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storageMany times auctions are mandated (or directed) by courts, public authorities, or by statute.

For instance, Let’s say a storage unit tenant has not paid his monthly rent for several months.

It’s likely the storage unit owner can sell — by auction — the contents in order to reclaim that space to rent to a new tenant.

These auctions are often bound by a legal tenet known as “commercially reasonable,” in that the auctioneer must endeavor to offer the property in a sensible, judicious manner.

In that spirit, the subject property could not be offered without telling anyone about the auction, not telling anyone what is selling, nor not telling anyone what the terms are …

Rather, commercially reasonable has a standard including four factors:

    Manner

      Does sufficiently detailed advertising reach a reasonable number of potential bidders and do bidders have the opportunity to inspect prior to bidding?

    Time

      Is the auction held with sufficient time for bidders to find out about it, and is the auction held soon enough to minimize property depreciation?

    Place

      Is the location able to be found and accessed? Is there reasonable parking, loading, access?


    Terms

      Is the property being sold to the highest bidder or is the minimum bid reflective of a number less than market value? Can buyers pay by cash, check, credit card? Do buyers have reasonable opportunity to access their purchases?

One could certainly argue that all auctions should be conducted in a commercially reasonable manner. Nothing aberrant about properly advertising an auction with reasonable inspection opportunity and terms.

Relatedly, there was such a discussion in Wisconsin. In the case of Cook v. Public Storage, 2008 WI APP 155, the Wisconsin Court of Appeals ruled a storage facility owed a tenant damages ($18,375 in damages, plus $100,000 in punitive damages and $282,154 in attorney fees and costs) for not conducting a storage lien auction in a commercially reasonable fashion.

By not adequately noticing the tenant, not advertising sufficiently and not selling the personal property in an open, viewable format, the storage facility violated their agency duties. Such violation cost the storage unit over $400,000.

Many auctioneers would report that at a storage unit auction specifically — where the bidders are left to imagine what’s in the unit — realized prices are actually higher than if (when) property is in plain sight. We discussed that proposition here: https://mikebrandlyauctioneer.wordpress.com/2013/03/14/does-the-unknown-sell-for-more-at-auction/

It is noteworthy that commercially reasonable standards vary by region or area. It might be quite reasonable to advertise an auction in one local paper in one location, where regional advertising would be reasonable in another; selling in bulk might be reasonable in one area, where selling piecemeal would be reasonable in another.

Even though the Internet has made some markets uniform, still today what is considered commercially reasonable in Chicago, Illinois, for example, is different than what is considered commercially reasonable in Butte, Montana.

Further, commercially reasonable standards are not necessarily firmed by what has “always been done.” In other words, just because an auctioneer has always done something a certain way doesn’t mean it should be done that way. Agency duties mature over time, and are generally developed to fix past regressions.

Auctioneers have a duty to know what the commercially reasonable standards of their profession are, and meet or exceed those standards.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. He serves as Adjunct Faculty at Columbus State Community College, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.