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Minutes for HB2454 - Committee on Commerce
Short Title
Self-storage unit rentals; sales and towing of property for nonpayment of rent or abandonment; contractual value of property.
Minutes Content for Fri, Mar 13, 2020
Chairperson Lynn opened the hearing on HB 2454 and requested Assistant Revisor Charles Reimer to provide an overview of the bill.
Senator Alley asked for a definition of "a commercially reasonable manner". Mr. Reimer responded there is no definition for this term.
Chairperson Lynn recognized Whitney Damron, The Self Storage Association, who presented testimony in support of the bill. (Attachment 6) The bill makes three changes:
1) Make damage loss limitations in contract enforceable in law.
2) Amendments to the process for disposing of stored items.
3) Publication and notice requirements for sale of stored items.
Section 1.(b) will allow contractual limitations on the value of stored items to be enforceable in court under contract law. Typically, a self-storage rental agreement will place a contractual limit on stored items to a value not greater than the maximum value permitted to be stored in the leased space under terms of the rental agreement. Some jurisdictions (e.g., courts) have not adhered to these limitations absent statutory authority. A self-storage operator may have good reason to limit the value of items stored in their facility, including limitations on their own insurance coverage and an interest in not having certain high-value items stored onsite that make theft difficult to discourage.
Section 2.(a)(1) will allow for a sale of property to be conducted in person and/or online. By allowing online participation in an auction, it is possible, if not likely that more people will participate in such auctions, which ultimately benefits the person with the stored items who is in default in their agreement with the self-storage operator.
Section 2.(b)(3) will allow a self-storage operator to provide public notice of intent to sell property where the renter has defaulted on their agreement through public notice in the official newspaper of jurisdiction (e.g., city or county) or (new language) in "any other commercially reasonable manner". The standard of review for the phrase "any other commercially reasonable manner" is met if three or more independent bidders participate in the auction in person or online.
Current law allows for a self-storage operator to sell stored items if the occupant is in default for a period of 45 days or longer. State law requires notice by First Class Mail at the occupant's last known address and by electronic mail if it has been provided. A second notice mailed not less than seven days after the initial notice with additional information must also be sent to the renter. The Legislature amended the notice provisions for the renter years ago to allow by First Class Mail and electronic notification. There are no changes to that process in this legislation. The purpose for the public notice of a sale is to generate interest in the sale and not a notification to the unit renter. The renter in default receives notice independent of the auction notice as noted above. The public auction is of benefit to the renter, as proceeds are first applied to the outstanding bill owed to the self-storage operator. Any proceeds received over and above that owed to the self-storage operator are returned to the renter. Should the self-storage operator be unable to locate the renter following an auction where proceeds exceeded the amount owed, the remainder funds are remitted to the State Treasurer as unclaimed property.
The testimony included maps from all states that note where similar provisions have been enacted. These amendments are consistent with industry trends and business practices for the self-storage industry and consumer.
Written only testimony in support of the bill was provided by:
- John Valley, Valley Self Storage (Attachment 7)
Chairperson Lynn recognized Doug Anstaett, Kansas Press Association, who presented testimony in opposition to the bill. (Attachment 8)
With this bill, the self-storage industry is asking the Legislature to eliminate transparency, cut out most of the public from the process and give storage unit owners even more power than they already wield in the rental process. When a person signs a storage facility rental contract, the person is accepting terms that have been shaped by the self-storage industry by years of legislation and litigation. Public notice in newspapers came about as a result of the courts giving up jurisdiction years ago because the cost of litigation often was higher than what the units held in storage. The states turned to public notice in newspapers of general circulation as the way to alert the public of an upcoming sale of property.
The bill wants to give storage owners a choice between placing public notices in newspapers of general circulation OR in any other "commercially reasonable manner". He expressed concern the notice will be switched to the web. He listed reasons in the testimony why putting public notice in a newspaper works.
In regard to storage units in default rented by active duty service members, Mr. Valley indicated the service member's property would not be sold at a lien sale.
Senator Baumgardner expressed a concern because public notice goes beyond just storage facilities. She said she could accept notice being made in a newspaper and in any other commercially reasonable manner.
Written only testimony in opposition to the bill was submitted by:
- David Prowls, Holton Recorder Newspaper Owner (Attachment 9)
- Jeff Cott, Kansas Press Association Membership Legislative Director (Attachment 10)
- Earl Watt, Owner/Publisher, Leader & Times (Attachment 11)
- Dan Thalmann, Washington County News (Attachment 12)
- Robin Wunderlich, The Eureka Herald (Attachment 13)
- Dane Hicks, Publisher, The Anderson County Review (Attachment 14)
- Rick Nichols, Editor, The Oskaloosa Independent (Attachment 15)
No testimony neutral to the bill was submitted.
Chairperson Lynn closed the hearing on HB 2454.
Senate Commerce Committee members received a follow-up e-mail from Whitney Damron concerning HB 2454 on March 13 after the meeting. (Attachment 16)
