What Agents Need to Know to Protect Their Clients
Delinquent tenants are a fact of life for self-storage businesses. A small number of delinquencies will eventually result in a lien sale, wherein the facility auctions the contents of the delinquent tenant’s storage unit. If you work with accounts in this industry, it’s important for you and your client to understand the risks that come with lien sales. A facility may follow every required step and still face a lawsuit from the tenant whose items were sold. And facilities that fail to comply with applicable statutes may face regulatory fines, reputational damage, and loss of business – on top of legal action from the tenant. Sound risk management practices and appropriate insurance protections are the first lines of defense. That’s where you come in.
So, how can you help your self-storage clients mitigate risk when it comes to lien sales?
What Is a Storage Lien Sale?
A storage lien sale is a legal process that enables a self-storage operator to recover unpaid rent by selling what is inside a tenant’s unit.
The process is governed by state-specific statutes that dictate:
- When a tenant is considered delinquent
- How and when notices must be delivered
- Required timelines and waiting periods
- Specific language that must be included in notices and advertisements
Overlooking a step may render the sale legally invalid, which could lead to claims of improper disposal or conversion of property. Most storage lien sale claims fall into a few predictable categories:
- Improper or missed notices that don’t meet statutory requirements
- Disputes over property handling, including damage or sale of restricted items
- On-site auction incidents, such as slip-and-fall claims or bidder disputes
- Third-party vendor issues involving auctioneers or movers
Modern Self-Storage Liabilities: Why Storage Lien Sales Carry More Risk Today
Before Storage Wars became a hit cable series in 2011, self-storage lien sales tended to be relatively small events with few attendees, in-person bidding, and little fanfare. Widespread public interest sparked by reality shows resulted in big changes, bringing more bidders, higher expectations, and closer scrutiny of sales. Operators have increasingly opted for online auctions, which can reduce on-site problems but don’t remove all risks. Sometimes, in fact, they introduce new issues involving documentation, compliance, and third-party vendors.
The takeaway for insurance agents working with self-storage clients is this: Lien sales today are not the same as they were 10 years ago, and insurance coverage should reflect that.
Mitigating Lien Sale Risk: Where Agents Add Value
The best strategy for mitigating lien sale risk is to act before a sale happens. Advise clients to avoid sales when possible by reaching out early and solving payment problems. If a sale is needed, following state law exactly is critical. Being “almost” compliant is not enough – and virtually an invitation to legal action. Automation can be helpful, and facility management platforms can be an asset when it comes to tracking deadlines and creating the right notices. Regular staff training and audits also help prevent errors that can lead to regulatory noncompliance.
A Practical Check-In for Agents Exploring Self-Storage Insurance
This quick check can help you see where extra support or expertise might help before a routine lien sale becomes a dispute.
- Does the client have a clear process for following state lien statutes exactly?
- Are lien sale steps automated and consistently documented?
- Is staff training conducted regularly with detailed documentation maintained?
- Are third-party vendors properly vetted, insured, and contracted?
- Does the business’s insurance policy include sale and disposal liability coverage?
- Are the sale and disposal liability coverage limits adequate to address a worst-case scenario?
To stay current on state lien sale laws, relevant litigation trends, and best practices, it’s beneficial to seek out a self-storage specialist who handles lien sale risks every day.
Storage Lien Sale FAQs
Are storage lien sales covered under general liability?
Not always. Many lien sale claims require sale and disposal liability coverage.
Does conducting lien sales online eliminate risk to the business?
No. Online lien sales reduce the risk of claims resulting from an on-site sale (such as slip-and-fall claims), but they still require strict compliance and vendor oversight.
What’s the biggest driver of lien sale claims?
Failure to comply with state lien sale laws and poor documentation.
Why Agents Work With MiniCo
Lien sales might make for interesting reality TV, but in real life, they’re serious business. MiniCo has focused on self-storage since 1974, so our underwriters and claims team are highly experienced when it comes to real-life lien-sale situations. We work with insurance agents to provide information and resources that you can share with your clients, in addition to offering a wide range of coverage solutions for self-storage risks. Our team is ready to support you when you need it. Contact us to learn more.
