Lienholders cannot lose their liens in New York, but there is a lot of misinformation that confuses this simple topic. Let’s clear it up.
Usually, this problem comes up when the lienholder discovers that someone has obtained a new title and the lienholder’s name and address is no longer showing on the title. This prompts the question: does this “clean title” mean that the lien is lost? The answer is no, the lien is still there, even if it is now invisible to the public.
The key is understanding the difference between an automotive lien being perfected and the lien being published. Perfection means that the lienholder has taken legal steps to ensure that the lien is superior to later arising claims. Perfection occurs when the proper lien application is delivered to DMV. The significance of perfection is that it is a legal act that greatly impacts property rights. Publication means that the lienholder‘s name and address are listed on the DMV title to the vehicle. Publication functions as a red flag, warning that a lienholder has taken the steps needed to perfect. The significance of publication is that it is an informational act that raises awareness.
Under New York law, the priority of rights in a vehicle is defined by perfection, not by publication. A lien can be perfected even if there is no publication. Because perfection is not impacted by publication, a perfected lien remains, even if someone has removed the publication component. In short, a “clean title” meaning one with no signs of publication on it, can be subject to a perfected lien that takes priority over later acquired interest. The notion that a lien only exists if it is published on the title is wrong and seems to be the cause of much of the confusion on this topic. It seems logical that a person should be able to determine if there is a lien by looking at the title, but that is simply not the law in New York.
What can a lienholder do if it finds out that someone has removed the publication component so that its lien is not listed in the title? The answer is to have it restored. A court order is needed, but the process is straightforward because there is no such thing as “unperfecting” a lien. The lienholder needs to show that its lien was perfected and the right to restore publication is authorized by law.