Getting Paid: Mechanics’ Liens
It is not uncommon for tradespeople, professionals and businesses alike to encounter customers who refuse or neglect to pay their bills. Although a lawsuit is always an option in these scenarios, many simply choose to write off the loss as bad debt rather than throw good money after bad, especially when a debtor has relative few assets and a lawsuit might result in a dry judgment.
Fortunately for mechanics, however, the British Columbia Repairer’s Lien Act provides a method for securing payment of unpaid bills without having to commence a lawsuit. The Repairer’s Lien Act gives a mechanic a lien on the vehicle he or she has repaired for the total cost of the repairs, and the mechanic is entitled to sell the vehicle to pay the debtor’s bill if the bill is still unpaid 90 days after it was rendered.
While the mechanic’s lien is virtually automatic, it is important to note that the lien exists only as long as the mechanic has the vehicle in his or her possession. If for any reason a mechanic wants to relinquish possession of the vehicle to a debtor, for instance if the mechanic doesn’t have enough space to hold the vehicle, the mechanic can preserve the initial, possessory lien by:
- before surrendering possession of the vehicle, obtaining a signed acknowledgement of debt from the debtor (a signed invoice will suffice); and
- registering a “financing statement” in the British Columbia personal property registry within 21 days after possession is surrendered.
Once a mechanic has registered the financing statement, the mechanic’s lien is preserved and continues to exist for a period of 180 days after the date of registration. At any time during this period, the mechanic can engage a bailiff to seize the vehicle and return it to the mechanic’s garage, whereupon the mechanic will be, as above, entitled to sell the vehicle to pay the debtor’s bill if it is more than 90 days overdue.
A mechanic who is considering relinquishing possession of a vehicle to a customer who hasn’t paid his or her bill should, before doing so, consider the likelihood of a bailiff being able to locate the vehicle if and when the time comes to seize the vehicle.
The mechanic’s lien, or repairer’s lien as it is otherwise known, is a very powerful tool for mechanics in BC. The mechanic’s lien is first in priority to nearly all other liens, with only a few narrow exceptions, such as where an innocent third party has purchased the vehicle after the mechanic has surrendered it to the debtor, but before the mechanic has registered the financing statement.
It is very important to note that a financing statement that is registered in the BC personal property registry in order to preserve the lien must strictly comply with the Repairer’s Lien Act, the Personal Property Security Act and the Personal Property Security Regulation. Even a small error—for instance, in the serial number or the legal description of the vehicle—may invalidate the financing statement and the associated lien, so if you’re unfamiliar with the process, seeking the help of a lawyer is never a bad idea.
Carl J. May