Self-storage operators often face a common but challenging issue: chronically delinquent tenants. For many storage managers, this subset of customers requires careful handling, as these tenants walk a fine line between profitable late fees and potential auction liabilities. Balancing late fees, lien laws, and customer relationships has become both an art and a science in the self-storage industry.
Many facility managers note that, in some cases, chronically late tenants aren’t a major concern. Late fees contribute to revenue, especially when tenants pay their balances just in time to avoid auction, making these customers profitable despite their recurring delays. For example, Randy Weissman, the COO of Pogoda Companies, shared a story of a regular delinquent in St. Louis, who would show up the day before an auction to pay his fees—often with added late charges and even auction fees—in cash. “They know they’re paying extra,” he says, “but as long as they keep their word and pay, it’s not necessarily an issue.”
But the tolerance for late payments hinges on tenants’ reliability. As Sue Haviland from Haviland Storage Services explained, staff members are trained to work with customers who communicate clearly about their payment delays and follow through on promises. “It’s when they stop communicating or try to talk us into waiving fees that it becomes problematic,” she says. A good policy that clearly outlines acceptable behavior around delinquency is essential for managing these tenants effectively; it hopefully persuades tenants to pay in a timely manner to avoid fees, or accept the consequences, which inevitably benefits the facility through fees.
While self-storage facilities may fiscally benefit from tenant delinquency, it is not necessarily what they want out of a tenant. Weissman mentions that they give their tenants the benefit of the doubt initially. “They wouldn’t be paying money to store things they don’t want to keep,” he says; “people are going into storage because they are storing valuable things.” Facilities try to adapt and work with their tenants on a case-by-case basis, and take many measures to ensure that their tenants abide by a timely payment plan.
Lien laws, which dictate the steps storage facilities must take before cutting a tenant’s lock and auctioning their goods, vary significantly across the United States. For instance, California has particularly stringent lien laws requiring a precise timeline and strict adherence to notification procedures. After a tenant is 15 days late, the facility can send a “pre-lien” letter, followed by an official lien letter at 25 days. At 30 days, the tenant’s account is considered in lien status, and by day 31, the facility is legally allowed to cut the lock and auction the unit. Managers report that enforcing these rules rigorously helps prevent legal risks and mitigates the issue of chronic delinquency.
“Following the lien laws is key to managing delinquent accounts effectively,” Haviland says. “We include these terms in all rental agreements, so tenants are fully aware of the process. However, every facility must have strict policies around partial payments and late fees to ensure clarity and avoid ‘gray areas’ that may lead to misunderstandings or manipulative behavior.”
While lien laws vary state by state, some people are flippant and not in compliance with their lien laws. This breeds opportunity for chronic delinquency, as it is more difficult to hold tenants accountable. Establishing a strong boundary for late fees and providing a threshold for what the facility will tolerate in terms of late payments will mitigate the amount of chronically delinquent tenants.
Some delinquent tenants become adept at manipulating the system, especially when facilities lack clear and enforceable policies. “Without a solid policy, tenants can learn that you’re ‘easy’ and will try to get fees waived frequently,” Haviland explained. "It’s critical to empower staff to understand what they can and can’t waive, while limiting fee waivers to no more than once per calendar year for any customer.”
Every facility has different terms for how they handle delinquency and the enforcement of late fees. Despite these differences, every facility should abide by these policies in order to sustain a strict, substantial expectation for tenants.
Regular training on handling delinquent tenants, maintaining a professional stance, and enforcing policies consistently is essential. Staff must balance maintaining a good customer relationship with ensuring that chronic late-payers don’t strain resources or cause operational challenges. Another effective strategy some facilities employ is reviewing accounts of habitually late customers and, when necessary, raising rent in accordance with lease provisions.
One preventive approach that many facilities have found helpful is offering (or even defaulting customers to) automatic payment. Autopay reduces delinquency by ensuring payments are automatically processed unless tenants explicitly opt out. This approach, according to Weissman, has significantly decreased late payments by “increasing the number of customers who don’t want to miss a payment.”
In addition to automated billing, facilities use a multichannel communication strategy, including emails, texts, and phone calls, to remind tenants about due dates and late fees. Although late fees can be a “taboo” topic, consistent reminders are proven to be effective.
For tenants on fixed incomes, like some seniors, flexibility around payment schedules can also be helpful. “If their income comes on a different date than their rent, we work with them,” Haviland says, adding that “being understanding in these cases prevents chronic delinquency.” This is a consistent theme for many facilities: working with their tenants to accommodate them as much as possible. Especially when some tenants are trying their best to make a payment and are fiscally debilitated, it is important to sustain a relationship with a consistent customer and occasionally make exceptions.
Though storage auctions are often dramatized as a lucrative endeavor, industry professionals emphasize that auctions are rarely profitable for facilities. “A big misnomer in storage is that we make money off of auctions. In reality, we’re just trying to recoup our losses and reclaim the unit for a paying customer,” Weissman says. When forced into an auction, many managers attempt to resell the unit to the delinquent tenant for a lower cost rather than going through the auction process. This allows facilities to avoid the costs associated with clearing out and disposing of items.
Managers also stress the importance of caution with auctions: “When in doubt, don’t sell,” says Weissman. Mistakes in lien procedures, even small ones, can expose facilities to legal liabilities. For this reason, many managers prioritize communication and flexibility over rapid escalation to auction.
This all ties back to the concept of facilities wanting to keep consistent tenants. They do not want to auction off tenants units, and would much prefer to work with a difficult tenant than sever the relationship altogether.
Collections are an unavoidable part of self-storage management, and every facility must balance profitability with tenant relationships and legal obligations. In this industry, the key to managing chronically delinquent tenants is having robust policies, investing in regular staff training, and consistently enforcing lien laws.
Along with strict policies, one must consider the fine line that highlights customer service, which is understanding and an occasional leniency. Handling tenants on a case-by-case basis, and being as understanding as possible, will prove to sustain customer relations while also avoiding delinquency through constructive means.
Haviland says, “When you start managing delinquent tenants early in the process, you can often prevent long-term issues.” By setting clear boundaries, staying compliant with state lien laws, and offering proactive solutions like autopay, storage facilities can minimize chronic delinquencies and create a stable, profitable operation for the long term.
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Ciera Rupp is a New York-based freelance writer with a passion for crafting engaging content across various niches. She specializes in captivating storytelling and delivering informative, impactful narratives that resonate with audiences.