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An Innovative Approach to a Warehouseman’s Lien Sale

Thursday, March 5, 2009
Tony Hopkins
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Authored by Tony Hopkins & Curt Emery

Moving and storage companies commonly encounter customers that become delinquent on accrued long-term storage charges. A warehouseman’s lien is the right of a warehouseman to retain goods until all storage charges have been paid. In many cases, undertaking a warehousemen’s lien sale is the only way to recoup these outstanding charges.

As the specific requirements of holding a warehouse lien sale can vary by jurisdiction, it is important for moving and storage companies to know the rules and regulations pertaining to them. As a best practice, one individual of authority within the company should handle all of the details relative to a warehouseman’s lien sale. This will eliminate miscommunication issues and the potential of making a mistake. Most importantly, it will avoid a claim filed against the company for conversion.

Most warehouse lien sale procedures contain key elements that are part of the Uniform Commercial Code, Sections 7-209 and 7-210.

1. Proper Examination and Notification

The records of each storage contract in question should be carefully reviewed to determine the names and the last known addresses of the individuals to be served with a notice. Multiple notices must be sent if the account is held in more than one name and address. It is important to research whether there are any additional unknown liens filed against the property prior to sale.

2. Proper Sale Notice

Proper notice of the intent to sell the goods must be provided to the customer. This notice must be delivered personally or via mail to the last known address of the customer(s). An effective notice contains the following details:

  • Itemized Claim Statement. This describes in detail the total past storage charges claimed, including wrapping and packing charges.
  • Description of Goods Subject To Lien. The most convenient way to describe the goods in question is to attach inventory sheets.
  • Demand for Payment. The total amount owed should be clearly stated with a specific payment deadline following receipt of the notice. Jurisdictions differ relative to adequate time frame for payment. Typically, this time frame is between 10-30 days.
  • Conspicuous Statement. This is a statement within the notice that outlines the consequences for ignoring the notice. A statement such as, “Unless this claim is paid in full within 15 days after receipt of this notification, the goods will be sold by public or private sale.”

3. Proper Advertisement of Sale

With regards to advertising the sale, jurisdictions will vary relative to what qualifies as proper advertisement. They commonly require a newspaper ad to be run once a week for two weeks or require posted notice at six or more locations within the vicinity of the sale. The advertisement must include the full name of the person or persons whose property is being sold, a description of the goods and the location and time of the sale.

4. Proper Sale

The sale must take place at least 15 days from the date of publication, and should include only those items sufficient to satisfy the lien. If there is a surplus from the sale, these additional funds should be held in a separate bank account. These surplus funds must be held for delivery on demand by the original customer. 

Containers should be properly unpacked by competent employees who will develop a complete itemized list of the contents. Each article should be assigned a lot and piece number. This list can then be used during the sale to check the price realized on each item. In addition, if items are removed from the sale, they can be returned to the original container. This procedure will reduce the potential for shortage claims. 

A complete record of the sale should be maintained, including returned registered receipts, notice of sale, items sold, amounts received and the buyer’s name and address. If requested, the original customer has the right to secure the name and address of the buyer and the price paid for each item.

5. Insurance Protection

While best in class moving and storage operations follow the warehouseman’s lien sale guidelines outlined above, mistakes occasionally occur. It is extremely important to secure and maintain proper insurance protection for inadvertently failing to follow the Uniform Commercial Code or any jurisdictional rules.
Most insurance providers specialized in moving and storage liability insurance programs are committed to the industry and have addressed the coverage in two different ways:

Some providers continue to issue their policies with the common “Voluntary and Knowing Parting of Property of Others” exclusion. These insurance providers offer a coverage extension under such names as “Unauthorized Auction” or “Warehouse Lien Sale” coverage. Limits for these extensions are typically a percentage of the overall warehouseman’s legal limit subject to a $25,000 or $50,000 maximum.

Other insurance providers indicate coverage within the Warehouseman’s Legal Liability insuring agreement. Through this approach, coverage for these types of claims are addressed within the initial insuring agreement. The total warehouseman’s legal limit will apply to the claim.

All coverage forms aside, it is extremely important that your insurance provider understands the unique nature of this exposure and addresses it adequately in their policy.


 

Warehouseman’s Lien Best Practices include proper:

  • Examination and Notification
  • Notice Advertisement of Sale Sales
  • Insurance Protection

 

 

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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