Ask the Expert: Does a Lienholder's Rights Take Precedent?
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Does a Lienholder’s Rights Take Precedent Over a Mechanic’s Lien?

Does a dealership where one of our customers bought her car have the right to repossess the car from us without paying the charges? We fixed the car and the owner spent the insurance money and defaulted on the loan.

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Barrett has authored numerous industry trade journal/magazine articles, including several cover stories for BodyShop Business. Having grown up in a family-owned collision repair business and owner/operator of two successful collision repair facilities, his ongoing efforts as industry speaker and repairer coach-consultant are geared toward educating professionals and consumers to achieve equally successful resolutions to automotive-related property damage issues. Such issues include proper and thorough repair, reasonable repair profitability for repairers as well as equitable claim settlements for both claimants and the responsible/paying parties. ADE offers numerous professional services nationwide.

Does a small car dealership in Ohio, where one of our customers bought her car, have the right to repossess the car from us without paying the charges? We fixed the car and the owner spent the insurance money and defaulted on the loan.

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Question answered by: Barrett R. Smith, AAM and president, Auto Damage Experts, Inc.

Your question begs for a legal answer and, because I’m not an attorney nor am I familiar with the specific lien laws in your state, I cannot provide you a reliable answer. I can, however, offer you some sage advice. If I was in your position, I would:

  1. Check with an attorney who understands contract law and who can provide you a legal opinion on the rights of your customer’s lienholder and if they supersede a “garagekeeper’s lien” and/or a “mechanic’s lien.” In some states, a lienholder may have rights over those of a mechanic’s lien, and in other states, the mechanic’s lien may trump all others. You may find that your right of possession and mechanic’s lien trumps the dealer’s, but if you don’t know this, you could be taken advantage of.
  1. Once you determine that information, ask the attorney if a provision can be added in your repair agreement that can protect you from such activities in the future.
  1. Locate a title service company in your area that can assist you in filing liens when needed and can offer other related services and information to help protect you in the future. Caution: “Trust but verify” all information provided you by an individual other than a licensed attorney. I find it common that so-called “professionals” and “experts” are unfamiliar with or have misinterpreted local and state statutes.
  1. Whatever happens, use this instance as a learning experience and a motivator to ensure that company policies and procedures are developed, put in place and adhered to in order to avoid such situations from reoccurring in the future. “When given lemons…” This may include mandating that the customer provide a down payment up front to cover parts and labor (insurer’s initial draft may suffice).
  1. Oftentimes, lienholders may have what may be referred to as ‘Lenders Collateral Protection’ (LCP), insurance coverage, which is designed to cover the lienholder when such issues arise and enables them to make a claim to pay for repairs when the customer has no insurance or, as in this case, has ‘taken the money and run.’ If you have primary lien rights, you may ask the lienholder if they have LCP coverage and suggest they employ it to enable them to pay your billing prior to your releasing of the subject vehicle.

I hope this information has been of help and, if you still possess the vehicle, that you find that your lien is primary and you’re able to collect for your efforts.

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