follow a risk management plan to minimize the potential for claims and lawsuits. Here are some considerations.

  • Avoid the Sale – From a risk management perspective, the action with the least amount of risk is to avoid the lien sale entirely and work with the delinquent customer to resolve the issue and achieve the best possible outcome for the facility.
  • Follow State Statutes – Each state has different laws regarding lien sales, and it is critical that you understand and follow your state’s laws to the letter.
  • Put Technology to Work – If possible, it is advisable to automate the steps of the lien sale process by incorporating them into your facility management platform. Each state requires that specific steps be taken within a prescribed timeline in regard to lien sales. Automating those steps helps to reduce the risk of human error, which can result in costly claims or lawsuits.
  • Conduct Staff Training – Train your staff as to the legal requirements for a lien sale, provide refresher training periodically, and document these sessions. Conducting routine audits of delinquent units and the actions taken to resolve them is also important.
  • Communicate with Customers – Providing ongoing communication is an important step that helps to enhance the relationship between the business and the customer. Better educated customers are more likely to work with the facility to resolve delinquencies.
  • Review Insurance Coverage – Consult with your insurance agent to review the limits of your sale and disposal liability coverage as well as your property and liability coverages.

Awareness of risk is vitally important when it comes to lien sales and auctions. Sale and disposal liability coverage is an important protection, and your insurance agent will work with you to ensure that you have appropriate coverage limits to protect your self-storage business investment.

Mike Schofield
President and CEO