On July 1, 2016, changes to the Repair and Storage Lien Act, R.S.O., 1990, c. R.25 (the RSLA) will take effect that relate to fees a storer or repairer of motor vehicles can claim under the RSLA.
You may recall that the RSLA creates rights for storage and repair companies to claim priority liens in respect of storage or repair costs in favour of the storer or repairer. The changes to the RSLA help to regulate the amount of the preferential storage or repair cost that can be claimed pursuant to the RSLA and should be welcomed by secured creditors, including motor vehicle financiers.
The most significant changes being made to the RSLA are:
- reductions to the storer’s maximum delay for notification to a lien holder from 60 to 15 days for a motor vehicle with a permit under the Highway Traffic Act, R.S.O. 1990, c. H.8; and
- guidance as to what should be included in calculating the “fair value” of storage and/or repair.
Storer’s Maximum Delay Notification
Under the RSLA a storer of vehicles is afforded priority over other secured creditors registered under the PPSA on account of storage costs. Currently under the RSLA, a storer of vehicles is permitted, subject to the terms of the Act, to accumulate storage costs for up to 60 days without notifying the owner of the motor vehicle when the motor vehicle is brought into storage by a person other than the owner or the person having the authority of the owner. This has been problematic for secured creditors as this can lead to a substantial sum for storage accumulated over the 60 day period that has priority over secured creditors registered under the PPSA.
The amendments to the RSLA reduce the period that a storer of motor vehicles can delay in notifying the owner from 60 days to 15 days for motor vehicles that have been issued a permit under the Highway Traffic Act. Note that based on the wording ‘owner or the person having the authority of the owner’ this does not protect a financier of motor vehicles from storage charges that were agreed to by, for example, its lessee, who would be acting on authority of the owner and in such a situation no notice is required to be delivered to secured creditors under the terms of the RSLA. As such, the amendments to the RSLA protect finance companies and other secured creditors from third party storers but not from their own lessees.
Fair Value of Storage or Repair
Under the RSLA, the amount of storage that can be claimed by a storer or repairer of vehicles is based on the fair value of the storage or repair in absence of an amount that is agreed upon by the parties. Given this, there was previously no guidance under the RSLA as to what constitutes fair value. The changes to the RSLA set out factors to be used as guidance in what constitutes fair value, when no amount is agreed upon.