STEP-BY-STEP PROCEDURES FOR REGULAR FORECLOSURE (not for motor vehicles, trailers, boats, and outboard motors) By Connie N. Heyer, TSSA Legal Counsel

REVISED January 2016 STEP-BY-STEP PROCEDURES FOR REGULAR FORECLOSURE (not for motor vehicles, trailers, boats, and outboard motors) By Connie N. Heyer, TSSA Legal Counsel The following is a step -by-step recommended procedure for exercising self -service storage facility lien rights in Texas if you are using a present or past TSSA Rental Agreement. If using any other rental agreement form, you may need to consult your attorney. Statutory Changes Effective January 1, 2012 The 2011 Texas legislature made many changes to the self -storage lien foreclosure process. It is vital t hat all self - storage operators familiarize themselves with the new procedures resulting from the 2011 session, all of which are described in this article as they related to the regular foreclosure process. Some of the more important changes are mandatory new language in all Notice of Claims sent as of 1-1-12; the ability to send Notice of Claim via verified mail as of 1-1-12; and the ability to send Notice of Claim via email as of 1-1-12 if the lease in question contains language underlined or in conspicuous bold print that notice may be given by email if the tenant elects to provide an email address. Preliminary Information Lien Covers All Monies Owed and All Property in Storage Unit. A self-service storage facility owner in Texas has a statutory/contractual lien under Chapter 59 of the Texas Property Code on all property found within the storage unit rented by the tenant. The lien covers all monies due, not just unpaid rent. This means it covers motor vehicles, trailers, boats, and outboard motors found in the storage space regardless of who owns the property and regardless of whose name the property is registered with at any governmental agency. Superiority of Chapter 59 Lien. The storage facility s lien on personal property within the rental space is superior to any other lien, including the lien of a finance company, bank, S&L, or seller (such as a department store or appliance store). A foreclosure sale under Chapter 59 cuts off all such liens. Community Property Laws. Community proper ty laws in Texas do not exempt any property from foreclosure. The failure of one spouse to sign the rental agreement makes no difference. Either spouse acting alone can store community property without the other spouse s consent and can subject the community property to a lien and Chapter 59 foreclosure by signing a rental agreement that complies with Chapter 59. See TSSA legal counsel s article titled What If the Contents Are Owned by Others? Mortgaged to Others? or Stolen? behind the Legal Articles tab in this Goldbook. Timeline Chart. A chronological sequence chart, diagramming the various steps in the foreclosure process, immediately follows this article. If Unit Contains Vehicles, Trailers, Boats, or Outboard Motors. If the storage unit c ontains a motor vehicle, trailer, boat, or outboard motor, some extra steps and additional waiting periods are applicable under another statute. See TSSA legal counsel s articles on those special procedures. The article regarding special procedures for boats and outboard motors, and the article regarding special procedures for vehicles and trailers, follow this article. Military. If you are not using a lease addendum which contains language waiving an active duty military tenant s rights under the U.S. Servicemembers Civil Relief Act, you must receive an order from a court before foreclosing on an active duty military tenant s unit (including active duty Texas State Guard and Texas National Guard), and in some cases before foreclosing on a unit rented b y his or her spouse or child. TSSA legal counsel has drafted an addendum for waiving a servicemember s rights under the SCRA if you choose to request that your military tenants do so. This addendum is on the Appendix CD, form ADD -4. See also TSSA legal c ounsel s article titled The U.S. Servicemembers Civil Relief Act behind the Legal Articles tab of the Goldbook. 2015 Texas Self Storage Association, Inc. 34 2016-2017 TSSA GOLDBOOK

Step-by-Step Foreclosure Procedures for Regular Foreclosures STEP 1. Make sure you have an original rental agreement which is signed by the tenant and which contains the required lien language underlined or printed in conspicuous bold print. This is required by Section 59.041(b)(1) of the statute. The TSSA official Self-Service Storage Rental Agreement form complies with this requirement. If your tenant is in the military or on active duty (including active duty service for a period of more than 30 consecutive days as a member of the Texas State Guard or Texas National Guard under the call of the governor), make sure you have a signed SCRA waiver before proceeding. The effect of Section 59.041(b)(1) is that the self-service storage facility owner does not have a lien and cannot foreclose if: (1) the rental agreement is oral; (2) the rental agreement is written but does not contain the necessary contractual lien; (3) the rental agreement is written but the contractual lien is not underlined or in bold print; or (4) the rental agreement is written but it is not signed by the tenant. (Note: If a signed rental agreement on an official TSSA Rental Agreement form has been modified or renewed by unilateral notice from the landlord under paragraph 30 of the rental agreement, only the original TSSA Rental Agreement needs to be signed by the tenant). In the foregoing situations, the facility owner cannot seize and sell the property in the storage space without a court order, and the facility owner can remove the tenant from the space only by filing an eviction lawsuit in the local JP court. The lien is not limited to a lien for rent only. It is a lien for all monies owed to the landlord, including rent, damages, and all other sums if it is so stated in the rental agreement (as required in Section 59.041). The TSSA Rental Agreement so states in Paragraph 22. Since the lien is on all property in a self-service storage facility, it makes no difference who owns the property or who has a lien on the property. It makes no difference whether it is community property or separate property of a spouse who did not sign the rental agreement. It makes no difference whether it is property belonging to a friend or employee of the tenant. It makes no difference whether such property is being stored with or without permission of such friend, employee or spouse. There is no legal requirement to make oral or written efforts to collect monies owed before starting the foreclosure process. But it certainly would seem smart to make some minimal effort before seizing and sending a Notice of Claim. STEP 2. Seize the contents under Chapter 59 by performing either Option #1 or Option #2 below. (See paragraph 24(6) of the TSSA Rental Agreement.) Option #1. Follow the language in the TSSA Rental Agreement and remove the tenant s lock, put your own lock on the unit, and thereafter send the Notice of Claim. Admittedly, this is more work than merely overlocking or doing nothing in the way of a lockout. Also, some tenants will likely be upset because if they pay up and continue to rent from you, they will have to buy a new lock. Nonetheless, this is the most conservative procedure. It is advisable when removing and replacing a tenant s lock to open the unit to see if there is anything in it. Option #2. If a facility owner wants to base a foreclosure on an overlock which is followed by a Notice of Claim that states the unit contents have been seized, the procedures in paragraph 24(6) of the post-1997 TSSA Rental Agreements (Form #1-97 or newer versions) need to be followed. TSSA Rental Agreements from 1997 forward contractually define seizure (in view of the lack of an express statutory definition of seizure ) as follows: For purposes of statutory foreclosure, seizure occurs when: (1) Lessor both overlocks Tenant s space and mails [in 2012 TSSA lease version, mails was changed to provides ] a statutory notice of claim to Tenant soon thereafter, OR (2) Lessor removes Tenant s lock or locks from a door or gate that is part of 2015 Texas Self Storage Association, Inc. 35 2016-2017 TSSA GOLDBOOK

paragraphs 18(1), (2) or (3) and without Lessor being directed to remove Tenant s lock by a health or law officer under paragraph 19. In an unlockable outdoor storage space, seizure for foreclosure purposes occurs when: (1) Lessor attaches a security chain or wheel boot to Ten ant s property to immobilize the property, OR (2) Lessor denies Tenant access to the facility and mails [in the 2012 TSSA lease version, mails was changed to provides ] a statutory notice of claim to Tenant soon thereafter. If the facility owner is us ing a pre -1997 TSSA Rental Agreement, the language of paragraph 24(6) defines seizure differently; owners should update to the newest version of the TSSA Rental Agreement. Seizure is necessary before a Notice of Claim form is sent to the tenant, since Section 59.043(a)(3) requires the Notice of Claim to state that the contents being stored have been seized. If you want to do the seizure after you send a Notice of Claim, it may effectively collect the rent without the liability exposure of a seizure; but the only Notice of Claim that will start the statutory foreclosure process is one sent after seizure. If you send a Notice of Claim before seizure and if you intend to foreclose, you must send another, via verified mail or (if you have the required lease language, email), after seizure. It is recommended that you use a video or still camera to take pictures of: (1) removing the lock; (2) opening the doors; and (3) the contents of the space immediately after opening the unit. This is good protectio n against fraudulent claims that valuable property was stolen by your employees or wrongfully sold at auction. Before locking the space with your own lock, make notes on the general description of the contents so you will be able to fill out the Notice of Public Sale. You may, but in TSSA legal counsel s opinion have no duty to, open boxes to get an idea as to what they may contain. Move the property to another space if it is reasonably necessary to better protect the contents, space, or facility from damage or loss. If property is moved, the tenant must be notified per paragraph 18 of the TSSA Rental Agreement. This is important so that an upset tenant does not break into his old space and find another tenant s contents, ripe for the taking. Seizure in outdoor storage situations. In the situation of an unlockable storage space, the TSSA lease defines seizure as either: (1) attaching a security chain or wheel boot to the tenant s property followed by sending a Notice of Claim, or (2) denying th e tenant access to the facility (for example, by invalidating his access card or code), followed by sending a Notice of Claim. Abandonment. If the unit has been abandoned in accordance with the TSSA lease definition of abandonment, it is unnecessary to proceed any further with the foreclosure process. Lessor may clean out the space and re -let it. See TSSA Rental Agreement Paragraph 26 for the definition of abandonment. STEP 3. STEP 4. Wait any length of time or no time at all. Notices of Claim may be sent via verified mail or via email, BUT email is only an option if the tenant s lease contains required language. The official TSSA Notice of Claim form has been drafted to comply with all the statutory requirements. It is recommended that you use the form shown behind the Official Forms tab in this Goldbook. It is important to use a TSSA Notice of Claim form dated 2012 or later because in 2011, the law changed and additional wording required by law is included on the form versions 2012 and lat er. 2015 Texas Self Storage Association, Inc. 36 2016-2017 TSSA GOLDBOOK

Verified mail notice. Verified mail is defined in the statute as any method of mailing that provides evidence of mailing. Examples of mailing that provides evidence (in the form of a receipt, whether handed to you at the post office our common courier office, or printed off of a website) are mailing via USPS with certificate of mailing (about 20% of the cost of certified mail with return receipt, about half the cost of certified mail without return receipt), mailing via USPS certified mail (wit h or without return receipt); and mailing via Federal Express, Lone Star Overnight, or any other common carrier who gives you a receipt for the mail sent. Make sure to keep a copy of the evidence of mailing for the tenant s file. Email notice. In lieu of sending the Notice of Claim verified mail, you may send the Notice of Claim via email if and ONLY if the tenant s lease contains certain required language (contained in copyright 2012 and later TSSA rental agreements). There is no legal requirement th at you use new lease forms effective January 1, 2012. However, if you desire to send Notices of Claim via email after 1-1-12, you MUST update your lease form. As an alternative to emailing the Notice of Claim, as of January 1, 2012, you may send Notices o f Claim (and Notices of Intent to Sell) by verified mail (defined as any method of mailing that provides evidence of mailing) in lieu of certified mail, without altering your lease form. There are several options for compliance in order to be able to sen d Notices of Claim via email as of 1-1-12: For leases with new tenants: (1) Use the updated TSSA lease form (the 2012 version or later); or (2) If you are still using pre -2012 TSSA lease forms, insert the following into the Special Provisions blanks in paragrap h 6 (the inserted language MUST be underlined or in conspicuous bold print): NOTICE MAY BE GIVEN BY EMAIL IF YOU ELECT TO PROVIDE AN EMAIL ADDRESS. It is recommended that facilities use the updated TSSA lease form. The updated form contains addition revisions clarifying procedures under the newly -revised Ch. 59. Also, the text of Ch. 59, reprinted in all TSSA lease versions prior to the 2012 version, is no longer accurate as of January 1, 2012. al For existing leases on a pre-2012 TSSA lease, signed by the tenant: (1) If you also want to raise rent or other dollar amounts. If in addition to providing the new email notice language, you also want to raise rent or other amounts under the lease, you may use the procedure outlined in TSSA lease paragraph 30. Namely, you may provide 30 -day advanced written notice to the tenant of the terms of the new lease. Notice may be hand delivered or sent via regular mail. (It is recommended that in addition to sending the notice regular mail, you also send it via a me thod of mailing that provides evidence of mailing, so that you can prove that the notice was sent if questioned.) If you elect to do this, you may use TSSA form BUS -5. Fill out this form, and attach a completed updated TSSA lease form (2011 version or l ater), listing the same tenants, same additional access persons and emergency contacts, and the revised dollar amounts. This will necessitate paying for a new lease for each tenant you wish to upgrade (either a new hard -copy lease, or a new Blue Moon click ). It is NOT necessary that the tenant sign the new lease for it to become effective. (2) If you do not raise rent or other dollar amounts. If you solely want to incorporate the new email notice language into your lease, you may also use TSSA BUS -5. You must provide this notice to ALL tenants (you cannot solely apply the new terms to selected tenants). Under TSSA lease paragraph 30 this notice may be hand delivered or sent via regular mail. (It is recommended that in addition to sending the notice r egular mail, you also send it via a method of mailing that provides evidence of mailing, so that you can prove that the notice was sent if questioned.) For older existing non-tssa leases that have not been updated to comply with the 2012 statutory requir ements, or if your TSSA lease is not signed by the tenant: In order to incorporate the email notice language into your lease, to be able to send Notices of Claim via email, you must have your tenant sign a new lease containing this language. If the tena nt declines to sign, you may not use email to send the Notice of Claim. 2015 Texas Self Storage Association, Inc. 37 2016-2017 TSSA GOLDBOOK

Send to proper address. The address to use on the form is the tenant s last known email or postal address as stated in the rental agreement or in a written notice from the tenant after the execution of the rental agreement. (See Section 59.043(c) of the statute.) The last known address may not necessarily be the address that is shown on the rental agreement. Make sure you look in the file for any communications or office notes regarding address changes submitted in writing by the tenant. A revised address on an envelope or personal check or money order with a new address on it does not constitute notice of change of address in TSSA legal counsel s opinion, but a slip of paper inside the envelope with nothing but the tenant s name and new address on it might be considered a change of address, even if unsigned by the tenant. Section 59.043(c) of the statute says that the Notice of Claim must be sent to the last known email or postal address on the lease or to an address furnished by the tenant to the owner. Therefore, an address furnished by the postal service (in response to an address correction requested stamp on a letter to the tenant), may not legally constitute a new address for Notice of Claim purposes. To be safe, however, the owner would be well advised to send the Notice of Claim to both addresses the one last furnished by the tenant and the one furnished by the postal service. Best advice: When in doubt, send to the address on the lease and to all other addresses that are possibly valid and that you know about. What if the tenant gave a change of address notice orally but not in writing? Section 59.043(c) requires the tenant to give change-of-address notices in writing. Nonetheless, if you have reason to believe that the tenant may have moved from the address in your files and if you are aware of possible new address(es), you should (through caution) send an extra copy of the Notice of Claim to the most recent of those other address(es) as well as the tenant s official address in your written records. There is nothing wrong with sending the Notice of Claim both verified mail and email. It would seem wise to mail the extra notice via verified mail (or email if the tenant s lease contains the required language) since the tenant could later claim that he or she gave you written notice of the more recent address when in fact it was given orally. This extra notice may increase your mailing costs, but is a prudent safeguard to maximize the chance of the tenant s payment of past due amounts. Section 59.043(c) of the statute requires that the Notice of Claim be delivered in person or sent by verified or email mail to the last address given to you by the tenant in writing. Notice is considered delivered when the notice, properly addressed with postage pre-paid, is deposited with the USPS (United States Postal Service) or a common carrier (such as Fed Ex or UPS). If a tenant s last known address is a foreign address (outside the territorial U.S.), USPS offers several alternatives, including its certificate of mailing service, for international mail. FedEx and other common carriers also have international service. Once an address is officially changed in writing by a tenant, there is no longer any need to send notices to that old address. STEP 5. Wait at least 15 days after mailing Notice of Claim to the tenant. On the 16th day, you may proceed to Step 6. This 15-day wait is required by Section 59.042(b). STEP 6. Publish a notice of the public sale in the newspaper. Make a written request to a local newspaper in your county, directing the newspaper to publish the information required under the statute. The ad must be published once in each of two consecutive weeks at least seven days apart (for example, on a Tuesday and the following Tuesday). See Section 59.044(b) of the statute. The official TSSA Notice of Public Sale behind the Official Forms tab in this Goldbook contains all of the information required in Section 59.044(a) of the statute. The statute states: The notice advertising the sale must contain: (1) a general description of the property; (3) the tenant s name; (2) a statement that the property is being (4) the address of the self-service storage facility; sold to satisfy a landlord s lien; (5) the time, place, and terms of sale. A sample newspaper notice might look like this (the numbers in the sample ad refer to the numbers immediately above for clarity; the numbers should not be included in the ad): 2015 Texas Self Storage Association, Inc. 38 2016-2017 TSSA GOLDBOOK

Notice of Public Sale [2] of property to satisfy a landlord s lien. Sale to be held at Steve s Self-Storage at [4] 900 West Street, Houston, TX 77082 [5] on May 2 at 9:00 a.m. Cleanup deposit is required. Seller reserves the right to withdraw the property at any time before the sale. Unit items sold for cash to highest bidder. Property includes the contents of spaces of the following tenant- [3] John Doe: [1] electronics, appliances and misc household items. Before listin g each space and the contents, it is okay in TSSA legal counsel s opinion to say something to the effect that All spaces contain household furniture unless otherwise noted. Then you need only list items that fall into other categories as you list the name of each tenant you are foreclosing upon. In the newspaper ad, be sure to use the exact tenant name as stated in paragraph 1 of the rental agreement. 1 Do not use initials in lieu of full names that are shown on the rental agreement. The requirement that the notice be published in a newspaper of general circulation means that it must be a real newspaper and not a Greensheettype tabloid in TSSA legal counsel s opinion. In TSSA legal counsel s opinion, it needs to be a genuine newspaper containing real news with a general circulation throughout the entire county. If in doubt as to whether the newspaper qualifies, send the inquiry letter shown on Appendix CD form L -1. The ad can be in the auctions, public notices, or legal notices section of the newspaper whichever is cheapest. There is no statutory requirement or prohibition relating to whether you must include the space number of the tenant being foreclosed upon in the ad. However, it is recommended that you not do so since that information and the name of the tenant in the ad will reveal a lucrative burglary site for those who might know the tenant and know what the tenant is likely storing. Regarding advertising the terms of sale, it should be sufficient to simply say Sale to highest cash bidder. Many owners get an affidavit of publication from the newspaper for both ads that they run. This is not legally required, but newspapers routinely offer this service, and the affidavit may be helpful to have. Consider supplemental online auction publication. It is also recommended (but not legally required) that you post your facility s scheduled lien sales on TSSA s self-storage auction website at www.storageauctionstx.com. This is recommended as a supplement to publishing the required newspaper notices. Newspaper notices are still required by law, but as a practical matter most bidders look to other sources for auction information. The TSSA auction website is available to the public (all potential auction bidders) at no charge, and as of this publication s press date, TSSA members may post their auctions on the site at no charge. STEP 7. Mail the Notice of Public Sale to the tenant by regular, first class mail (as of the 2011 TSSA lease version, email is also expressly allowed). (See form behind Official Forms tab in this Goldbook.) Mailing or emailing this form to the tenant is NOT required by the statute. Similarly, mailing or emailing the form is not required in the 1996 and later versions of the TSSA Rental Agreement; but mailing such form was required by all prior TSSA Rental Agreements (in paragraph 24(6)). Despite the deletion of such required notice in the 1996 (and subsequent) TSSA Rental Agreements, it is nonetheless recommended by TSSA legal counsel that a Notice of Public Sale be sent to the tenant at the tenant s last known address. Such notice should be mailed as a matter of fairness so the tenant can know other than by newspaper notice when and where the sale is to take place. If you mail it, be sure to mail it long enough before the auction sale for the tenant to receive it before the sale. 1 The tenant s name appears three times on page 1 of the TSSA Rental Agreement. The name as it appears in paragraph 1 is the safest name to use if there are differences. However, using any of the tenant s names on the first page should be sufficient. 2015 Texas Self Storage Association, Inc. 39 2016-2017 TSSA GOLDBOOK

STEP 8. STEP 9. Wait at least 15 days after the first newspaper ad. The 15-day wait is required by Section 59.042(c). Running the auction ad twice is required by Section 59.044(b) of the statute. If you are using a pre-1996 TSSA Rental Agreement, you must also wait at least 10 days after mailing the Notice of Public Sale to the tenant. See paragraph 24(6) of the pre-1996 TSSA Rental Agreements. Conduct the public foreclosure sale. On the day of the sale, pass out or post written rules for conducting the sale. This is not required by the statute; however, Section 59.044(5) states that the notice of public sale published in the newspaper must contain the terms of sale, and Section 59.045 states that the sale must be conducted according to the terms specified in the newspaper ad. Be sure that the rules for conducting the sale that you hand out on the day of the auction are not inconsistent with the terms of sale stated in the newspaper ad. Oral open-bid auction required. It is TSSA legal counsel s opinion that foreclosure sales by self-storage owners under Chapter 59 should be by an oral open-bid sale and that internet auctions, sealed bid auctions and silent auctions (used exclusively, without any oral open-bid component) are arguably not a public auction or conducted at the facility or a reasonably near public place both requirements of the statute. In TSSA legal counsel s opinion it is all right to combine a sealed bid, internet, silent, or other type of auction with an oral openbid auction and take the highest of all bids, as long as there is an opportunity for bidders to bid in an oral open-bid auction. Auction procedure rules. It is recommended that facility owners, before the sale begins, distribute a set of foreclosure sale rules that all purchasers must abide by. A sample set of auction rules can be found on Appendix CD form L-6. Who can bid. The facility owner or owner s employees, friends, family, or their agents can bid. It may actually help increase the price if more bidders participate. Any amount bid by the highest bidder must be credited against what the tenant owes. TSSA legal counsel believes tenants should be given the right to bid. Indeed, there are no statutory prohibitions against tenant bidding. An owner would be hard pressed to defend a sale to a third-party bidder when the tenant was there at the sale, willing and able to bid more. Also, remember, the owner or his employees can always outbid the tenant if the tenant bids too low and is the only other bidder. Sale of portion of contents. You are not required to sell all property in the unit. You may set aside or pull from the sale and not sell any property that you wish such as photo albums, birth certificates, and bibles. If you do that, make a clear written record for the file and try to notify the tenant to pick up any property not auctioned. If you have pulled any item from the sale, the only way to effectively rid yourself of that item is to: (1) deliver it to the tenant (if you can find him and he will accept it); or (2) re-advertise and sell it at a Chapter 59 public sale. If the tenant has not picked up the property within four years after the date of advertised sale, the tenant s claim to the property or claim for damages for disposing of the property is barred by the statute of limitations. Even better, you could sell the photo albums, etc. under the condition that the buyer gives them back to you, and you will try and return them to the tenant. This way, the items have been sold and the buyer (and later you, when he gives them to you) is the lawful owner. Sale by item, batch, or space. The tenant s property can be sold item-by-item, in batches, or by the space. The statute is silent on this matter. TSSA Rental Agreements (1991 and thereafter) clearly state that the sale may be done in any of the above three manners. If you sell the contents item-by-item or by the batch, when the sale proceeds reach the total owed by the tenant (including all rents, charges, and cost of sale), it is recommended that you stop selling and store the remaining, unsold property if such unsold property has substantial value or if the tenant is present at the sale and is willing to remove such unsold property. Then send a letter to the tenant asking him or her to pick up the remaining unsold property and pay for any post-sale storage charges that have accrued. Despite the foregoing advice for when the sale is item-by-item or by the batch, there is no statutory prohibition 2015 Texas Self Storage Association, Inc. 40 2016-2017 TSSA GOLDBOOK

the facility owner from liability for any alleged seller warranties, allegations that the property was stolen, etc.; (4) it is a written record of the exact amount of money received for the property in the particular unit being sold; and (5) it serves as a reminder to collect sales tax. The first four reasons can be very important when disputes or lawsuits later arise about the legality of the sale. More importantly, the Bill of Sale form may prevent disputes and lawsuits before they arise. STEP 12. Collect sales taxes. Whoever is conducting the sale must collect sales tax on the monies paid by the purchasers. This is the legal responsibility of the storage facility owner under the State Comptroller s sales tax rules. The facility owner must obtain a sales tax number and permit from the Comptroller s office and send yearly, quarterly, or monthly periodic reports, with the collected taxes, to the State Comptroller s office. (Incidentally, auctioneers must have a sales tax permit also.) The telephone number for obtaining information about a state sales tax permit is 1-800-252-5555 and the comptroller s website is http://www.comptroller.texas.gov. The facility owner must collect not only state sales taxes but also any applicable local sales taxes. Wh en a facility owner contracts with an auctioneer to conduct a foreclosure sale, the auctioneer acts as the owner s agent for purposes of collecting the taxes. The failure of the auctioneer to collect and remit the sales taxes does not relieve the facility owner from the responsibility to do so. There are two exceptions wherein sales taxes do not have to be collected. The first is when the buyer fills out and delivers a resale certificate to the person conducting the sale. A copy of a resale certificate is on Appendix CD form TAX-1. The second is when the buyer has an exemption certificate which is available to certain charitable and governmental institutions. Facility owners should retain those resale and exemption certificates in their files for at least four years (the statute of limitations on Comptroller audits). STEP 13. Send notice of any excess proceeds to tenant (skip this step if there are no excess proceeds). There is no legal deadline for sending this notice, but it is recommended that you do so promptly after the sale. This Notice of Excess Proceeds is required by Section 59.046. (See Appendix CD form L-2.) It is also recommended that you enclose a Request for Excess Proceeds so you can be relatively assured that the correct person receives the excess proceeds. (See Appendix CD form L-3.) If you receive a Request for Excess Proceeds from the tenant, make sure the identification information in it matches the tenant identification information in the rental agreement. If it does, forward the excess proceeds to the tenant (write a check and mail it to the tenant s last known address in your records). If it does not match, it is a good idea to contact the person forwarding the Request for Excess Proceeds and double check to make certain that you have the right person before sending any money. If the tenant does not respond to your Notice of Excess Proceeds, keep the excess proceeds for a period of two years in case the tenant ever shows up to collect the money. After two years, the excess money belongs to the storage facility owner as provided in Section 59.046. Although the statute is silent on the mailing method, it is recommended that you send each of the foregoing notices and/or checks via verified mail. STEP 14. Keep all records on foreclosure sales for four years. After a sale is completed, keep a copy of: (1) all correspondence; (2) the Notice of Claim; (3) evidence of mailing (and if applicable, any evidence of receipt of) the Notice of Claim; (4) a copy of the newspaper ads; (5) a copy of any Notice of Public Sale; and (6) a copy of any Bill of Sale. Keep all such records for at least four years, since the statute of limitations cuts off a tenant s right to file suit after that. 2015 Texas Self Storage Association, Inc. 42 2016-2017 TSSA GOLDBOOK

SUMMARIZED REGULAR FORECLOSURE STEPS (Days on steps for example only) REVISED DAY 1 Seize Contents Either overlock the unit or open the unit (a good time to look around and note generally what is in the unit for purposes of your newspaper ad) and lock with your lock. Before you open the unit make sure you have a signed Rental Agreement with the proper Chapter 59 Language (TSSA rental agreements comply). Mail Notice of Claim Any time a tenant is delinquent (even one day), you may seize the property and mail the Notice of Claim. Mail the claim notice via verified mail or email (if the tenant provided an email address to you in a 2012 or later version of the TSSA Rental Agreement). DAY 16 First Newspaper Ad Wait at least 15 days after mailing the Notice of Claim before publishing the first newspaper ad. (See Step 6 in detailed Foreclosure Procedures.) This is a good time to send the Notice of Public Sale to the tenant and to post your ad to TSSA s auction site at www.auction.txssa.org. This is not required by the statute, but is highly recommended by TSSA s legal counsel. DAY 23 Second Newspaper Ad In the next week (at least 7 days later) run the same newspaper ad again. (Example: 1 st ad runs Tuesday and 2 nd ad runs Tuesday of the following week.) DAY 31 Auction Day Hold the public auction sale at least 15 days after the first newspaper ad is published. For details, see next page. 2015 Texas Self Storage Association, Inc. 43 2016-2017 TSSA GOLDBOOK

DETAILS FOR SUMMARIZED REGULAR FORECLOSURE STEPS The rental agreement must be signed by the tenant. The statutory lien language in the rental agreement must be underlined or in bold print as required by Section 59.041 of the self-service storage facility statute. The TSSA rental agreement complies. Seizure must precede mailing of Notice of Claim, according to Section 59.043(a)(3) of the statute. In TSSA legal counsel s opinion, seizure must be accomplished either by: (1) removing the tenant s lock, opening the unit, and placing the Lessor s lock on the door; or (2) overlocking the unit, either of which is followed by sending a Notice of Claim. There is no required waiting period between seizure and mailing Notice of Claim. Mail Notice of Claim via verified mail or email. This is required by Section 59.042 of the statute. Verified mail is defined by statute as any method of mailing that provides evidence of mailing. The Notice of Claim may also be sent via email if (and only if) the lease contains language underlined or in conspicuous bold print that notice may be given by email when the tenant elects to provide an email address. (In TSSA lease after Jan. 2012.) Wait 15 days before publishing your first ad in the newspaper. This 15-day wait is required by section 59.042(b) of the statute. This section requires you to publish notice if the tenant fails to pay on or before the 14 th day after the Notice of Claim is sent. So, if you mail or email the Notice of Claim on Day 1, the tenant has to pay on or before midnight on Day 15. So, your first notice can be published no earlier than Day 16. In other words, the first notice can be published no sooner than 16 days after the date the Notice of Claim is emailed (if your lease has the language allowing email) or sent via verified mail. It is immaterial whether the tenant actually receives the notice. (Provided you ve sent the notice properly, you ve given proper notice, even if the Tenant rejects the mail or doesn t open it.) Newspaper publication is required by Section 59.044 of the statute. The ads must be published in a newspaper once in each of two consecutive weeks. Also, consider a supplemental online auction publication. It is also recommended (but not legally required) that you post your facility s scheduled lien sales on TSSA s self-storage auction website at www.auction.txssa.org. This is recommended as a supplement to publishing the required newspaper notices. Newspaper notices are still required by law, but most bidders look to other sources for auction information. The TSSA auction website is available to the public (all potential auction bidders) at no charge, and as of this publication s printing, TSSA members may post their auctions on the site at no charge. Mail the Notice of Public Sale to the tenant (optional). Notifying the tenant of the sale, time, and place of the sale is required by paragraph 24(6) of pre-1996 TSSA rental agreements. It is recommended (but not required) under the 1999 TSSA Rental Agreement and later versions. It is okay to mail it in advance of placing the ad or publishing the ad, so long as the letter correctly states the sale date and time (when the sale actually occurs). 2011 (Rev. 10/11) and later versions of the TSSA Rental Agreement also expressly contemplate this notice being sent via email (but again, there is no requirement that any such notice be sent). Wait 15 days after your first newspaper ad before holding your auction. This 15-day wait after the first ad is published is required by Section 59.042(c) of the statute. This statute says that you cannot sell the property until the 15 th day after the date the notice is first published. So, the earliest date you could hold the sale is Day 31 (Day 16 + 15 days = Day 31). A sale by public auction to the highest bidder is required by Section 59.043(a)(4) and Section 59.045 of the statute. Public auction is not defined in the statute, but the statute requires the auction to be held at the facility or a reasonably near public place. 2015 Texas Self Storage Association, Inc. 44 2016-2017 TSSA GOLDBOOK

DETAILS FOR SUMMARIZED REGULAR FORECLOSURE STEPS Allow tenant to redeem prior to sale. Section 59.008 allows a tenant to redeem prior to sale. Do not do anything to prevent the tenant from bidding at auction or paying the balance in full prior to the gavel falling at the auction. Give buyer a Bill of Sale. Giving a bill of sale is not required by statute or the TSSA Rental Agreement, but it is recommended. Remember to collect sales taxes. This is required under the State Comptroller s sales tax rule. The exceptions are a vehicle, trailer or boat foreclosure (see Summarized Special Foreclosure Steps); or a sale to a buyer possessing a resale certificate. Send a Notice of Excess Proceeds if applicable. There is no legal deadline for sending this notice, but it is required under Section 59.046. It is recommended that you send this notice promptly after the sale. After this notice has been sent, the tenant has two years to claim the excess proceeds. Keep all tenant records for four years (five years for a vehicle foreclosure). A tenant s right to file suit is cut off after four years per the statute of limitations so keep all records that are relevant to that time period. For more details, see Step-by-Step Procedures for Regular Foreclosures. 2015 Texas Self Storage Association, Inc. 45 2016-2017 TSSA GOLDBOOK