Following State Law Rules
Although the expectation of having proceeds from a lien sale (defined as funds remaining from a sale after all outstanding tenant debts have been paid, including rent, late fees, lien fee, and sale fees) has dwindled over the last few years, a storage operator must still follow the law of the state where the facility is located to properly comply with how any proceeds after a lien sale should be handled.
The laws vary by state from those that require that the proceeds be held for three years and, if uncollected, be paid to the State, to those that allow the facility owner to keep the proceeds if the money is otherwise abandoned by the tenant. Further, some states require that a post-sale letter be sent to notify a tenant if there are proceeds from a sale; there are other states that do not require any post sale notice at all. Again, since each state has its own rules for lien sales and proceeds, operators must take the time to review and implement the process required for the handling of proceeds for the state where the facility is located.
As examples, here are a few states to show the variety of rules that apply:
Alabama: If the occupant, lienholder, or other person in interest does not claim the balance of the proceeds within three years of the date of sale, it shall become the property of the owner without further recourse by the occupant, lienholder, or other person in interest.
Arizona: If the occupant does not claim the balance due to the occupant within 90 days of the sale, the operator shall pay the balance to the department of revenue. If the occupant, at any time within two years from the date of payment to the department of revenue, establishes the occupant’s right to the money to the satisfaction of the director of the department of administration, it shall be paid to the occupant. After two years, all unclaimed monies shall be deposited in the permanent state school fund.
California: Any excess proceeds of the sale over the lien amount and costs of sale will be retained by the owner and may be reclaimed by the occupant or claimed by another person at any time for a period of one year from the sale and that thereafter the proceeds will escheat to the county in which the sale is to take place.
Florida: A notice of any balance shall be delivered by the owner to the tenant in person or by first-class mail with a certificate of mailing to the last known address of the tenant. If the tenant does not claim the balance of the proceeds within two years of the date of sale, the proceeds shall be deemed abandoned, and the owner shall have no further obligation with regard to the payment of the balance.
Nevada: The occupant or any person authorized by the occupant or by an order of the court may claim the excess proceeds or the portion of the proceeds necessary to satisfy the person’s claim at any time within one year after the date of the sale. After one year, the owner shall pay any proceeds remaining from the sale to the treasurer of the county where the sale was held for deposit in the general fund of the county.
New Jersey: All property that is held, issued, owing in the ordinary course of a holder’s business and has remained unclaimed by the owner for more than three years after it became payable or distributable is presumed abandoned and is subject to the custody of this State as unclaimed property.
Ohio: The owner may satisfy the owner’s lien from the proceeds of any sale, but shall mail the balance, if any, by certified mail to the occupant at the occupant’s last known address. If the balance is returned to the owner after the owner mailed the balance by certified mail to the occupant or if the address of the occupant is not known, the owner shall hold the balance for two years after the date of the sale for delivery on demand to the occupant or to any other person who would have been entitled to possession of the personal property. After the expiration of the two-year period, the balance shall become unclaimed funds, as defined in division (B) of section 169.01 of the Revised Code, and shall be disposed of pursuant to Chapter 169.01 of the Revised Code.
Pennsylvania: In the event of a sale, the owner may satisfy his lien from the proceeds of the sale but shall hold the balance, if any, for delivery on demand to the occupant. If the occupant does not claim the balance of the proceeds within six months of the date of the sale, such balance shall be deemed to be abandoned and the owner shall pay such balance to the Secretary of Revenue who shall receive, hold and dispose of same in accordance with Article XIII.1 of the act of April 9, 1929 (P.L. 343, No. 176), known as “The Fiscal Code.”
Scott Zucker is a partner in the law firm of Weissmann Zucker Euster Morochnik & Garber, P.C. in Atlanta, Georgia.