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California Enacts Lien Law Reform

Tuesday, October 24, 2017   (0 Comments)
Posted by: Erin King
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California Enacts Lien Law Reform

The California and national Self Storage Associations took a first step in reforming the state’s lien law this year.  Both organizations will be working with the California legislature to bring additional reform in 2018 and in the 2019/2020 legislative session.   The organizations have determined that the one-and-done approach does not work in a state as complex as California, and that the self storage industry needs a permanent presence in the state to achieve its long-term legislative goals.   The 2017 legislation, which goes into effect on January 1, 2018, was a modest preparatory effort that also cleaned up some ambiguities that had been introduced into the lien law by prior bills.  

AB 1108 makes three changes to current law.  First, it authorizes the facility operator to send lien notices by electronic mail.  It also requires that the rental agreement notify the occupant that email will be used and the tenant must consent to receiving lien notices by this method.   Next, it clears up an ambiguity in current law on exactly when the owner has the right to deny access, enter the space and move the property to a place of safekeeping.   Revised Business and Professions Code section 21705 now states:

 (a) If the notice has been sent as required by Section 21703 and the total sum due has not been paid by the termination date specified in the preliminary lien notice,… [Changed language is underlined]

These important rights clearly accrue when the occupant does not pay the total sum due by the date stated in the Preliminary Lien Notice.   The prior statutory language was not clear on this point.

Finally, AB 1108 revises Business and Professions Code section 21707 (b) as follows:

(b) For the purposes of this section, publication of notice in a public notice district is governed by Chapter 1.1 (commencing with Section 6080) of Division 7 of Title 1 of the Government Code. For the purposes of this section, a commercially reasonable manner of sale includes, but is not limited to, an in-person auction or a sale on a publicly accessible Internet Web site that customarily conducts online auctions or sales. [New statutory language is underlines]

This change in the law specifically authorizes a self storage operator to conduct a lien sale on a website that customarily conducts online lien sales.  This would include websites such as Ibid4Storage and Storage Treasures.   

The state imposed significant regulation on the use of email to send lien notices.  First, the owner must modify the rental agreement to include a statement that lien notices may be sent to the occupant and to the alternate by electronic mail and the occupant must provide a written signature on the rental agreement consenting to receive lien notices by electronic mail.  In addition, the law details in technical terms how a complying email notice must be sent.  The facility operator must have a system in place whereby actual delivery and receipt may be proved.  There is language that suggests that the operator must be able to show that the email was opened.   This is difficult to prove and the delinquent customer can avoid effective notice simply by not opening the email. 

It should be noted that the changes authorizing sending notices by email will expire on January 1, 2021.  The very restrictive 2018 changes are temporary, and the legislature will provide permanent regulations governing the use of email in self storage lien notification in the next legislative session.  The CSSA and the SSA will be working with the legislature to develop better rules governing how email lien notice may be sent. 

“The CSSA believes that email notification should have the same legal status as a notice sent by USPS,” said Erin King, CSSA Executive Director.   “A mailed lien notice only has to be deposited with the USPS, properly addressed with postage pre-paid.  The law should not require that an email notice is only effective when the owner has proof of the tenant’s opening the email.”       

The California Self Storage Association with the permission of the Self Storage Association is sharing this article.