How NOT To File A Mechanics Lien On A Vehicle

Mechanics Lien and Title Problems
I know what you’re thinking: you have this vehicle, you have a title problem, and you’re thinking, “Wait, an easy solution is just to file for a mechanic’s lien and I’ll get a title.” Even if you are a licensed automotive facility, you may find that filing a mechanic’s lien not only will not work to get you a title, but it could backfire and create some problems for you. Here’s the thing: what many people aren’t aware of is that filing a mechanic’s lien for a vehicle title is a very specific process.

Consequences of Filing a Mechanic’s Lien
It should only be used in certain circumstances, and if your situation does not meet those circumstances, not only will you not get a title, but number two, you could be fined and have enforcement action taken against you, and number three, you could lose the vehicle. So let’s take a look at how that works. What may not be readily visible to you is that any time you file a mechanic’s lien, you now have three or four very powerful forces aligned against you to keep you from getting that title. You have the DMV—they don’t want you to get a title on a mechanic’s lien. They have task forces that are trying to prevent mechanic’s lien title applications from going through. You have lien holders that are out there trying to block mechanic’s liens. You also have an enforcement arm of your local district attorney looking at mechanic’s liens. It opens up an enforcement and audit process.

Florida’s Mechanic’s Lien Example
So let’s take a look at what a mechanic’s lien is. Here’s one example from Florida for lien enforcement of a lien sale of a motor vehicle. A person claiming a lien under statute 713 for performing labor or services may enforce a lien by sale of the vehicle in accordance with the procedures, and if you notice, this goes on and on. Here are the procedures—this goes on for pages. A copy of their certificate, a copy of this, failure to make good faith efforts precludes the imposition of charges. If you make any mistakes at any time, the owner can request to inspect the vehicle. You can’t charge—a lienholder or sales agent may not charge fees in excess of $250. Must use third-party services with a million-dollar bond. There are all kinds of requirements here that would probably make your application invalid or ineligible. Also, at the end of this process, you can’t keep the vehicle—you have to auction it off. A vehicle subject to a lien must be sold at public sale, very clearly. Immediately upon the sale, the lienholder, meaning the seller, must deposit with the Clerk of Court the proceeds of the sale. So there’s a lot of stuff you have to do here. The clerk receives 5% of the proceeds, and that’s after you go through all this. After final demand, a hearing should be held. Now look, in this there’s an option you have: at any time before the sale, the owner may post a bond or file a demand for hearing, so that’s going to be a clue of what things you can do. So here’s what the official statutes are.

Forces Against Mechanic’s Lien Filing
Now when I said before that there are forces lined up against you to prevent you from getting your mechanic’s lien, we’re going to look at those, but don’t despair. There is a method you could use that’s better than a mechanic’s lien that doesn’t have any of these adversaries. These people are not trying to block you, and it’s faster, cheaper, and easier than a mechanic’s lien, and most people don’t know about it. We’ll talk about that at the end.

Fraud Prevention in Mechanic’s Lien Process
So how do we know that there are forces working against you? Well, here is a trade publication: “Filing Fraudulent Mechanic’s Liens—Don’t Do It” and “Auto Lien Sale Fraud in Florida: What Every Lender Needs to Know.” This is Auto Dealer Today. This is a dealer publication. This was published five years ago. The automotive industry, lenders, and DMVs know that a lot of mechanic’s liens are fraudulent, or even if they’re not, they’re trying to block them. Facts indicating lien sale fraud: not able to contact the customer, no accident information from the insurance company, tow/repair shop recently incorporated or not licensed, telephone number for the towing company is not answered. So there’s going to be a lot of red flags. Steps to take to prevent lien sale fraud: calendar the lien sale date, contact the customer including “Did the towing company tow your vehicle? Did you authorize repairs?” The bank is going to contact the owner of the vehicle and ask them if it’s legitimate. If it’s not, it’s going to be reported to law enforcement.

Best Practices for Fraud Prevention
You’re also going to contact the person starting the lien to get documentation for the towing and storage, and if you provide them fake documentation, that’s another crime. Don’t be a victim of what they call lien sale piracy. If you’re using a lien sale to take a vehicle away from somebody you’re not supposed to take it from, you’re going to get in trouble. “Best Practices for Prevention of Abandoned Vehicle Mechanic’s Lien Fraud”—this is from the American Association of Motor Vehicle Administrators. Those are DMV Commissioners. Motor vehicle administrators are the people who run the DMV. They have put together best practices for prevention of mechanic’s lien fraud. What does that tell you? That tells you that the DMVs are aware of this. They have put together best practices. What are some of the best practices? Here is their 39-page handout. It’s a 39-page manual on the best practices for preventing that. Let’s take a look at some of that. First, they tell you the reason that they’re doing it is because of inadequate, outdated title laws—financial institutions may suffer significant losses from people taking advantage of mechanic’s liens.

DMV Fraud Detection Practices
There’s a working group task force to develop detection of fraud in the title application process. They are actively looking for fraud with these cases. We’ve talked in prior videos about how they do it. They audit them. They have sophisticated software that will flag applications based on your automotive license. Should you be doing this many mechanic’s liens? And here’s the fraud they’re identifying in the mechanic’s lien process: title brand washing, trying to remove a title brand, lien washing, fraudulently removing a lien holder without a valid lien release. So if you want to remove a lien, get a valid lien release. There are better ways to do it that are legal than trying to do a mechanic’s lien, and we’ve talked about it before, and our website will explain that to you. If you try to use a mechanic’s lien for getting rid of a bank lien, you’re just putting a big target on your back and a big flashing light on that VIN number for them to look at it and to possibly catch you doing something illegal.

Fraudulent Practices and Their Consequences
Fraud may occur when a lien claim intentionally circumvents the notification requirements: not providing the owner information, not doing the notification, intentionally sending empty or junk-filled envelopes to the legal owner, sending it to incorrect addresses. Also, this is a big one—selling the vehicle to their employees, not holding a public sale. So if you’re trying to get the title for yourself, that’s what you do—you won’t hold a public sale where your vehicle gets the highest price.

Avoiding Fraud and Mechanic’s Lien Pitfalls
Trying to avoid getting the highest sale price in a public sale—you just want to slide it to your friend or to yourself—that’s going to be fraud and they’re going to catch you. In chapter four, they tell you the process to locate and notify the vehicle owners. They tell you how to do that using the NMVTIS. They’re also going to tell you how to use lien title services and third-party agents and find out which ones are committing mechanic’s lien fraud. And the biggest way they do that is through fraud in advertising. So you might use a false VIN number, a fictitious ad for a sale that never takes place. This occurs when the lien claimant creates a newspaper ad but never publishes it as required, or they don’t actually hold the sale. What does the DMV do? They’re validating and verifying the ad and also validating and verifying the sale, making sure it matches the vehicle and that it was actually held. Collusion between the lien claimant and the buyer—that means that if the person you’re trying to steer the title to is a friend of yours and you’re colluding to make sure they get the vehicle—that’s also a crime. In some cases, it’s a felony.

Legal Consequences and Internal Audits
Another big one is intentionally holding a vehicle to increase storage costs, and that is a way to try to jack up your fees. Again, they know about all this. This is published information at the DMV, so they’re looking for it. So don’t think just because it’s possible to do something that there aren’t people watching what actions you’re taking. And so at the DMV, they tell you the best practices for registries is to review the application. And when I say review, they go over it with a fine-tooth comb. They look at the application, the fees, the jurisdiction, the lien notice forms, bill of sale, affidavit of ownership. They’re going to do a background check on all the parties to make sure there are no relationships. They’re going to verify the lien, and what they’re going to do in many cases is even if everything looks okay, they’re going to reject it and send it back to you with the hopes that you’re going to be scared that they caught you and you’re not going to refile it. They’re also going to do a stop title process, placing an administrative stop on the application during the review. This makes sure that the vehicle isn’t fraudulently conveyed to another party. This is the big one—internal audit.

They’re going to internally audit all the records for that repair shop to see: did they have a repair record for that vehicle before they did a lien sale? If you can’t show that you had a record of repair on that vehicle before you’re doing a lien sale, that right there is a red flag that’s going to catch you in the act of trying to do a fake mechanic’s lien. And what they’re going to do is if they suspect fraud, they’re going to take that title application and they’re going to retain it for criminal prosecution. They’re not playing around. They are doing this very specifically in all 50 states. We are in contact with all 50 states’ DMVs on a regular basis discussing how these issues are coming up in different states and how they’re being caught.

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