The Garageman's Lien: How to Seize and Sell the Car

Introduction

In the Brave New World of the Great Recession, both garages and customers confronted economic pressures that had not been encountered for years and it was no longer remarkable to confront a customer who no longer had the ability or credit to pay for the vehicle repair that was once taken for granted. As with foreclosure of homes, consumers soon discovered that the garage had statutory rights to seize the property at issue and sell same at auction, eliminating the ownership interest of the person owning the vehicle. Such procedures are strictly controlled by California law and this article briefly outlines the rights and remedies of the parties.

 

1. What is Required to Obtain a Garageman’s Lien?

If a person has repaired, furnished supplies/materials for, or towed or stored a vehicle and has not been paid for the services rendered, that person has a lien against the vehicle. A garageman’s lien arises at the earlier of either (1) the time a written statement of charges for completed work or services is presented to the registered owner, or (2) 15 days after the work or services are completed. See Civil Code § 3068(a).

Note that the lien can arise without the “final bill” being generated. It is completion of the work that matters, not the billing.  

 

2. How is it Enforced?

The lien may be satisfied by getting a court judgment or by selling the vehicle through a lien sale process. Civil Code § 3071 governs the sale of vehicles valued at more than $4,000. Civ. Code § 3072 governs the sale of vehicles valued at $4,000 or less.

Steps to conduct a lien sale may be found in the Department of Motor Vehicles’ brochure, “Conduct a Lien Sale for a Vehicle Stored at a Self-Service Storage Facility or Valued Over $4,000,” (“DMV Brochure”) found online at: http://www.dmv.ca.gov/pubs/brochures/howto/htvr8.htm#.

To conduct a lien sale, Lienholder must:

a.  Have possession of the vehicle, and

b.  Apply to the Department of Motor Vehicles for an authorization to conduct a lien sale within 30 days after the lien has arisen. [Civ. Code § 3068(b)].

Certain conditions apply. If legal owner or lessor (“Owner”) makes written demand by either personal service or certified mail with return receipt requested to Lienholder for either of the following, Lienholder must comply or the lien is extinguished and no lien sale may be conducted:

a.  Vehicle inspection. Within 24 – 72 hours of receipt of written demand, Lienholder must allow inspection of vehicle by Owner or Owner’s agent during Lienholder’s normal business hours. See Civ. Code § 3068(b)(3).b.  Document production. Within 10 days of receipt of written demand, Lienholder must furnish to Owner or Owner’s agent a written copy of the work order or invoice reflecting the services or repairs performed on the vehicle and the authorization from Owner requesting Lienholder to perform the services or repairs. See Civ. Code § 3068(b)(4).

NOTE: An automotive repair dealer who is not validly registered under the Automotive Repair Act (Bus. & Prof. Code § 9880 et seq.) cannot use the sale procedures to satisfy a lien for labor or materials [Bus.& Prof. Code § 9884.16].

Limitations on the lien amount may be found at Civil Code § 3068(c). Exceptions to these limitations will be made if Lienholder gives actual notice to Owner and the written consent of Owner is obtained prior to beginning any work, services, storage, safekeeping, or rental of parking space. See Civ. Code § 3068(c)(1).

In any action brought by or on behalf of the legal owner or lessor to recover a vehicle alleged to be wrongfully withheld by the person claiming a lien pursuant to Civ. Code § 3068, the prevailing party shall be entitled to reasonable attorney's fees and costs not to exceed $1,750 [Civ. Code § 3068(d)]. 

 

3. What Notice is Required for the Consumer?

When DMV receives a request to conduct a lien sale for a vehicle valued over $4,000, the department shall notify the registered and legal owners and any interested parties by certified mail, or the out-of-state vehicle registry, if the vehicle bears registration from another state. If the vehicle’s value is $4,000 or less, the registered and legal owners of record will be notified by the party conducting the lien. See Civil Code §§ 3071-3072.

It is vital to note that it is the DMV that provides the notice, not the garage.

DMV Form REG 280Notice of Pending Lien Sale must be provided by certified mail with return receipt requested 20 days before the sale date to the legal owner, if any, the registered owner, any interested parties and the DMV. At least five days, but not more than 20 days before the sale (not counting the sale date), notice of the sale must be given by advertising the sale for one day in a newspaper of general circulation in the county in which the vehicle is located.

All notices shall specify the make, year model, vehicle identification number, license number, and state of registration, if available. The specific date, exact time, and place of sale must also be included.

The vehicle must be available for inspection at a location easily accessible to the public for at least one hour before the sale and must be at the place of sale at the time and date specified on the notice of sale. See DMV Brochure. 

 

4. Lien Limitations

Lienholder may charge Owner up to the following limits:

a.  $1,500 for any work or services or that amount, subject to the limitations contained in Section 10652.5 of the Vehicle Code (pertaining to fees allowed regarding notice of stored vehicle);

b.  $1,025 for any storage, safekeeping, or rental of parking space; and

c.  $1,250 for any storage or safekeeping performed at the request of anyone other than Owner if an application for authorization to conduct a lien sale has been filed pursuant to Section 3071 within 30 days after the commencement of the storage or safekeeping,

Portions of the lien in excess of these amounts will be invalid. See Civil Code § 3068(c)(1).

Exceptions to the above limitations will be made if the person claiming the lien gives actual notice to Owner by personal service or by registered letter, and Owner’s written consent is obtained before starting any work, services, storage, safekeeping or rental of parking space.

If any portion of a lien includes charges for the care, storage, or safekeeping of, or for the rental of parking space for a vehicle for more than 60 days, the portion of the lien that accrued after the expiration of that period is invalid unless Lienholder has complied with sections 10650 and 10652 of the Vehicle Code (pertaining to notice of stored vehicle). See Civil Code § 3068(c)(2).

The charge for the care, storage, or safekeeping of a vehicle which may be charged to Owner may not exceed that for one day of storage if, 24 hours or less after the vehicle is placed in storage, a request is made for the release of the vehicle. If the request is made more than 24 hours after the vehicle is placed in storage, charges may be imposed on a full, calendar-day basis for each day, or part thereof, that the vehicle is in storage. See Civil Code § 3068(c)(3).

 

5. Lien Sale Procedures

DMV’s Vehicle Industry Registration Procedures Manual (VIRP)
Chapter 18 Lien Sales – Abandoned – Abated Vehicles

Vehicle valued at

$4,000 or less

Over $4,000

Sources

Civil Code § 3072 and § 3073
VIRP 18.100
See also DMV Vehicle Registration Brochure HTVR 07

Civil Code § 3071 and § 3073
VIRP 18.110
See also DMV Vehicle Registration Brochure HTVR 08

Application for Authorization

Lienholder applies to DMV for names and addresses of registered/legal owners of record

Within 15 or 30 days:
Submit INF 1126 and $70 non-ref processing fee (for DMV Record)

 

 

Within 30 days:
Submit REG 656 and $100 non-ref processing fee

Notice to Owner, Setting Date of Lien Sale

Upon receipt of DMV Record, Lienholder may set date of sale between 31- 41 days hence

Send REG 668 by certified mail to Owner with postage pre-paid envelope addressed to DMV

If no DMV Record, Lienholder mails REG 668 and names of  known interested parties to DMV

Declaration of Opposition  must be filed within 10 days from date of mailing REG 668 

DMV notifies owner and interested parties,
and
provides opportunity to file Declaration of Opposition within 10 days from date of mailing

DMV notifies Lienholder if Lien Sale approved or denied

If authorized, Lienholder sets date of sale, then:

Lienholdersends REG 280 to Owner, interested parties and DMV

Public Notice

At least 10 days prior to and including date of Lien Sale:

REG 668 must be posted in conspicuous place on premises of Lien holder’s business office

5-20 days prior to date of Lien Sale:

Advertise Lien Sale in county paper

Vehicle Inspection prior to Lien Sale

Vehicle must be available one hour prior to Lien Sale

Vehicle must be available one hour prior to Lien Sale

Lien Sale

Sale must be conducted in a business like fashion. Sealed bids are not allowed.

Sale must be conducted in a business like fashion. Sealed bids are not allowed.

Redemption Period after Lien Sale

None

Owner has 10 days to redeem the vehicle by paying the amount of sale, costs, expenses and 12% interest

Post-Sale Procedures

Remove & destroy plates

Send REG 138 to DMV within 5 days

Complete REG 168A

If no buyers, Lienholder completes REG 168A as both buyer & seller

Remove & destroy plates

Send REG 138 to DMV within 5 days

Complete REG 168

If no buyers, Lienholder completes REG 168 as both buyer & seller

Documents to Buyer

REG 168A

certified mailing receipts

Printout of DMV Record

DMV authorization to continue with Lien Sale if it was opposed

 

Any other documents, i.e. odometer disclosure

REG 168

certified mailing receipts

 

DMV authorization to conduct Lien Sale or,
if opposed, DMV authorization to continue conducting Lien Sale

Sale Proceeds

Excess fees to DVM within 5 days

Excess fees to DVM within 15 days

 

6. Practical Considerations

Both the garage and the Owner have an interest in avoiding the turmoil and expense of a lien sale.  Seldom is good value received for the vehicle at such auctions and the many hours needed to conduct a legally valid sale are not compensated for the owner of the garage.

Quite often notice of a lien sale acts as effective incentive for the Owner to achieve payment for the work. If payments over time are elected as acceptable by the garage, it is vital to achieve equivalent appropriate security for the payments if the vehicle is surrendered to the Owner. Quite often the vehicle is kept by the garage until final payment is made.

It is a long held belief that most people will do almost anything to avoid losing their means of transportation.  Having a vehicle is so central to life in America that the last debt that is unpaid is the car payment. But the economics can become so tough that even that incentive is not enough to achieve payment and the proceeds from the sale are the only chance the garage has to receive payment. Good people, now desperate, simply have no way to pay the debt.

One garage known to this writer would understand that customers without vehicles can often never make enough money to pay off the lien and would “rent” the vehicle to the customer, keeping the pink slip until paid in full. So long as insurance is in place and the customer is somewhat trust worthy, that can work.

But even that method breaks down if unemployment is so severe that people are unlikely to improve their economic condition in the near future. Thus, mastering the skills necessary to enforce the lien has become a standard part of the business skills required of the well run garage or mechanic.