FEATURE ARTICLES

Legally Losing Your Car in Unforeseen Circumstances

By Patrick Smith

Every once in awhile, you hear a story that makes you think, "Wow, I didn't see THAT coming." The situation is different for every person, only the result is the same. A valued car is lost. Let me make this clear right away. I'm not talking about auto theft, fires or accidents. In fact, insurance wouldn't have much sway over the kind of events I'm about to describe. You can lose a car by a shop lien. You can also lose a car while at a work shop during a business bankruptcy. There is one more related way a car can be lost; seizure for nonpayment of storage fees. Each one is perfectly legitimate when proper procedure and due diligence are performed. It happens every year, everywhere in a scale ranging from a few hundred dollars for a pile of used parts stored in a unit that has rent overdue, to an entire car worth thousands of dollars exclusive of any work a shop may have invested in it on behalf of a client.

The circumstances of a shop closure are unique to each situation. Sometimes, the owner of a car dies and the estate has to go forward and handle the job of contacting the shop and settling outstanding bills and retrieving the car. Even in straightforward, tidy wills where everything is accounted for, it may take awhile for the executor to get rolling. The executor may be from another State or may have to search through documents and round up addresses. If the car owner died without a will (intestate), things get complicated. The process slows down considerably. In such a situation, dialog with the shop and arranging some sort of agreement on paper is your best option. The priority should be securing the vehicle so the estate can be settled according to the terms of the will. A variation on the theme is when a shop owner dies while your car is in for work. If his affairs weren't in order, the car will sit awhile until the details are handed over to capable hands. Bigger established shops usually have a chain of command and someone able to step in and keep projects rolling. Smaller, mom and pop operations often have no contingency plan. If there are debts or credit collection agencies hovering, you're looking at the shop assets being frozen until legal matters are delineated. It's hindsight to say avoid a shop that is in financial straits because it's easy to disguise money troubles especially if you're not in the auto business and unable to look for telltale signs.

Instead, you should do the homework before sending a car to the shop. Ask questions at car shows, talk to people who have nicely finished cars or an engine that runs well. Find out who worked on it and what the shop was like dealing with payments. This is one case where "working under the table" for cash and having no paper trail can come back to bite you if the shop goes bust. It's something to consider when you're pricing out work.

Let's look at these situations more closely starting with shop liens.

The shop lien is legal protection offered to the mechanic or shop owner who has performed work of value and or has installed parts of value in a customer's car and has not secured payment for parts or services rendered. Lots of nonsense is bandied about regarding shop liens. This isn't a quickie procedure. No matter what anyone tells you, a proper shop lien gives the owner of the car plenty of time to pay the outstanding amount before seizure of the car takes place. The claimant has to notify the owner of the amount due on the invoice and contact owner in writing with info on the car, VIN number, amount of work done, invoice number and a deadline for payment. The claimant also has to have the owner's name, business address and home address, date of birth. In the State of Washington, the claimant must send a registered letter to the owner with a deadline to pay the specified amount. If the owner does not pay, the claimant can claim the car by mechanic's lien and get a title in the claimant's name. This can take up to 30 days to do. In Illinois, the owner has to be notified by registered letter sent to his mailing address informing him of the amount owing and deadline for payment. The owner also has to be told the date and location of the auction should the claimant sell the vehicle.

In the State of Virginia, a mechanic's lien only applies to personal property and can only be enforced up to the amount of $800. If the property is worth more than $5,000, it must be sold at a Sherrif's Auction ordered by the appropriate court. In addition, with cars valued at $15,000 or higher, the mechanic or storage lien holder must request the Department of Motor Vehicles (DMV) to search the title records available for the vehicle owner and lien holder if any, and petition the circuit court in the city/county where car is located to order sale of car. There is considerable paperwork involved for the new buyer to present to the DMV including an Affidavit from the Sherriff stating the car was sold in compliance with the court's order, along with completed application of Certificate of Title Registration and fees.

There is also protection for owners who are on Military Duty and cannot be reached easily. If a title search reveals the owner is on active Military Duty, the claimant must obtain a court order granting enforcement of the lien to a request by Service Members Civil Relief Act. As you can deduce from the above stipulations, getting a lien on a vehicle isn't a quickie process. The process can be abused and there have been instances where a dishonest operator lays claim to property and it sells for a profit. However, in many States the lien act specifies that any amount earned above what is owed to the claimant must be returned to the former owner. The lien act wasn't designed to allow someone to profit from seizure of property due to nonpayment. If the lien holder realizes a profit and doesn't return the money to the original owner of property, he can expect to be sued in court.

Another time a lien situation appears is usually when someone purchases a car that has a work order outstanding on it. A lien will appear if the claimant went through proper channels and registered a lien on the car. This prevents the sale from keeping the shop owner from losing his investment. I suggest strongly that you familiarize yourself with your State's Lien Act or the State where your car is being restored or worked on.

Let's move to repossessions. If a car is sold with a financing arrangement, a regular payment is agreed upon by both parties until the purchase price is paid in full. I know it's a simplified explanation omitting interest rates and other factors but the heart of the arrangement is a car bought on the installment plan. Usually the purchaser's credit and banking history are vetted before approval to buy is made.

Sometimes mistakes are made on the dealer's end when it comes buying cars for stock. It's possible in some States for a car with large amounts owed to a previous seller to be sold to someone else. When the repo man catches up with the car, it's a matter of tow and go. The law enforcement agency cannot do anything to stop it unless the repo man breaks a law while in progress. Most classic car dealers are thorough in their due diligence while acquiring stock. There are a few situations where you should go the extra mile to protect yourself. One is a consignment sale especially those proffered online. Usually this ends up being nothing more than a deluxe online ad spot provided by a car dealer in exchange for money. They don't verify the financial status of the car and even if they asked for copy of the ownership documents, they can be easily counterfeited. If a consignment sale interests you, take the same care you would as in a private sale with a stranger. Check the paperwork and do a title search.

The last scenario, losing a car due to nonpayment of storage actually happens a lot. The best way to prevent this is to use a reputable firm. You pay more, but the benefits are worth it. Read the contract carefully and ask questions about anything that seems unclear to you before your sign up. Understanding your rental terms and clauses protects your property. Many rental contracts include surcharges for late rent payments and NSF checks. The car often is locked in the building until rent, surcharges and any other fees have been paid. Most rental contracts do not allow abatement of rent either. Usually a car storage loss comes from fire or flood damage, not some tricky enforcement of an obscure clause in a contract. It's up to you to keep your payments in order. I hope there's some interesting stuff for you to think about.