Six most important changes in garage lien laws in 2021

2021 brought many changes in garage impounds

Here are the six most important developments that benefit lien/leaseholders…

Elimination of abusive storage fee tactics
The worst abuse, the secret lien for storage, has met its demise.  For years garages contended that they had no obligation to send notice of accruing storage fees to lienholders/lessors. Garages would pile up storage fees in secret. By the time the lienholder learned of the situation, fees were often $10,000 or more. The courts now explicitly reject this abusive tactic holding that storage fees cannot be charged to a lienholder/lessor unless prior notice is given by the garage. Old habits are hard to break however, especially when those habits make money. Garages are likely to continue to try to get away with charging secret storage liens. It is important to resist secret storage fee claims so this abusive practice can be finally stamped out. Automotive finance companies should be on the alert to identify and get invalid storage fees dismissed in court.

No more holding vehicles for non-monetary conditions
Garages who tow for police often refuse to release a vehicle unless the lienholder or lessor first provides a police release, title or a hold harmless agreement. There is a daily storage fee for every day it takes to comply with those conditions and garages like to prolong the process so that their storage fee profits increase.  The problem with these demands is that the statutes do not allow garages to refuse to release vehicles unless these conditions are met. The courts have ruled that garages can no longer demand non-monetary conditions and instead must release the vehicle upon offer of the legitimate fees. Consequently, lienholders and lessors should be able to recover police towed vehicles at a cost of no more than a few hundred dollars. As with secret storage liens, this practice is still going on, even though it has been condemned by the courts. Automotive finance companies should be ready to challenge this practice if it comes up.

Limitation on the daily rate of storage
The law in New York is that any storage fee charge must be reasonable. The courts have held that a reasonable rate of storage is limited to $27 per day, unless the garage makes a specific showing that a higher rate is justified by the circumstances. Garages generally don’t want to discuss what is reasonable; they are used to demanding whatever they want and threatening to sell the car if they don’t get their way. Automotive finance companies can change this narrative by sticking to $27 per day when negotiating storage fees.

Improper lien sales will be thrown out
Garages often try to force lienholder or lessors into complying with their demands by threatening to use a lien sale to wipe out the lienholder or lessor interest in the vehicle. This is a pressure tactic. The courts have held that these lien sales will not alter a lienholder or lessor interest unless all the legal requirements for a sale are strictly satisfied. The courts’ willingness to throw out faulty lien sales makes it easy to stop the sale before it goes forward. This eliminates the garages’ most powerful pressure tactic.

Garages must pay costs and damages if they assert a bogus garage lien
The courts have held that a garage which converts a vehicle, inflates its fees, or asserts improper charges, will be held liable to pay damages to a lienholder or lessor who has the garage lien claim thrown out. This should make garages think long and hard before they attempt to gouge a lienholder or lessor for improper or excessive fees.

Reform of police towing liens The Federal Court in Massachusetts held that garages that tow for police cannot charge storage fees unless they both give notice to lienholders and provide the lienholder with the opportunity to contest those storage fees. This is a major change because previously in Massachusetts, tow yards were allowed to charge storage fees to lienholders without any notice or opportunity to challenge. The same rule went into effect for towing done at the request of Yonkers city and Port Authority police.

How to take advantage of these changes in the law

  • Demand the right to redeem your vehicle and then document the garage’s reaction. It is important that your records prove your demand to recover the vehicle. Remember, the date of this demand cuts off the garage’s right to keep charging storage into the future. If a lawsuit is later filed to recover the vehicle from the garage, the garage is likely to deny that you called. System notes showing a clear demand including details, such as the name of the garage representative, should win the case.
  • Make a record of any conditions demanded such as a hold harmless or police release or title.
  • Resist a daily storage fee greater than $27 per day. Very seldom can a garage show a reason for charging more than that. The courts have held that the mere fact that other garages charge a certain rate doesn’t mean that a rate higher than $27 per day is reasonable.
  • Push back on the garage tactic of using the lien sale threat to force payment. Lien sales can be stopped with something as simple as an attorney demand letter. Once the sale is stopped, you have time to negotiate a reasonable resolution or refer the matter for a legal challenge if the garage insists on overcharging.
  • Pursue garages to recover your costs and damages when the garage asserts a bogus lien claim. The best resolution of a garage lien claim is a fair settlement, but garages will not be fair when they believe that they have leverage. Lienholders and lessors that are willing to pursue garages for damages change the leverage dynamic by creating an incentive for the garage to make a fair and reasonable settlement. Word gets around fast. Lienholders and lessors who fight back against overcharging garages have a much easier time settling cases quickly and efficiently.
  • Challenge storage fees charged without notice on police tows in Massachusetts, Yonkers and the Port Authority. Lienholders and lessors finally have the power to demand fair treatment in these areas. However, change comes slowly and if you are not demanding fair treatment, it is very likely that you will not get it.

If you have questions about this article, please feel free to email me at rudy@meolalaw.com.

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