Court decisions clarify garage lien laws

Court decisions clarify garage lien laws

Issue #15, April 2015

AHFC v. E&R Auto

On January 30, 2015 a court hearing was held to determine if a Bronx garage had a valid garage lien for $9,000 in repairs on a 2013 Honda Accord. The garage appeared to have all of its paperwork in order — a repair authorization signed by the owner and invoices for parts and repairs. The garage also sought $9,000 in storage fees for a total garage lien of $18,000. The garage had offered to reduce its storage fee to $5,000 giving the lienholder the opportunity to recover its collateral for $14,000. The lienholder was suspicious, however, because the car had been hit in the back end but all of the claimed repairs were for the front end. The lienholder filed a challenge to the garage lien in court and recovered possession of the vehicle by posting a bond. The lienholder then had an inspector check every repair that the garage claimed against the actual condition of the vehicle. The inspection confirmed that the supposedly repaired parts were original to the car. The inspector took clear, close-up photographs to support his inspection. At trial, the garage testified that it repaired the vehicle. However, the lienholder proved that the vehicle showed none of the typical signs of repair such as turned bolts, new part stickers or differences in wear between allegedly repaired and original parts. The court dismissed the entire $18,000 garage lien claim and the lienholder recovered the car for $0 paid. The key to the case was that the lienholder took the time to put the car on a rack to check and photograph it thoroughly. That minimal effort saved $14,000. The lesson for lienholders: check everything; never assume that a garage lien is valid just because a garage’s paperwork “appears to be in order”.

TMCC v. City Line Auto

A garage towed a leased vehicle, which had been booted by the city for unpaid tickets. The garage never sent any form of notice to the leasing company that storage fees were being charged by the garage. The leasing company resolved the unpaid tickets with the city but the garage refused to release the vehicle unless its storage fees were paid. The leasing company filed a court proceeding to challenge the storage fees. The garage argued that the law requiring notice of storage fees does not apply to vehicles towed for unpaid tickets. The court disagreed and dismissed all of the garage’s fee claims holding that on all police directed tows, whether for unpaid tickets or otherwise, a garage must send the notices required by Lien Law 184 in order to legally charge storage fees. The court also dismissed the towing fee. This case reinforces the basic rule that lienholders and leasing companies cannot be charged for towing and storage fees without proper notice by the garage.

An important point about lien sales

Garages want automotive finance companies to believe that if a lien sale date passes, the garage wipes out the auto finance interest. The garage hopes that the lienholder/lessor will be desperate to save a car and pay whatever the garage demands. However, the law is much different than what the garages suggest. In Huntington Bank v. Jonathan Auto, the court noted that the right to challenge a garage lien does “…not become moot simply because the property that is the subject of the lien has been sold.” The garage has the burden of proving that it holds a lien for legitimate charges and the mere passing of a sale date does not turn an invalid lien into a valid one. Thus, a lienholder/lessor should never feel pressured into making a bad deal to save a vehicle from a lien sale. Instead, if garage charges look suspicious, the lienholder/lessor should promptly file a court challenge to make the garage release the car and justify its charges.

No repo title reminder

Lienholders cannot use “repo titles” to recover vehicles from NYPD impound. The NYPD has made this clear in the language of its lienholder hold harmless form that states: “The undersigned certifies, under penalty of perjury, that he/she has investigated the method by which the title which is being presented to the NYPD was obtained and does hereby certify that the title is not a “repo title” or “repossession title” which was obtained without the RELEASOR being in physical possession of the subject vehicle.” This means that lienholders cannot obtain repo titles from other states. Repo titles are not considered valid in these circumstances because a repo title can only be obtained if the lienholder represents that it has actual physical possession of the vehicle and the lienholder cannot make this statement if the car is in the NYPD impound lot. The NYPD cannot make exceptions to the no repo title rule. Lienholders should use one of the several lawful methods for obtaining title when seeking to recover a NYPD impound.