Approximately three years ago, I wrote a blog titled: “Can A Repairer Assign it’s Lien Rights to a Party Who Paid For Those Repairs?” Having now dealt with this issue probably half a dozen times since, I thought I’d provide an update.
Many of our clients are in the business of vehicle leasing. Occasionally, when their Lessees default on the terms of the Lease, our clients will repossess the Vehicle only to discover that a third-party lender (the “Lender”) has registered lien(s) under the Repair and Storage Liens Act R.S.O. 1990, c. R.25 (the “RSLA”) and sometimes the Personal Property Security Act, R.S.O. 1990, c. P.10 (the “PPSA”).
The Scheme
The Lessee attends at a Garage (the “Repairer”) for an alleged repair. For some reason, the “repair” performed on the Vehicles we have dealt with involve the installation of new fancy rims/wheels to the leased Vehicle.
The Lessee can’t afford the new fancy rims they want, so they finance the installation by entering into some form of a Repair Payment Plan (the “Agreement”) with the Lender while at the Repairer. The Repairer I note is a “partner” of the Lender. The Lender approves the Lessee for the funding of the repair, and the Lender pays the Repairer. These Agreements are drafted by and for the sole benefit of the Lender.
The Lender then claims they are entitled to lien the Vehicle under the RSLA by having the Repairer “assign” their lien rights through the Agreement.
These Lenders claim that the Repairer has a non-possessory lien under the RSLA, because the Repairer returns the Vehicle to the Lessee prior to being paid for the repair.
Why They’re Wrong
The problem with this position, is that the repairs are only carried out by the Repairer in contemplation of being paid by the Lender who pre-approves the loan with the Lessee in advance of the repair being carried out. Because the anticipation and guarantee of payment exists between the Lender and Repairer, there are no lien rights to assign to the Lender.
What the Court Thinks
I successfully made that argument during a Section 23 Application we brought in the matter of Douglas Ford Lincoln Sales Inc. v Go To Loans Inc., 2022 CanLII 145665 (ON SCSM) where Deputy Judge Besunder found at paragraph 103:
“it is difficult to conceptualize an actual indebtedness that exists and which would support a non-possessory lien right with the Repairer, a right that must exist for it to be assigned. It is a conceptually created and factually artificial right, in my view, and not an actual right, and it seems to be a case of parties trying to be a bit too clever, to create a right that wouldn’t ordinarily exist based on the factual reality.”
Lenders argue that their payment is provided to the Repairer after the Vehicle is returned to the Lessee, which creates a non-possessory lien for only a short amount of time and it is that time the Repairer’s lien rights are assigned.
Deputy Judge Carr of the Richmond Hill Small Claims Court found in the matter of Go To Loans Inc. v Lovats Acceptance Corp., 2025 CanLII 38381 (ON SCSM) that Go To Loan’s Agreement is simply a credit agreement to pay for the repairs, and not unlike a credit card transaction, where the customer authorizes the charges, the repairer may not receive the funds until a later date.
Multiple Deputy Judges have found any attempt to create a lien where there is none is improper and any lien registered by these Lenders is invalid.
Several decisions involving these types of Lenders are currently being appealed, one of ours included. Hopefully soon the Appeals will bring an end to these invalid liens being registered to leased Vehicles and the costs incurred by the Lessors to discharge them.
Murray Brown, Licensed Paralegal