LEGAL UPDATE - SUMMER 2022
Lien law. Governor Scott signed House Bill 74 into law on June 1, and it takes effect on July 1, 2022. The bill amended the lien law as follows:
Newspaper advertising. Starting July 1, 2022, Vermont storage owners are no longer legally obligated to advertise lien sales twice in a newspaper of general circulation before the sale is conducted. Alternatively, owners may advertise in a commercially reasonable manner. A manner of advertisement is commercially reasonable if three (3) or more independent bidders attend or view the sale. Online auction platforms and websites such as eBay or Craigslist fulfill this requirement. However, owners must ensure that least three (3) independent bidders attend or view the sale. If not, the sale should be readvertised. In that scenario, the owner must also resend the required second notice of default with the updated sale date and time.
Notice by certified mail no longer required. Starting July 1, 2022, Vermont operators are now able to send required notices via first class mail with certificate of mailing. Certified mail is no longer required. First class mail with certificate of mailing provides proof that the notice has been sent and automatically forwards to a new address. This provides a greater assurance that the tenant will receive the notice and is less expensive than certified mail.
The law also now permits the owner to send notice by email, but only if the occupant makes an express election to receive notice by email in the rental agreement. However, even if the election to receive notice by email is made, if the owner sends the second notice of default via email and does not receive a response, return receipt, or delivery confirmation from the same electronic mail address within two (2) days, then before proceeding with a sale, the owner must send the second notice of default to the occupant either by certified mail or by first-class mail with a certificate of mailing.
Personal information. The law was amended to provide significant consumer protections to safeguard personal information. Personal information means written information about a person that is not publicly available and that readily identifies that person or is closely associated with that person, including a Social Security number, credit or debit card information, a bank account number, medical information, or passport information.
If an owner has a reasonable belief that storage space contains the personal information of an occupant or clients, customers, or others with whom the occupant does business, the owner must not hold a lien sale of the personal information and may destroy the personal information without liability to any person. Further, before the purchaser at the lien sale takes possession of any personal property sold, an owner must provide notice and must require written acknowledgment from the purchaser that, if any of the contents contain personal information, the purchaser will return the personal information to the storage owner. If any personal information is returned to the storage owner, the storage owner may destroy it without liability to any person. Owners should consult with their legal counsel to draft an appropriate auction rule that requires bidders to acknowledge and comply with the provisions on personal information.
Contractual value limitation. The 2022 amendments include statutory protection for contractual value limitations. The law states that, “[i]f a rental agreement contains a limit on the value of property that may be stored in a storage space, the limit is deemed to be the maximum value of the property in the storage space and the maximum liability of the owner for
any claim.” Value limitations are a necessary tool for operators because they have no reasonable means to know the type or value of property that customers are storing on a self-service basis. In the event of a lawsuit, this is a powerful tool to reduce any potential damages owed to a tenant.
However, for the provision to be enforceable, most operators will likely need to amend their rental agreement. The 2022 amendments require the provision to be written in bold type and of a font size equal to or greater than the general text of the agreement.
Optional towing. Starting July 1, 2022, if rent, charges, fees, or expenses remain unpaid after fifty-one (51) days, an owner may have a vehicle, vessel, snowmobile, trailer, or all-terrain vehicle towed away by a towing company. However, unlike many other states, Vermont owners are legally required to provide notice to the occupant no later than five (5) days after having the property towed. An owner must notify the occupant by regular mail or electronic mail at the occupant’s last known address, and the notice must include the name, address, and telephone number of the towing company. While not legally required, we also recommend sending an optional tow notice at least ten (10) days prior to having the property removed from the premises. This notice may prompt the tenant to pay the debt owed to avoid removal of their property.
Late fee. Starting July 1, 2022, Vermont operators are now expressly permitted by statute to charge a late fee of twenty dollars or twenty percent of the monthly rent payment, whichever is greater, for each delinquent payment of rent, fees, or other charges due under the rental agreement. However, an owner may not impose a late fee until the occupant is in continuous default for at least six (6) days. Additionally, unlike some other states that provide a late fee safe harbor, the Vermont law imposes a hard cap on late fees. Owners are free to charge a late of less than $20 or 20%, but they may not impose a late fee greater than those amounts. Further, to lawfully impose the late fee, the amount of the fee and the conditions for imposing it must be stated in the rental agreement and must be written in bold type and of a font size equal to or greater than the general text of the agreement.
Disposal of property. The bill amends the law to provide that “if an owner complies with the
requirements of this section and a qualified buyer does not purchase the property offered for sale, the owner may dispose of the property without liability.”
Owner bidding. Starting July 1, 2022, the law prohibits owners from purchasing property at a lien sale. By extension, owners should also not have relatives or friends bid at the sale on the owner’s behalf.
Security deposits. If the owner charges a security deposit, the rental agreement must contain the conditions for retaining or returning the deposit. The disclosure must be written in bold type and of a font size equal to or greater than the general text of the agreement
Online sales. The law now expressly permits owners to conduct lien sales online as opposed to exclusively in-person at the facility. Online sales expand the audience of potential bidders by allowing bidders to submit bids without attending a one-day sale in person. More bidders increase the likelihood of higher bids. Online auctions provide an optional mechanism for the owner to conduct lien sales. Online auctions can also allow owners to return units to inventory more quickly rather than waiting for multiple delinquent tenants to justify the time and cost of a live auction. Some owners feel in person is better for their specific facility and clientele, while others believe online auctions provide greater access to additional bidders that drives prices and is appropriate for their facility. Vermont owners can now use either option. Regardless of the method of sale chosen, owners must ensure that their default notices reflect the accurate location of the sale -- an online auction website or a physical address for an in-person sale.
The new Vermont Annotated Lien Book, which explains all of the new and existing provisions of the law and provides recommendations for implementation is available here.
BUILDING CODES UPDATE
Changes to the International Building Code Affect Self Storage
With the support of its Code Committee, the Self Storage Association successfully pursued several key changes to the 2021 International Building Code.
An exception has been added to IBC Section 2902.3.3 to permit an increase in the location (to greater than every other floor) and maximum distance of travel (to greater than 500 ft) for restrooms. The location and travel distance must be approved by the code official.
The maximum allowable height of sprinklered facilities made of Type IIB materials (unprotected steel) and Type IIIB materials (noncombustible or fire-retardant-treated wood stud exterior walls and any interior construction) has been increased from 3 stories to 4 stories. The Code continues to have total floor and building square footage limits.
Pursuant to modified IBC Section 903.2.9, storage facilities are exempt from the automatic sprinkler system requirement if: (1) the total fire area is 12,000 sq. ft. or less; (2) the combined total fire areas are 24,000 sq. ft. or less; (3) the facility is no greater than one story above grade plane; and (4) all storage spaces are accessed directly from the exterior.
These changes go into effect as they are adopted by local and state governments over the next several years. Prior to the adoption on the local and state level, storage developers can request that the code official rely on the 2021 changes as acceptable alternative methods of construction pursuant to section 104.11 of the existing International Building Code.
Please email Joe Doherty with any questions or to receive supporting documentation for these changes.