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Recent Developments in Wisconsin Self Storage Law
Published: March 26, 2009
Author: Rebecca M. Orvick
The Wisconsin Court of Appeals has recently issued a wake up call to Wisconsin self storage facilities regarding how to proceed when renters default. In Cook v. Public Storage, 2008 WI APP 155, the Court of Appeals affirmed a judgment awarding plaintiffs $18,375 in damages, plus $100,000 in punitive damages and $282,154 in attorney fees and costs.
In Cook, a self storage facility ("Public Storage") entered in to a rental agreement with Zachary Luckett to lease a storage unit in the City of Milwaukee. At the time Luckett lived with his parents, James and Quincle Cook. The rental agreement identified Luckett as the "Lessee" and the Cooks as persons allowed access to the Storage Unit. Approximately one year after renting the unit, Public Storage sent Luckett a notice of default, followed a week later by a notice of lien and sale. Both notices were returned undeliverable, and Public Storage held a blind auction of the contents of the unit. Public Storage had incorrectly recorded Luckett's address, failed to update his address when his mother provided a new address and did not provide notice to the alternate contact provided in the rental agreement.
§704.90, Stats., Protects Persons Other Than the Lessee
Section 704.90, Stats., encompasses the Wisconsin statutory guidance for self storage facilities. Section 704.90(12) provides remedies for "any person injured by a violation of this section," and does not limit recovery to a "lessee." In Cook, the Court found that the provision in the rental agreement stating that "Lessee shall store only property that belongs to Lessee" was ambiguous when taken together with the provision allowing others "access" to the storage unit and the Cooks were therefore authorized to store their property in the storage unit. Public Storage's violations of the notice and sale provisions of Section 704.90 caused the Cooks to lose their property. Even though they were not technically Lessees of the storage unit, the court concluded that as persons authorized to store their property in the storage unit. The Cooks were protected under §704.90. Consequently, the Cooks were entitled to recover damages from Public Storage for lack of notice.
Punitive Damages
Plaintiffs were awarded $100,000 in punitive damages based in part on Public Storage providing improper notice and a finding that the sale did not qualify as commercially reasonable. Public Storage sent the required notices to Luckett at an address that Public Storage improperly typed in from Luckett's unclear handwriting. Luckett initialed the incorrect address indicating it was correct. Public Storage failed to provide the statutory notice to the alternate contact Luckett provided. As for the sale not being commercially reasonable, the court based its opinion on the fact that the purchasers of the storage items had no idea what they were buying. The items were well packed and not well described or visible. These facts provided sufficient evidence for the court to conclude that the sale was "substantially certain to result in a price that was unreasonably low, in disregard of the plaintiffs' right to a commercially reasonable sale of their property."
What this Means for Self Storage Facility Owners
It is important not only to have the necessary information in your records to properly proceed with a defaulting renter's property, but also to have systems in place which would allow you to show a court of law that you have made reasonable efforts to obtain necessary information from your renters, the information in your files is up to date and accurate, you used all the information in your file, including alternate contacts, to provide proper notice of default, and sales are conducted in a commercially reasonable manner. To limit damages, consider the following:
- Create a system for periodically updating your information
- Create a system for verifying accuracy of information
- Create a system for special instructions regarding notice of default or property
- Review your rental agreements and include language limiting value of contents
- Consider wrongful sale and disposal insurance
- Be consistent within and between all renters documents and agreements
- Conduct sales in a commercially reasonable manner
Recent cases in and outside of Wisconsin demonstrate courts’ willingness to award large damages against self storage facilities. Now is the time to review your procedures and agreements to verify compliance with applicable law and limit your liability exposure.
Rebecca M. Orvick is an attorney at Axley Brynelson, LLP and member of the Business Practice Group. Her practice includes a variety of business and corporate law transactions, estate planning and real estate matters. For more information on Wisconsin self storage facility law, contact Ms. Orvick at 608.283.6728 or rorvick@axley.com.
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