Tenants Bidding on Their Own Unit

Have you ever had a tenant show up at an auction FOR THEIR OWN UNIT?! If so, it probably threw you off guard since it isn’t a common occurrence. Unfortunately, some people think that they are being sneaky by showing up to the auction themselves or sending a friend or family member to do their dirty work. However, as a facility owner you do have options to protect your business.

For starters, if your state allows, you can prohibit the person from entering the premises during the auction. This would be the easiest way to prevent such a problem if it is legal. However, some states require a public in which case you would not be allowed to prohibit the tenant from attending. You also have the option of not allowing the tenant to bid on the unit if your state statutes allow.

Rest assured that if you do have a public auction or can’t prevent people from bidding you still have options. Most states allow you to refuse an offer less than the amount owed on the unit. Most states even allow you to refuse any bid you want. If this is the case in your state you are able to refuse the tenants bid and take the bid below them if you choose. Unfortunately, this means you are either re-auctioning the unit or accepting a bid lower than the amount owed.

Of course, tenants that come to the auction are trying to get their belonging back for less than what they owe. In addition, they typically use this as a tactic to hold off the actual auction by winning the auction and then not being able to pay the amount they bid which forces you to take a different bid or in some cases re-auction the unit. That being said you can help deter them from even attending the auction by setting a cash deposit requirement. What this means is that you require a person that has won the unit to make a cash deposit at the time of the auction that will go toward the payment on the unit if they win. You can set the deposit amount at $200 and get that secured. This amount will likely deter a tenant who doesn’t have the money to bid on the unit and actually pay. As always make sure your state allows the requirement of a cash deposit.

Another option is to start the bidding at the amount owed on the unit or at least an amount close to it. For example, if the amount owed on the unit is $600 you can start the bidding at $450 to help ensure you will get the amount you need from the unit. This tactic is usually allowed (always double check your state statutes), and it definitely deters tenants from bidding on their own unit if they can’t pay.

Some facility owners will make payment arrangements with a large down payment, or cut a tenant a deal if they feel it is worth it. This usually applies to people who normally pay on time, and have had recent life hardships, but make an honest effort. Most managers or owners consider this to get the unit freed up and potentially to make more than an auction while avoiding the hassle of an auction. This is a great option if you are able to. However, make sure to protect your business and not let tenants take advantage of you.

Finally, if it is impossible to keep the tenant from bidding on the unit due to the statutes in your state then it doesn’t hurt to mention collections. Most facilities send overdue amounts to collection after the unit has been auctioned in an effort to recoup costs. This won’t phase some of the tenants but for some of them it will make the difference between paying or not.

In conclusion, some tenants will try to take advantage of auctions and get their belonging for pennies on the dollar. However, as a business owner it helps to know what you can do to prevent this from happening. Good luck!