Many storage facilities (warehouses, tow yards, marinas, etc.) across Canada know that there are certain laws that allow for stored goods to be sold when storage fees go unpaid. What many of these facilities do not know is how the process works or what laws are actually being followed to make it happen.
This list will outline 9 key aspects of storage liens, helping storers and warehousers to get a better grasp on this legal remedy and hopefully enabling them to cut the costly and not always necessary legal professionals out of the picture.
You can take a closer look and get started with our storage recovery products HERE.
1) Most storage lien matters do not actually require the involvement of a bailiff or sheriff (excluding those in Saskatchewan)
Common practice amongst storage facilities when a customer is in serious arrears is to contact a local agent (bailiff or sheriff) to have the stored goods “seized” so that they can eventually be sold. The bailiff or sheriff attends to post a seizure notice on the goods and then begins the legal process. If the customer does not pay the storage arrears (along with some hefty “seizure” fees) the agent arranges for the goods to be sold and from the proceeds pays their charges first and sends what is left to their client.
Though some are happy to let the agent deal with the customer and the process, nowhere in any of the provinces (excluding Saskatchewan) applicable Act’s is the seizure by a bailiff or sheriff required. The bailiff attendance serves no legal purpose but it does allow them to charge for such, which increases the customer’s debt making it more difficult for them to pay the arrears and reduces the amount of potential return the storage facility could get from a sale.
2) In many cases the customer has made a calculated decision that paying the storage arrears is not worth the value of the stored goods
There are of course situations where the money is just flat out not available, but when it makes financial sense a significant number of customers are able to gather the funds or find a friend or relative to help them out with payment during the required notice and advertisement periods. In many cases, under these Acts, the sale of goods yielding more than what is owed will not happen. And after paying fees to an auctioneer or sales agent, splitting the net return with an agent bailiff, sheriff, or lawyer can be frustrating.
Even worse, their fees get paid first and in full, which can sometimes mean the warehouser gets nothing at all for their trouble after months of free storage and time wasted dealing with the customer etc.
3) Getting paid the arrears and costs directly by the customer is the best-case scenario
The stress, hassle, and frustrations that come along with a non-paying customer and executing these remedies is something that no one wants to deal with, however, it is usually an inevitability for storers and warehousers. The remedies available at law take time to follow correctly, and as you may have experienced, it can also be contentious.
As long as you demand and receive payment via certified funds, chances are that hurt feelings will be the worst that comes from the action taken. And now that the customer knows what may happen if they don’t make their payments regularly going forward you will likely be bumped up their priority list of payees.
4) The customer can stop the action at any time right up until the goods have actually been sold
During this process ownership of the goods to be sold remains intact right up until the sale actually occurs. At no time leading up to the sale does title transfer to the warehouser/storer, which means the customer has the right to stop the action by paying the full arrears and costs until the goods are legally purchased.
An 11th-hour payment may be frustrating for the warehouser/storer and disappoint interested buyers, but as long as the customer pays the full arrears plus any legal, advertisement, and sale costs incurred it should be gladly accepted and viewed as a positive in the big picture.
5) Time is of the essence
When payments stop and the amount owed starts to build it makes things more and more difficult for both the customer and the warehouser/storer. The higher the arrears get the less likely it becomes that they get paid directly or from the proceeds of a sale.
Contacting a bailiff or sheriff on delinquent accounts may feel heavy-handed, which can lead to warehousers/storers putting it off in hopes that the customer pays. Handling your own documents (perhaps using Recourse’s storage recovery solutions) to get the ball rolling on the process greatly reduces the additional costs to the customer which makes it not feel like such a drastic act while keeping the warehouser/storer in a favourable position if and when a sale has to occur.
6) Possession is key
Many people know liens as something that is registered in a database and is visible to anyone that runs a search against a name or specific item. Storage liens differ in that they are “possessory liens” which means the storer/warehouser’s interest is reliant on the goods being in their control or on their premises. These liens cannot be registered and if the customer removes their goods from the premises when there are arrears owing the lien is lost and the debt will have to be pursued in court.
7) Do your lien due diligence
Where the storer/warehousers interest is based on their possession of the goods, there very may well be other parties who have a lien registered against the customer or the specific goods. These parties must be notified throughout the process to avoid a legal mess when the goods are sold and the creditor has no obligation to release their lien.
Lien searches should always be run against the customer name along with the serial numbers of the goods (when available) to make sure that anyone that should be in the loop is. You must also make sure to notify any other known interested parties, especially if they have notified you of their interest in writing.
Keeping creditors and interested parties in the loop can also result in prompt payment if they step up to pay the arrears and fees to avoid the sale. You can never be too safe in matters like this so it is worth it to cover all bases and notify anyone and everyone that could possibly try to claim an interest.
8) Not all goods are subject to sale via storage lien
Depending on what you are storing there may be situations where the goods cannot be legally sold using these provincial Acts. You must remember that (whether using a bailiff/sheriff or not) the storer/warehouser is acting as the seller when this remedy is utilized.
Use discretion to consider if the stored goods may be subject to any glaring sales regulations or taxes (ie. alcohol, dangerous goods, etc.) and if you are at all unsure we recommend contacting a lawyer in your province for clarification.
Boat storage facilities and marinas specifically must know before beginning this process if the vessel in question is registered provincially or federally. It is much more common for vessels to be registered on a provincial level, however, there are instances where they are registered federally which makes the transfer of title using provincial laws impossible. Storers/warehousers involved in boats can check to see if a vessel is federally registered for free HERE by searching Transport Canada’s database by owner name, boat name, or registration number.
9) Know who dropped off the goods
Every province has a requirement for the storer/warehouser to make sure that the owner of the goods knows that they are now in storage. Goods deposited to storage not by the owner or under the owner’s authority require a specific letter called a Notice of Lien to be sent to the owner along with any registered creditors or interested parties.
Failing to issue this notice caps the amount of storage that can be charged at 60 days which can be a huge blow if it takes much longer than that for the owner or a creditor to step up. This is specifically important for tow yards as impounded or repossessed vehicles would not be deposited by the owner, but instead by whichever authority caused for them to be delivered to your control.
Issuance of a Notice of Lien should be considered a “better off safe than sorry” step and if there is any doubt about the owner’s knowledge of the goods being deposited.
You can get started on your own storage lien action HERE or find more information about your province/territories specific act below:
- Alberta’s Warehousemen’s Lien Act
- British Columbia’s Warehouse Lien Act
- Saskatchewan’s Commercial Liens Act
- Manitoba’s Warehousemen’s Lien Act
- Ontario’s Repair and Storage Liens Act
- Newfoundland’s Warehouser’s Lien Act
- New Brunswick’s Storer’s Lien Act
- Nova Scotia’s Storage Warehouse Keepers Act
- Prince Edward Island’s Warehousemen’s Lien Act
- Northwest Territories’ Warehouse Keepers Lien Act
- Yukon Territories’ Warehouse Keepers Lien Act
- Nunavut’s Warehouse Keepers Lien Act
