From time to time, we have vehicle leasing clients who discover that liens have been registered on the title of their vehicles after their lessees delivered the leased vehicle to a repairer without payment.
Many discover that their vehicles are at a repairer upon a lease default, conduct a lien search only to discover the lien, or are eventually served with a Notice of Intention to Sell/Retain (future blog coming soon).
Section 24 of the Repair and Storage Liens Act allows a repairer who claims they were not paid for the repair and still have possession of the vehicle to retake possession of it (a possessory lien).
To get the vehicle back, an Application for Initial Certificate under Section 24 is issued by the Court. The amount of the alleged repairs is paid into Court, and the Initial Certificate is issued and then served on the repairer.
Once the funds are paid into Court, the lien against the vehicle is discharged and becomes a charge upon the amount paid into Court. Any lien registrations by the repairer must also be discharged; however, that isn’t always the case.
Once the funds are paid into Court, the repairer does not have a non-possessory lien, as they no longer have an interest in the vehicle, but the funds are paid into Court.
A repairer has 90 days from the date it releases the vehicle to file a claim for those funds paid into Court.
After the 90 days have expired and no claim has been issued, a Motion can be brought for an Order that the funds paid into Court are returned to the party who issued the Application.
After the 90 days have expired and the funds are returned, the only claim a repairer would have is against the actual party who contracted with them for the alleged repairs.
Repairers have tried to rely upon the doctrine of unjust enrichment to have leasing companies pay for those repairs authorized by their lessees. Unjust enrichment occurs when a party receives a benefit at another party’s expense without a valid legal reason, and there’s no legal basis for the enrichment. A claim for unjust enrichment should fail, and the basis of a legally binding contract between the repairer and the lessee to carry out those repairs, to which the lessor is not a party.
If a claim is commenced within the 90 days, the Court will have to determine if the repairer is entitled to the funds paid into Court or not.
Section 24 should only be used to retake possession of a vehicle from a repairer. It doesn’t determine the repairer’s lien rights, which will have to be determined by the Court.
If you have possession of the vehicle and discover a lien has been registered, Section 23 of the Repair and Storage Liens Act applies. A Section 23 Application is the Court’s determination of the repairer’s lien rights, and it does not require the payment of funds into the Court, as you already have possession of the vehicle (future blog coming soon).