< The Storeganise Blog

Self-Storage Delinquencies in the Age of COVID
Coronavirus has affected how storage companies handle account delinquency. We break down how to handle it for the benefit of both sides.

At this point it’s become a cliche, but it’s hard to overstate how strange and different this year has been. Many businesses have had to overhaul their operations during the coronavirus pandemic, and this includes self storage companies of all sizes. With that in mind, a major consideration for storage businesses has been how to handle tenant delinquencies in this unprecedented time. 

Handling with sensitivity

While your storage business may be suffering from increased debt coming from delinquencies, it’s important to remember that the pandemic has affected everyone, and as a result tenant delinquencies must be handled with sensitivity and empathy. In the past, storage delinquencies and late fees were more easily dealt with. There would have been clear procedures in the lease to handle the event of late payment. Communication would be simple and if the fees weren’t paid off by a certain date, the account would most likely go into lien status.

However, in the present day, the procedure is anything but clear. Social distancing has made it harder to drop off payments in person, and even if a check is mailed, it will take more time than normal to arrive, which is another possibility for lateness. On top of the difficulties in communication and payment, you have to consider the possibility your customer is ill, or caring for someone in their family. Further, the job market all over the world is volatile, meaning many of your customers might not have a stable income. As a result, they will need to prioritise their spendings, and their self-storage needs might fall further down their list. 

Before going into the actions you can take, it’s important to note the many legal changes that have happened during the pandemic. Many governments have enforced mandates against foreclosures and lien sales, meaning it may be harder to recoup the losses of tenant delinquencies. For example, in Los Angeles County, the council passed an ordinance for all self-storage operators to suspend rent and late fees for tenants that can’t afford to make payment. With that said, it’s important that you do your research on your local area on any moratoriums, mandates, or ordinances in place in regards to tenant delinquencies. 

Empathetic communication

With all this context in mind, the first key consideration is how to handle confronting your tenant. What’s important is keeping your message and tone in mind when communicating with tenants who are late on payment. Most times, your tenants aren’t intentionally trying to take advantage of this situation, but simply lack the funds to pay for your storage service on time. You want to encourage payments, but not penalise the customers that are unable to. While you should still be persistent, you should treat your customer’s struggles with compassion. 

Expanding payment options 

As mentioned earlier, physical payments are more difficult due to social distancing and the post service being slower than usual. Your storage business can adapt to this by offering more online or phone payment options, which will eliminate the obstacle of making physical payments and reducing the number of late payments from customers. These types of payments are also easier for the tenant to make, which makes this solution a win-win. 

Another option is to offer payment plans or a percentage pay-to-vacate option. This is where your tenants debts and late fees are structured in a way so they can pay it off in a longer time period. A percentage pay-to-vacate deal means your tenant agrees to pay a part of what they owe you, and move out of the facility by a certain date. Again these options will require clear communication, so you understand how much they are able to pay, and how quickly. If your tenant really can’t afford to continue paying, you can consider waiving their past fees and have them pay past rent instead, or forgive their debt completely if they move out of their unit. 

The last resort 

If you’ve been sensitive and upfront with your tenant but their accounts are still delinquent, it’s best now to turn back to what your local lien laws . It can also be worth consulting an attorney for advice on further action, as these mandates can be written in confusing language and be quite vague. Sadly, there are bound to be some who are taking advantage of the situation, but these days it’s paramount that you give your tenant a chance with the options listed above, and are able to separate the ones who are delinquent as a result of a hardship from those intentionally not making payment.

The COVID-19 pandemic means as an operator of a self-storage business, you might have to make some tough decisions about account delinquencies. The most important thing is to proceed with sensitivity and compassion, but to also be appropriately persistent. These are tough times for everyone, and being empathetic will not only be a moral victory, but also swing your company’s reputation to your favour.