HB 97-SELF-STORAGE UNITS: LIENS; SALES  2:22:36 PM CHAIR VANCE announced that the next order of business would be HOUSE BILL NO. 97, "An Act relating to self-storage facilities for personal property, including vehicles and watercraft; distinguishing self-storage facility liens from another type of storage lien; and excluding self-storage liens from the treatment of certain unclaimed property." [Before the committee was CSHB 97(L&C).] 2:23:19 PM The committee took a brief at-ease. 2:24:34 PM REPRESENTATIVE MIKE PRAX, Alaska State Legislature, prime sponsor, presented CSHB 97(L&C). He read the sponsor statement [included in the committee packet], which read as follows [original punctuation provided]: 49 states and the District of Columbia have self storage lien statutes. Alaska is the last remaining state without a self storage lien statute. These laws provide for a non-judicial foreclosure process to address and remedy nonpayment issues between the facility owner and the unit renter. Storage liens are the national standard for settling disputes between facility owners and unit renters. Self storage lien laws provide protections for unit renters. HB 97 would require facility owners to include specific information regarding the facility owner's lien rights in the rental agreement. HB 97 would also require the facility owner to wait at least ten (10) days after the unit renter's default to begin lien enforcement. After ten (10) days, the facility owner would be required to send a default notice to the unit renter. If the unit renter does not cure the default, the facility owner would then be required to send a second notice of default to the unit renter that provides an additional 20-day window for the unit renter to cure the default. If the payment issue is not remedied, then HB 97 would permit the facility owner to proceed with a sale. The bill details that process and how proceeds from that sale must be applied. HB 97 also provides certainty and protection for storage facility owners. The bill would provide a specific statutory process for facility owners to follow to enforce their lien rights in the state. 2:27:40 PM DANIEL BRYANT, Legal/Legislative Counsel, Self Storage Association, gave invited testimony during the hearing on CSHB 97(L&C), which would require owners to follow a unified procedure after default. He provided information on the [storage] industry's background, noting that Alaska is the only state without a self-storage statute addressing liens. Statutory lien laws are important, he said, because they provide a basic legal framework and guardrails to protect both owners and occupants. The bill would ensure that several steps were taken before a sale, starting with a written rental agreement that informs the occupant of the lien and the inevitable sale or disposal of the property upon default. He noted that the law would not apply to active-duty service members, as they are protected under the Servicemembers Civil Relief Act (SCRA). Should default occur, the owner must send at least two notices to the occupant and provide an opportunity to cure. The first notice may be sent by email or First-Class Mail; the second notice may be sent by email, Certified Mail, or US mail with a certificate of mailing at least 10 days after the first notice and provide a minimum of 20 days to cure the default. If the occupant is generally unresponsive, the owner would be afforded three remedies: tow certain titled property, proceed with the sale, or dispose of property that receives no bid or offer. 2:33:32 PM MR. BRYANT explained that national lien sales are not money makers for storage owners. The primary objective of those sales is to return the unit back to inventory and re-rent the unit to a paying customer. He noted that all occupants may exercise their redemption rights until the sale is final. Lastly, the bill outlines the order of payment from proceeds obtained from the sale. After paying the facility owner and lien holders, any excess balance would be held by the facility owner for three years, and if unclaimed, the money would be remitted to the state. He opined that HB 97 strikes an appropriate balance between facility owners and unit renters and asked the committee's support to bring a self-storage lien statute to Alaska. CHAIR VANCE sought questions from committee members. 2:36:02 PM REPRESENTATIVE C. JOHNSON asked whether all states allow email notifications. REPRESENTATIVE PRAX deferred to Mr. Bryant. MR. BRYANT answered yes, email is an extraordinarily common means of effectuating the notice. More than 40 states expressly permit that form of notification in statute. 2:37:15 PM REPRESENTATIVE GRAY asked why Alaska was so far behind. REPRESENTATIVE PRAX did not know the answer. 2:37:51 PM CHAIR VANCE asked whether the timeframe outlined in the bill was sufficient to notify someone about the loss of their property given the unreliability of timely mail in Alaska. REPRESENTATIVE PRAX said yes, 30 days seemed reasonable. CHAIR VANCE asked what kind of notification would be provided to a renter when making the agreement and whether expectations would be clearly communicated. MR. BRYANT confirmed that the agreement would be written, informing the occupant of the lien's existence and ultimately, what would transpire should monetary default occur. 2:40:53 PM CHAIR VANCE questioned the sale and disposal of property in Section 34 and asked Mr. Bryant to describe the notification of sale, as proposed in the bill. MR. BRYANT shared his understanding that as a matter of practice, every facility owner goes above and beyond the statutory minimum to remedy the payment dispute in a manner that does not require sale of the property. Nonetheless, he acknowledged that the bill required nothing more of facility owners subsequent to the second notice being sent. REPRESENTATIVE PRAX directed attention to page 3, line 15, which described the second notice of default. 2:44:27 PM REPRESENTATIVE C. JOHNSON asked whether there would be recourse for disposing of illegal property or property that is costly to dispose of, such as batteries. REPRESENTATIVE PRAX said the bill does not address those scenarios; nonetheless, he shared his understanding that the facility owner would be liable. 2:47:03 PM REPRESENTATIVE GRAY questioned the magnitude of this issue in Alaska. REPRESENTATIVE PRAX did not know the answer. He directed the question to Mr. Bryant. MR. BRYANT did not have specific data on Alaska. Nationally, approximately 1 to 3 percent of units go through the sale and auction process. In other words, 97 to 99 percent of unit renters follow the terms and conditions of the rental agreement. REPRESENTATIVE PRAX shared a personal anecdote. 2:49:51 PM REPRESENTATIVE CARPENTER inquired about a scenario in which a vehicle with a lien was stored in a unit under default. REPRESENTATIVE PRAX explained that as written, the facility owner's lien would supersede the bank's lien. He shared his understanding that a forthcoming amendment would make it so the bank's lien would supersede the facility owner's lien. 2:52:28 PM The committee took a brief at-ease. 2:53:24 PM REPRESENTATIVE PRAX clarified his misstatement, acknowledging that CSHB 97(L&C) was before the committee. He asked his staff, Ms. Elliot, to explain the changes from the original version of the bill. 2:53:47 PM MARGARET ELLIOT, Staff, Representative Mike Prax, Alaska State Legislature, on behalf of Representative Prax, prime sponsor, presented a summary of changes in CSHB 97(L&C) [included in the committee packet], which read as follows [original punctuation provided]: Section 3, page 2, lines 19-20: • Adds language requiring the unit renter to disclose on the rental agreement any lien holders that may have an interest in the stored property. Section 3, page 3, lines 5-6: • Adds the following language: "and any other lien holder identified in the rental agreement". Requires a facility owner to notify any lien holders that a unit renter is in default in the same manner the unit renter is notified. All other sections remain unchanged. 2:55:02 PM REPRESENTATIVE CARPENTER reaffirmed that CSHB 97(L&C) was before the committee, not the original version of the bill. 2:55:39 PM The committee took a brief at-ease. 2:56:17 PM CHAIR VANCE announced that CSHB 97(L&C) would be held over.