Guest Post: The Lien Foreclosure Process on Cars and Boats by Scott Zucker

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    Self storage operators are in the business of renting space suitable for storage. No self storage owner or manager enjoys pursuing tenants that are in default and enforcing their lien over the tenant’s stored goods. Certainly, no owner or operator looks forward to going through the bureaucratic process of enforcing their lien over titled property like cars and boats. Whereas common personal property such as household furnishings can be sold without proof of title, property such as motor vehicles and boats cannot be sold to new owners without delivering proper title. Therefore, when a tenant defaults and a foreclosure occurs, generally (some states differ) a storage owner cannot officially sell the vehicle or boat in question to a new owner until it has first obtained title itself to the vehicle or boat. The process of getting title can be accomplished a number of ways. Certainly the simplest is where the delinquent tenant voluntarily agrees to sign over his or her title to the storage owner in lieu of paying the outstanding rent. Obviously, this type of agreement should be documented, but this transfer entitles the storage owner to then sell the vehicle or boat to any third party with the ability to deliver proper title. A more complex method of obtaining title, but one which guarantees the storage owner proper title, is to file a request for title transfer with the appropriate department that controls the titling of cars and boats in the state (Department of Motor Vehicles, Department of Watercraft). Under most state statutes, the procedure for applying for a replacement title for an abandoned vehicle is similar. Ultimately, if no objection is filed by the vehicle owner in response to the application for abandonment, the abandonment will be confirmed by the department (and may need to be approved by the Court in some states) and the foreclosure sale will be allowed to proceed. The storage owner must still send the regular foreclosure letters and advertisements to sell the vehicle at public sale that it would send under its normal lien foreclosure procedures. If you are in a state like Tennessee, North Carolina, Illinois and Nevada, recent changes to their self storage lien laws now entitle storage operators to have the vehicle and boats towed from the property, leaving the issue of transfer of title and sale to the towing company who more regularly handles such procedures. These states all provide that if the rent remains unpaid for at least sixty (60) days, the facility owner may have the property towed from the facility and, if towed, the facility owner has no liability for any damage which may thereafter occur to the property. The towing option provides tremendous relief to storage operators who have found the lien foreclosure process on titled property to be difficult and time consuming. Operators who are able to manage the process still retain the right to foreclose on their liens over the property. Operators who choose the towing option lose the right to recover their debt from the sale of the collateral property but do not lose the right to recover their debt from the tenant via their contractual claim for monies owed. Certainly, there are times when the condition of the vehicle or boat stored at a facility may not be worth the time and effort of getting title or even of having the property towed. Sometimes the property can be sold for parts only. When sold for parts, the vehicle or boat is to be used solely for dismantling and for selling used parts. However, before you sell tenants’ vehicles or boats for parts only, you must review your state statutes on these issues. No matter what approach you may decide to take, you must still follow the default notice and foreclosure procedures as outlined under your State’s Self Storage Statute, and which should be explained in your lease. Your tenant must always be given the opportunity to pay the outstanding rent before the property is sold, towed or disposed of. The foreclosure of motor vehicles and boats is a complicated matter and outside the run of the mill storage unit foreclosure. The guidelines and laws for properly selling such property must be followed or a storage owner risks liability and substantial damage claims by its tenants (especially because the value of motor vehicles and boats is usually high). Caution should be the goal in this situation and compliance with state laws should be the rule in order to avoid liability.]]>

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