Motor vehicle dealers, as well as purchasers of motor vehicles in Ontario, will be impacted by amendments, including two new set of regulations, to the Motor Vehicle Dealers Act, 2002 (Ontario) ("MVDA"). January 1, 2010 has been proclaimed as the date the amendments are to come into force.
The regulations provide for a 27 point list of details to be included and clearly communicated to a potential new vehicle purchaser in the purchase agreement by a registered dealer. The list ranges to obvious and simple disclosures such as the date of the sale and the colour of the vehicle, to more arduous disclosures, including a detailed description of any and all charges the purchaser is responsible for and that are included in the final price of the motor vehicle (such as freight, fees and levies). The disclosure requirements are even more numerous for used vehicle sales. In addition to the applicable requirements of a new vehicle sale, a dealer must also include in the contract "[a]n itemized list of all repairs, if any, that, under the contract, the dealer has made to the vehicle and the cost of any such repairs that are to be paid by the purchaser." If the car is being sold with a safety standards certificate, specific language must be inserted to the contract notifying the purchaser what such a certificate entails. If the car is being sold "as-is", then language must be inserted into the contract notifying the purchaser that a car sold on an "as-is" basis may not be driveable.
The regulations also require compliance with a list of 25 additional pieces of information about the vehicle that must be disclosed before the completion of a proposed sale. The list is explicit and includes the disclosure of, for example, the maximum odometer reading upon delivery of the vehicle; any damage that has been caused by fire to the vehicle; any repairs required to the engine, transmission, frame, suspension, computer system, electrical system, air conditioning or the fuel operating system; the make, model and trim level of the vehicle; if the vehicle is a recovered stolen vehicle; if two or more adjacent body panels (other than bumpers) have been replaced; and if the dealer is aware of any other fact about the vehicle that, if disclosed, could reasonably be expected to influence the decision of a reasonable purchaser to buy the vehicle on the terms of the purchase.
Used car sales are heavily overseen under the regulations. Obviously, a dealer may only know what the previous owner has willingly disclosed, and thus even if a registered dealer has done all of his or her due diligence on the acquisition of a motor vehicle (accident reports, inspections, etc.) it is quite possible that a dealer may inadvertently be in breach of the disclosure requirements.
Depending upon the nature of the breach, a breach of the disclosure obligations by the dealer can result in the right of a purchaser to cancel the agreement of purchase and sale. This remedy is available to purchasers upon discovery of a breach of certain disclosure requirements (such as a misrepresentation as to previous use of the motor vehicle or the mileage of the motor vehicle). This right of cancellation exists even if the dealer "did not know the information that the dealer was required to disclose under that subsection or honestly believed it to be accurate, regardless of the steps taken by the dealer to ascertain or verify the information." A purchaser has up to 90 days after the receipt of the motor vehicle to rescind the transaction. Upon delivery of notice to the dealer, the car may be returned by the purchaser to the dealer and the dealer must refund all money paid by the purchaser. This remedy deems that the purchase agreement, any contract for an extended warranty or service plan, all guarantees in respect of money payable under the contract, all security given by the person or a guarantor, all credit agreements and other payment instruments be rescinded. Any failure to comply with the requirements of this section gives the purchaser a right to commence an action against the dealer.
It should be noted however, the cancellation remedy only applies to a breach of a limited number of disclosure requirements. Different remedies exist under the MVDA and its regulations which do not necessarily involve the return of the motor vehicle or the refund of any amounts paid under the contract. The MVDA also provides for the Registrar to receive complaints from individuals who believe that a dealer has breached its obligations under the MVDA. In particular, if the registrar believes there has been a failure with compliance under the code of ethics, a discipline committee may be formed to deal with the matter.
Disclosure is mandatory under the MVDA and a failure to disclose or to comply with an order, direction or other requirement under the MVDA renders a dealer guilty of an offence. However, failure to comply with the directions of the discipline committee, or a breach of the Code of Ethics, are not considered offences under the MVDA.
Classification of Dealers
The classification of dealers essentially creates exemptions to the requirements imposed by the regulations. The regulations create seven classifications of motor vehicle dealers. The majority of requirements under the regulations apply to the "general dealer" class only. A general dealer is the class of dealers that is authorized to act as a "motor vehicle dealer". The remainder of the classifications are groups of dealers who typically deal with other dealers on a wholesale basis, or who are fleet lessors and therefore obtain the benefit of being excluded from certain aspects of the regulations, one of which is the disclosure requirements. The exemptions from the MVDA are carved out in the regulations and include those who run auctions, auto wreckers and those who trade in motor vehicles under court order.
Code of Ethics
Under the regulations, a code of ethics must be followed by all registered classes under the MVDA. The code of ethics broadly covers the disclosure requirements, but also includes the requirements that all registrants act financially responsible; be "clear and truthful" in describing all aspects of the cars for sale including features and their prices; ensure that their sales force is equally compliant with all the new regulations; be respectful; and act professionally. Non- compliance with the code of ethics and other requirements under the regulations can lead to disciplinary action by the newly created discipline committee. The code of ethics cannot be contracted out of.
Other Notable Changes
The regulations provide for stringent new advertising requirements. The general requirement in all advertising is that it be in a "clear, comprehensible and prominent manner." There are more specific requirements if the advertisement is for a used vehicle, and the regulations set out what information about the used vehicle must be displayed in the advertisement.
In view of the rules for non-compliance with the new amendments, it is imperative that vehicle dealers subject to the MVDA become aware of the new disclosure obligations prior to January 1, 2010.