As a self-storage facility owner in Arizona, dealing with defaulting tenants is an unfortunate but necessary part of the business. Knowing how to handle these situations legally and efficiently is crucial to protecting your business interests. This guide will walk you through the proper steps to take when faced with a defaulting tenant, based on Arizona's self-storage statutes.

Understanding Default

First, let's define what constitutes a default. According to Arizona Revised Statutes §33-1701, "default" means the failure to perform on time any obligation or duty set forth in the rental agreement. This typically refers to non-payment of rent, but could include other violations of the rental agreement as well.

Step 1: Deny Access

When a tenant is in default, Arizona law (§33-1704, subsection K) allows you to deny the occupant access to the leased space. This is typically the first step in addressing a default situation.

Step 2: Send Notices

Once a tenant is in default for more than 30 days, you can begin the lien enforcement process. This involves sending two notices to the tenant:

1. First Notice (§33-1704, subsection B, paragraph 1):
   • Send this notice by verified mail or electronic mail to the occupant's last known address.
2. Second Notice (§33-1704, subsection B, paragraph 2):
   • Send this notice by first class mail at least seven days after the first notice.
   • This notice must include:
     • A statement that the contents of the occupant's leased space are subject to the operator's lien.
     • Your claim, indicating the charges due and any additional charges that will accrue.
     • A demand for payment within a specified time (at least 14 days after mailing, or 30 days if the occupant's address is outside the continental U.S.).
     • A statement that unless the claim is paid within the specified time, the contents will be sold or disposed of.
     • Your name, street address, and telephone number.

Step 3: Wait for Payment or Response

After sending the notices, you must wait for the specified time to allow the tenant to pay the amount due or respond. During this time, the tenant has the right to pay the amount necessary to satisfy the lien and redeem their personal property (§33-1704, subsection C).

Step 4: Prepare for Sale

If the tenant doesn't respond or pay within the specified time, you can proceed with selling the contents of the unit. However, there are some important considerations:

• If the unit contains a vehicle, you must send additional notices to the registered owner and any lienholders (§33-1704, subsection B, paragraph 3).
• If you're aware of any lienholders or secured parties with an interest in the stored property, you must send them a notice at least 10 days before the sale (§33-1704, subsection B, paragraph 4).
• If the unit contains "protected property" (such as personal information, legal or medical records, pharmaceuticals, or firearms), you cannot sell these items but must dispose of them properly (§33-1704, subsection F).

Step 5: Conduct the Sale

When conducting the sale:

• The sale must be public (§33-1704, subsection A).
• If at least five unrelated bidders attend, the sale is considered commercially reasonable (§33-1704, subsection H).
• Distribute the proceeds in the order specified by law, including paying off any prior liens, satisfying your lien, and returning any excess to the occupant (§33-1704, subsection G).

Important Notes

• Keep thorough records of all notices sent and actions taken.
• Always comply with the specific timeframes outlined in the statute.
• Be aware that your liability is limited to the net proceeds received from the sale if you comply with all legal requirements (§33-1704, subsection J).

By following these steps carefully, you can handle defaulting tenants in a way that protects your business while complying with Arizona law. Remember, while this guide provides an overview, it's always advisable to consult with a legal professional for complex cases or if you have specific questions about your situation.