Black’s Law Dictionary defines a “Good Faith Purchaser” as a “purchaser who buys without notice of circumstance which would put a person of ordinary prudence on inquiry as to the title, or as to an impediment on the title, of a seller”. What that basically means is that a good faith purchaser is someone who buys without notice of any other party's claim to the title of that property.
Self storage auction buyers are included within the definition of “good faith purchasers” and as such, they are typically immune from liability, especially from unhappy former tenants who seek a remedy for the sale of their property at auction.
In fact, this concern is specifically addressed within the language of almost every self storage statute in the United States, emphasizing that such buyers at self storage auctions cannot be held liable for the purchase of a foreclosed self storage unit and its contents.
As examples we can look to the states of Colorado and Illinois, both which provide for such protections to auction buyers and both which include almost identical language.
“A purchaser in good faith of the personal property sold to satisfy a lien as provided in this article takes the property free of any rights of persons against whom the lien was valid and free of any rights of a secured creditor, despite noncompliance by the owner with the requirements of this section”.
“A purchaser in good faith of the personal property sold to satisfy a lien, as provided for in Section 3 of this Act, takes the property free of any rights of persons against whom the lien was valid, despite noncompliance by the owner with the requirements of this Section”.
A recent case decided in California can also shed light on this exact issue. In the case of Nist v. Hall (Court of Appeal, State of California, 2018), a tenant sued the buyer of his property as a result of a self storage lien sale. The buyer responded contending that the California self storage statute, specifically Section 21711, would bar such an action since the buyer was a good faith purchaser. Section 21711 states as follows:
“A purchaser in good faith of goods sold to enforce a lien or a judgment entered on the lien in favor of the owner on goods stored at a self-service storage facility takes the goods free of any rights of persons against whom the lien was claimed, despite noncompliance by the owner of the storage facility with the requirements of this chapter”.
In its decision the Court discussed that provision of the law and held “The statutory purpose is obvious. Absent such an immunity, few if any bidders would attend lien sales or risk liability due to a technical noncompliance with the Act. Bidders would have to inspect the rental agreement and review all aspects of the lien sale before making a bid.”
This explanation by the Court clearly outlines the intent of the statutory language found in the self storage laws.
If the bidders and buyers at self storage auctions were at risk of liability for purchasing the abandoned property being sold at these lien sales, then no one would ever bid or buy the property being auctioned.
If that were the case, the self storage landlords would have no remedy for their lien right. Although they could try to sell the goods, no one would buy the property, at the risk of being sued by the former tenant.
Ultimately the only way to make the lien process work, allowing landlords to recoup their lost rent and tenants to recover any reasonable proceeds from the sale, is to create this shield from liability for the participants of the sale.
Thumbnail: Photo by Mark Weaver on Unsplash