Two Tricky Repo Issues

Does NY law prohibit repossession on weekends?

New York Vehicle and Traffic Law (V&T) 425 requires that the repossessing creditor send a notice of repossession to the DMV and the vehicle owner within 24 hours of repossession. DMV offices are closed on Saturdays and Sundays.

The most conservative creditor could resolve the problem by not repossessing on Friday or Saturday. However, this is not the required result. The DMV Legal Department has issued a letter opinion stating that when a repossession occurs on a Friday or Saturday, the creditor may notify the DMV on the next business day following the repossession. Accordingly, creditors should be able to comply with V&T 425 and thus, may repossess on weekends if they choose. If anyone would like a copy of the DMV letter opinion, please contact Rudy.

To Redeem or Not to Redeem: That is the Question

Hamlet never had to deal with the NYPD but you might have to. As a condition for releasing a vehicle to a lienholder police often require signature of a hold harmless agreement wherein the lienholder promises not to return the vehicle to the offending driver. Several provisions of New York Law allow a customer to regain possession by redemption. Where the offending driver is a customer, the lienholder who signs such a hold harmless with police may face conflicting demands. That is the rub. Must the lienholder release the car to a customer who wants to redeem and tenders all past due payments? Must the lienholder release the car if the customer tenders the payoff balance.

The answer to the first question is clear. New York General Obligation Law 7-401 states that no contract provision can deprive a customer of the right to redeem provided in New York Personal Property Law (PPL) 302. PPL 302 13(g) guarantees that the customer will have the right to redeem where the default consists solely of the failure to make timely installment payments. PPL 302 does not guaranty a right to redeem where the default is a non-monetary default. Because a police impound is a non-monetary default, the lienholder can refuse to permit redemption.

The answer to the second question is not so clear. Vehicle and Traffic Law (V&T) 2121 requires that upon satisfaction of a security interest a lienholder shall release its lien. The implication of the law is that when payment in full is offered, the lienholder must take the money and release its lien.

Since a valid lien is the justification for the lienholder’s continued possession, payment of the lien leaves the lienholder with no basis to detain the vehicle from the customer. The lienholder must return the vehicle to the customer even though this action may violate the hold harmless agreement given to the police. There is, however, a way to avoid the slings and arrows of an affronted NYPD in this situation. The NYPD is willing to add an exception to its hold harmless form clarifying that the lienholder may release a vehicle if required by law. This exception covers the situation where the lienholder receives payment in full and releases the lien as required by V&T 2121. Make sure to negotiate the required by law exception into your hold harmless before you sign it.

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