Welcome back to Exit & Equity, the email for serious self storage owners.

Today we're talking about the part of this business that keeps me up at night. Unit 42 just hit 90 days delinquent. The spreadsheet says "process for auction." My gut says "someone's life is in there." Both are true. Most operators feel this tension but never say it out loud.

Let’s go!

It’s 9:00 AM on a Tuesday. The coffee is still hot, but my stomach is already engaging in that familiar, anxious knot. On the screen in front of me is the Management Summary report. To an outsider, it’s just data:

To an investor looking at my pro forma, B-14 is a drag on Net Operating Income. It’s a vacancy waiting to happen, a problem to be solved with a pair of bolt cutters and a legal notice.

But I know who rents B-14. It’s Mrs. Miller. She’s 72. She moved her things in six months ago after her husband passed and she had to downsize into a studio apartment that couldn't hold 40 years of marriage memories. She didn’t pay last month because her Social Security check got garnished. She didn’t pay this month because she’s in the hospital.

I have partners who trusted me with their capital. I have a mortgage on this facility that doesn't care about Mrs. Miller's hospital stay. If I let everyone stay for free, the business fails, the staff loses their jobs, and the bank takes the keys. But if I cut that lock and sell her husband's fly fishing gear and their wedding album for $50 to a stranger, I have to live with that.

Both things are true. The business must survive, and the human cost is heavy. This is the part of the industry we don't talk about at trade shows. We talk about cap rates, occupancy, and SEO. We rarely talk about the moment you realize you are the executioner of someone’s history.

This article isn't about giving you a pass to ignore the bottom line. It’s about building a framework—Compassionate Compliance—that allows us to protect our equity without losing our humanity.

Speedy evictions is why many of us chose self-storage over multifamily. When someone stops paying rent on an apartment, you're looking at 6-9 months of eviction court, sheriff notices, and legal fees just to get them out. In storage, the lien sale is a "self-help" remedy, we don't need a judge to process delinquency. It's faster, cleaner, less legally complex. But here's the catch: That streamlined process only works if you follow the statute with surgical precision.

One missed notice, one wrong date, one skipped step doesn't just cost you the auction, it can expose you to serious legal liability and destroy your reputation. The efficiency is the feature. The margin for error is the bug.

State laws vary wildly, but the risks are universal.

New York (Lien Law § 182): You are navigating a minefield. You must send notices by verified mail and email (if consented), and recent legislative pushes are trying to mandate "emergency contacts" to prevent exactly the Mrs. Miller situation described above.

California (Bus. & Prof. Code § 21700): The "Declaration in Opposition" is the operator’s nightmare. If a tenant signs this form, you cannot sell. You must file a lawsuit. It changes the game from "auction" to "negotiation" immediately.

Florida (Statutes § 83.806): You are still required to fund the newspaper industry. Ads must run once a week for two weeks in a newspaper of general circulation. It’s archaic, expensive, and absolutely mandatory.

If you think "close enough" counts, look at Dubey v. Public Storage. A manager cut the lock on Unit E-11 instead of C-10 due to a clerical error. They sold a non-delinquent tenant’s goods—family photos, heirlooms, medical equipment. The jury awarded the tenant over $1.2 million. Why? Not just because of the mistake, but because the facility treated the loss as a line item rather than a tragedy, discarding "unsellable" sentimental items.

Let’s be brutally honest about the numbers. The idea that auctions are a profit center is a myth fed by reality TV.

Data from StorageTreasures indicates that the average lien loss recovery rate hovers around 39%. That means for every $1.00 of bad debt (rent + late fees + legal costs), we only get back $0.39.

We are not selling units to make money. We are selling units to stop the bleeding. The goal is occupancy recovery, not debt recovery. Every day a non-paying tenant holds a unit, you incur an opportunity cost.

However, we must also weigh the administrative cost of being aggressive. A manager spending 20 hours a month on collections, cutting locks, and inventorying units is 20 hours not spent on sales or maintenance. There is a financial argument for leniency: it is often cheaper to forgive $300 in debt and get a voluntary vacate ("cash for keys") than to spend 90 days and $500 in legal/ad fees to auction a unit for $50.

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We cannot sanitize this. When we auction a unit, we are often auctioning the wreckage of someone's life.The industry talks about the "4 Ds" that drive self-storage rentals

People rent storage because life is in transition, often painful transition. But here's what we don't talk about: Those same transitions that bring people to storage are often the same ones that prevent them from paying. The crisis that made them need the unit is the crisis that makes them lose it.

Sabrina Thomas in Minnesota owed $300. By the time she arrived with the money—days late—her unit had been auctioned. Inside were her late brother's ashes and her mother's Bible. Both gone. You can refund a late fee. You cannot replace a brother.

Walter Ward, a contractor, owed $375. His unit contained $70,000 worth of tools—the equipment that fed his family. When the unit sold, he didn't just lose his belongings. He lost his ability to work.

This is where the mythology of the "stoic operator" confronts reality. Yes, we have a duty to the business. Yes, we must protect our partners' capital. But we cannot operate as if the human cost is theoretical. It's not. It's sitting in Unit 42 right now.

The people who buy these units at auction understand this better than we might think. Many follow an unwritten code: If they find a yearbook, a marriage license, military medals, or an urn, they leave it with the facility manager. They know they're not just buying stuff. They're buying the remnants of someone's worst chapter. And something in them wants to return what never should have been for sale.

The Surplus Funds (The Industry's Secret) If a unit sells for $1,000 and the debt was $200, that $800 overage does not belong to you. It belongs to the tenant. In states like California, unclaimed funds eventually escheat to the county/state.

Ethical Move: Try to find them. Send that check. It might be the only money they have to restart their life.

Role of Charity Sometimes, the stuff is just stuff. Partner with StorageGives or Charity Storage. These programs allow you to donate auction proceeds or abandoned goods to causes like Kure It Cancer Research or Homes For Our Troops. It turns a net negative event into a net positive for society.

We operate in a business of space, but we serve people in transition. The lien sale is a tool, not a weapon.

By adopting Compassionate Compliance, we do three things:

We lower our legal risk (juries hate bullies).

We often recover the unit faster (voluntary vacate).

We sleep better.

You can run a profitable, rigorous self-storage business and still treat Mrs. Miller with grace. In fact, in the long run, it’s the only way to build a brand that lasts.

This article discusses ethical considerations, not legal advice. Lien laws vary by state (especially in NY, CA, FL, and TX). Consult an attorney familiar with your state's self-storage lien laws before implementing any process.

How do we thread this needle? We move from "collection agent" to "problem solver."

Here is a tactical 9-week framework to operationalize empathy.

Week 1 (Day 6-14): The "Are You Okay?" Phase

Action: Automated text/email with human script
Script: "Hey [Name], we noticed the payment didn't go through. We know life gets busy. Is everything okay? Give us a text back."
Goal: Separate the forgetful from the crisis

Why It Matters: 60% of early delinquencies are simple oversights (expired card, forgot to update payment). Catching them here saves everyone time and stress. If They Respond: Use the LARA method (Listen, Acknowledge, Respond, Apply). Don't open with demands. Start with: "I hear that things are tough right now. Let's figure out what works."

Week 2 (Day 15): The Intervention Call

Action: Personal phone call (no more automated messages)
Offer #1: The One-Time Grace - Waive late fee if they pay today
Offer #2: The Downsize - "That 10x20 is $200/month. If we move you to a 5x5 today, we can cut your bill to $75. Let's make this work."

Why It Matters: This is your best window for resolution. They're not too deep yet, and a real conversation often reveals workable solutions. People respond to humans, not robots.
Critical Step: Document everything in your CRM. Every call attempt, every offer made, every response. If this ends up in court or dispute, your notes are your defense.

Week 3 (Day 30): The Formal (But Human) Notice

Action: Send Legal Notice of Default (required by state law)
The Compassionate Insert: Include a separate, handwritten note. "This is a legal notice I'm required to send, but I still want to help you keep your stuff. Please call me - [Your Name]"
Resource List: Print and include local assistance resources - United Way 211, St. Vincent de Paul, county rent assistance, veteran services

Why It Matters: The legal notice protects you. The personal note and resources show you tried everything. Both matter if this goes sideways legally or reputationally.

Week 4-8 (Days 30-60): The "Cash for Keys" Pivot

Action: Offer voluntary surrender with debt forgiveness
The Reality: By Day 45, if they haven't paid or responded, they likely can't pay. Continuing down the auction path helps no one.
The Deal: "If you can clear the unit out by Friday, I'll forgive the entire balance. No auction, no debt collectors, no credit hit. You keep your belongings and your dignity; I get my space back clean."

Why It Matters: This saves you $200-500 in auction advertising and legal fees. It eliminates disposal costs. It gives them a way out that doesn't destroy them. Win-win when the alternative is lose-lose. Document the Agreement: Get it in writing (email/text counts). "I agree to remove all items from Unit #42 by 12/20 in exchange for full balance forgiveness."

Week 9+ (Day 60+): The Last Resort

Action: Begin formal auction proceedings Legal
Checkpoint #1: Verify SCRA status (Servicemembers Civil Relief Act). Active duty military have additional protections. Violations start at $55,000+ penalties. Legal Checkpoint #2: Confirm all notices were properly sent, received, and documented per your state statute

Why It Matters: By this point, you've exhausted every reasonable alternative. This is business survival, not cruelty. But execute it correctly or face serious legal exposure. The Inventory Protocol:

When you cut the lock, photograph the unit before touching anything Look for: Military uniforms/ID, medical records, family photos, urns, personally identifiable documents (SSN cards, passports, birth certificates) Separate these items immediately - they are NOT part of the auction Store them securely for 60-90 days with retrieval instructions

Instruct your auctioneer: Personal papers, photos, urns, and medical records must be returned to office, not sold Document what was excluded and why If you find something irreplaceable after the sale (buyer discovers ashes, etc.), facilitate return to original tenant if possible

Post-Auction:

If auction proceeds exceed the debt, you are legally required to return the overage to the tenant in most states Send certified letter with check if applicable Keep all records for minimum 2-3 years

A man's true wealth is the good he does in this world

— Marcus Aurelius