Transitioning to Online Auctions
By J. Ashley Oblinger, Esq.
Live auctions have long been a staple in the operation of self storage facilities. There have even been reality television shows revolving around live self storage auctions. However, as with everything, auctions have evolved with the use of the internet and the development of online bidding systems. And with most states allowing online auctions, a lot of operators have moved from live to online auctions. Furthermore, over the last year, many people stayed away from even small gatherings, which, in turn, resulted in more and more operators foregoing their live auctions in favor of online auctions.
While many operators remain comfortable with the standard live auction, online auctions do offer operators some distinct advantages. The websites that host the auctions often help operators with the auction process and will market the auctions to potential bidders to help increase the number of people who view and bid on the auctions. In addition, online auctions can provide a larger audience of potential bidders than live auctions, which can be especially useful not only in generating more bids, but also in helping operators meet their state's statutory "commercially reasonable" standard for the sale, as visitor views of the auction can be counted as potential bidders to meet the statutory requirement.
Online auctions also allow operators and their employees to avoid the inconvenience of spending valuable time and money conducting auctions at the facility. Online auctions also greatly reduce the number of auction-related persons at the facility, which reduces potential liability and other issues related to bidders being at the property for live auctions. Moreover, concerns related to bad weather for live auctions do not exist with online auctions.
While online auctions can result in better and easier sales for operators, there are a number of operational changes that must take place in order to transition from live auctions to online ones. First, the majority of state self storage acts require the lien notice and advertisements of sale to include the time, place, and manner of the sale. As such, if an operator wishes to conduct online sales, it must be specified in the lien notice and the advertisements. Generally, for online auctions, we recommend that the lien notices state the auction will be conducted online and provide the date and time for when bids open for the auction, the date and time when bidding closes for the auction, and the website address of where the auction is being held. The advertisements of sale should also include this same information.
Secondly, operators should take the time and effort to include a good description of the unit being sold in the online auction listing and provide a number of clear pictures of the property in the unit (without necessarily going into the unit or touching the property). Most digital cameras or phones have adequate zoom capabilities that allow operators to provide potential bidders with detailed photographs from different angles of the unit up for auction. Good pictures can help attract bidders to the auction.
Finally, operators should ensure that their bid rules for online auctions address certain issues to help avoid potential headaches with purchasers. The bid rules operators currently use for live auctions are a great starting point, but they should also address other issues, including, but not limited to, the type of payments accepted, how long the winning bidder has to make payment for the unit, what happens if the winning bidder fails to make payment by the time stated in the rules, how long the winning bidder has to remove all the property in the unit after paying, and when the auction is considered final and the tenant no longer has the ability to pay the past due balance (this last point can be especially important – many operators want to make this as late as possible simply to give the tenant an opportunity to pay and avoid a sale of the tenant’s property). Also, it is important to make sure that the rules for the website hosting your auction do not conflict with your own bid rules.
Moving from live auctions at a facility to online auctions is a big decision for an operator to make and may seem overwhelming at first. But, if done correctly, it can be a move that provides great benefits to the operator.
Ashley Oblinger is an attorney in the law firm of Weissmann Zucker Euster Morochnik & Garber P.C. in Atlanta, Georgia. Ashley specializes in business law and self-storage law, advising self storage facilities throughout the country on all legal matters, including lease preparation, lien enforcement, tenant issues, tenant claims defense, and employment policies. Ashley can be reached at 404-760-7434 or at Ashley@wzlegal.com.
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