Update - March 28th, 2013 A new site, OnlineStorageAuctions.com has emerged as the clear choice in the online storage auction niche. The main differences between this site and it's competitors is that it's 100% free to use and it offers a legal alternative to storage facilities who are located in states where the legality of online storage auctions is questionable. This site recently merged with StorageAuctionForums.com, which was, until the merger, the largest storage auction website in the world. OnlineStorageAuctions.com now has more content and traffic than any any other storage auction website on the web.
July 8th, 2012 - Over the past few years, a handful of companies which hold storage auctions online have emerged on the scene. One of these companies is Storage Battles, which recently bought out Sealed Online Bids. We here at Texas Storage Auction Schedules & News are huge fans of online storage auctions because we believe that this concept is the future of storage auctions; however, there seems to be a question as to whether they are operating legally in Texas and some other states.
This legal dilemma boils down to whether or not a storage auction can be conducted online or whether it must be held at a physical location. Some state's self storage lien laws are vague and don't specify where the sales are to be held; therefore, one could reasonably assume that an online storage auction would be permissible. Texas's self storage lien laws, along with a handful of other state's, are not so vague. Chapter 59 of the Texas Property Code, section 59.045 clearly states: A sale under this sub-chapter must be a public sale at the self-service storage facility or a reasonably near public place. So how are companies like Storage Battles operating in Texas? Through a narrow loophole that depends on one's interpretation of what a public sale and what a public place is.
We spoke to a Texas auctioneer and former President of the Texas Auctioneer's Association, about this matter. He replied “ Chapter 59 states that the sale must be a public sale at the self storage facility or a nearby public place. The attorney for TSSA has stated that an Ebay or internet auction does not satisfy the statute in that the internet is not a public place. This is a legal question that will either be resolved by revising the law or a lawsuit.”
According to USLegal.com, the legal definition of a public place is: an indoor or outdoor area, whether privately or publicly owned, to which the public have access by right or by invitation, expressed or implied, whether by payment of money or not, but not a place when used exclusively by one or more individuals for a private gathering or other personal purpose.
We contacted the Texas Self Storage Association about this matter and received the following response: Connie Niemann Heyer, attorney for the Texas Self Storage Association, stated that she does not consider auctions that take place online only are meeting the strict letter of the law requiring that the sale take place at or near the storage facility. Her opinion was published in the TSSA's magazine.
We contacted Sealed Online Bids to find out how they are conducting online storage auctions for storage facilities in Texas. Kevin Gorzny, principal at Sealed Online Bids provided the following response.
“First off I want to address the fact that we have approached the Texas SSA with our stance on the Texas Lien Laws in the form of an official statement, and it was met without any opposition what-so-ever. Our attorney covered quite a few points in regards to the Texas lien laws, but I'll address the specific one you cited. (Referring to: a public sale at the self-service storage facility or a reasonably near public place.) The definition of a consummated sale is the exchange of monetary funds, between the buyer and the seller. Simple as that. Our auctions are conducted online, yes, but the actual process of purchasing the unit-in-lien is a cash-in-person exchange performed at the storage facility where the contents are stored.
To be even more specific: our auctions are live and open for bidding for a period of 7 to 10 days, typically. Once the auction closes, the manager is provided with the buyer's information. They organize a time for the buyer to then come in to the self storage facility's office for the actual purchase where the buyer pays cash for the sale, just as it always has been performed. The overall issue is the fact that every state's lien laws were written long before the mainstream internet as we know it today. Many of these laws are subject to interpretation and common sense.”
Although eloquent, I believe this response is completely off topic. The debate here is not about what a “consummated sale” is, rather, it's about what the legal definition of a “public sale” is. According to Merriam-Webster's Dictionary of Law, a public sale is: a sale (as an auction) that is publicly advertised and that takes place at a location open to the public. Is the internet a location or a public place? It is arguable.
I agree, a lot of state's storage lien laws are outdated; however, Texas revised it's storage lien laws in January, 2012. Are there still sections that don't take modern technology into consideration, absolutely. Texas's storage lien laws still require legal notices to be placed in a newspaper instead of being communicated electronically on a website. Do you really think they would allow the actual lien sale to occur on a website?
Regardless of how archaic some of these laws may be, if you use common sense to interpret (A sale under this sub-chapter must be a public sale at the self-service storage facility or a reasonably near public place) it'sobvious that this law was meant to be quite literal. I think that Sealed Online Bids' interpretation of the Texas storage lien law is a bit of a stretch, but either way, this is a legal question that will inevitably be resolved when a disgruntled tenant challenges the legality of an online sale.
So, are online storage auctions legal?
The answer is - it depends. Each state has it's own unique storage lien laws. To my knowledge, no state's storage lien laws specifically state that storage auctions can be held online and vise versa, no state's storage lien laws specifically state that they can't. The only way to know for sure is to look at your state's storage lien laws to see if they specify a location for where the sale is to be held.
How does this affect the storage auction buyer?
It really doesn't. Most states have laws protecting the purchaser similar to Texas, Sec. 59.007 which states: A good faith purchaser of property sold to satisfy a lien under this chapter takes the property free of a claim by a person against whom the lien was valid, regardless of whether the lessor has complied with this chapter.
How does this affect storage facilities?
Whenever there is a gray area, there will be lawsuits; however, companies who hold storage auctions online are protected through lengthy disclaimers that the storage facility and buyer must agree to before using their service. This leaves storage facilities to bear the brunt of the legal challenges that may arise by former tenants that believe that the law was not complied with. In Texas, Sec. 59.005 states that: A person injured by a violation of this chapter may sue for damages under the Deceptive Trade Practices–Consumer Protection Act (Sub-chapter E, Chapter 17, Business & Commerce Code).
Storage facilities should also consider whether they need to comply storage the lien laws in the state(s) where the online storage auction company's server/business is located. Our advise to storage facilities – consult with your attorney to make sure that this type of sale complies with federal, interstate and your state's storage lien laws.
So, what do you think? Are Texas's storage lien laws specific enough or do you feel that companies that conduct storage auctions online have a good argument? Should storage lien sales be permitted on the internet? Please leave you interesting and creative responses below.
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Be it “legal” or not at this time there is too much room for error and misunderstandings involving ANY so-called “on-line auctions” be it storage auctions or even EBAY. There is NO substitute for direct, visual, one-on-one business transactions. Enough Internet intervention. Lets keep at least some things on a “human” involvement basis.
I believe that storage auctions should be held online! For the Storage Facility Owners: It’s cost effective, increase loss recovery, gains access to mainstream visibility, and your able to bid anywhere at anytime. Storage Unit Buyers also benefit from not wasting gas driving to the facilities, and being able to bid from home. “In TSSA legal counsel’s opinion, while sealed bid and online auction postings may enhance revenue by generating more interest, they are not recommended for use in lieu of in-person auctions. Rather, they would be appropriate to use as a supplement to the in-person auctions if desired.” TSSA Legal Update Vol. 7 Issue No. 2. TSSA states, “on-line storage auctions can used as a supplement if desired.” Also, If transactions of funds are facilitated at the facility and not online why not use a third party? Dallas Consignment Auction has helped numerous facility owners in the DFW area by increasing their storage auction sales & efficiency. They use an online platform, and all sales are conducted at the facility. Let’s stay current with technology and use it.
There is no argument as to whether virtual storage auctions would be beneficial to both the storage facility and the storage auction buyer. The argument here is whether virtual storage auctions are legal in Texas. At this time, storage facility owners that choose to have their storage auctions online must be willing to risk a wrongful foreclosure lawsuit and be willing to bear the brunt of the legal costs involved in challenging the legality of virtual storage auctions.
Don’t get me wrong, we love the idea of online storage auctions. As a matter of fact, Texas Storage Auction Schedules & News would like to get involved with online storage auctions in Texas; especially since we already have the user base to support a successful online storage auction website. However, Chapter 59 is very clear that the sale must occur at the storage facility or a reasonably near public place, which is why we are not currently hosting virtual storage auctions on our website.
In the same issue that you quoted above, TSSA Legal Update Vol. 7 Issue No. 2., TSSA’s legal counsel states “they (referring to online storage auctions) are not recommended for use in lieu of in-person auctions” and “In my opinion, a self storage facility owner may risk being found in violation of the statute if an auction were solely held online.” As to TSSA’s counsel’s opinion that online storage auctions “would be appropriate to use as a supplement to the in-person auctions if desired.” The keyword here being “supplement” which is defined as “something that completes or enhances something else when added to it”. So in plain English, TSSA’s counsel is saying that a online storage auction would be permitted as long as it was being held “in addition to” the in-person auction occurring at the storage facility or reasonably near public place.
Now, this is not just any attorney’s opinion. This is an opinion from a specialist in law pertaining to the storage industry and one of the top ten real estate attorneys in the country. She is giving Texas storage facility owners good advice but it’s up to them to heed it. Storage facility owners should just be patient. It’s just a matter of time before our lawmakers realize the benefits of allowing storage auctions to be held online and they are made legal in Texas. Until then, don’t take any unnecessary risks. It’s not worth the potential legal ramifications, legal fees, judgements and negative publicity. The question is not will a lawsuit occur; but, rather, when will it occur.
Last but not least, consider where the information is coming from. The people who insist that that storage facilities can legally have their storage auction online are the ones who own the online storage auction websites. Organizations without a financial interest, such as the TSSA and Texas Storage Auction Schedules & News, feel that online storage auctions do not fulfill the legal requirements in the statute. Either way, this debate will eventually be settled by our lawmakers or by a lawsuit.
We truly hope that Chapter 59 is amended in the future to allow storage facility owners the option of having their storage auctions online. We also hope that the TSSA’s lobbyists push for an amendment which allows storage facilities the option to publish their legal notices on a storage auction related website; However, we do have a financial interest in that…LOL
When there is some doubt in the interpretation of a law, the courts in most states consider the intent of the legislature. This is one reason why the record of legislative debates is preserved. I have heard that the Texas self storage law dates to 1984. If so, the Texas legislature could not have been considering the non-existent internet as an alternative to a live auction.