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Think Twice About The Vermont Title “Loophole”

So if you have a vehicle with a title problem you’ve probably heard a lot of information online about how you can get a title. You may have heard about the Vermont loophole, or abandoned vehicles, or mechanics liens. We’re going to talk about why there’s some serious problems with one information you may have heard online. Some of these are urban legends, some of them are people that talk on chat boards about things they know nothing about, and some of these things either don’t work, or some of them could get you into big trouble. So you want to make sure you’re actually getting correct information about how to get a title and you don’t fall for one of these tricks or loopholes that either doesn’t work or it’s going to get you in trouble.

Overview of Title Issues
We’re going to talk about mechanics liens, we’re going to talk about abandoned vehicles, and we’re going to talk about the Vermont loophole and what the problems with those are and why you want to be very, very careful before you jump into one of those or pay anybody to get you a title if they’re going to use one of these methods and you know what you’re getting into. At the end, we’re going to talk about what are the things you can do to get a title and that you can do yourself. You don’t have to pay anybody to do this if you don’t want to and what’s going to work and not get you into any kind of jeopardy.

The Vermont Loophole
First of all, let’s talk about Vermont. For 20 plus years, the Vermont loophole has been kind of an urban legend. People have talked about it on chat boards, on the internet, there’s been articles written about it. Even some very high profile automotive publications like Jalopnik and Hagerty have talked about this loophole, and it has some validity. Basically, what you do is you apply by mail to the state of Vermont to get a registration and then you take that and exchange it in your state for a title.

Issues with the Vermont Loophole
Why does that help you? Well, if you don’t have a title or a legal document in your state, this Vermont registration is a version of an ownership paper that you can use as a loophole to get a title in your state. What’s wrong with that? Well, what’s wrong with it is first of all you have to pay tax to the state of Vermont. The tax is always going to be more than you want to pay. It’s going to be more than you think it is because you might say, “Well, I have an old car, it’s not worth much because it’s in bad shape.” But Vermont is going to look it up in a very high book value and charge you a lot of tax based on that book value.

State Reactions to the Vermont Loophole
More about that in other videos, but even if you do pay that tax and even if you do get that Vermont registration, you still have to bring it to your state to exchange for a title. Look, this is not a big secret. You might have just found out about this Vermont loophole yesterday and you might think it’s a big revelation and you’re in on some big secret, but guess what? It’s been going on for 20 years. Every single state in the country knows about this. All the DMVs know about this. Some of them give you a hard time, some of them reject it, some of them tell you you’re doing something wrong, but they still have to accept it because it’s a legal document from Vermont. Some of them are a lot more aggressive than that.

Example: Florida DMV
Here’s an example. Florida has an official publication at their DMV on their website: information notice fraud alert Vermont registrations. They’re calling it a fraud. Now they’re not saying every one is a fraud, they’re getting your attention with the headline. What are they saying? The Florida DMV has been informed that in lieu of a title, the Vermont Department of Motor Vehicles will issue a registration form of ownership. That’s true. They are a non-titling jurisdiction. They don’t give titles on vehicles at all. They only give a registration. Now of course this only works if the vehicle is 15 years old or older. So right now it’s 2023, that means a 2008 and older this works on.

Florida DMV Requirements
So what happens is people are using this as a loophole. They’re saying, “Wait a minute, I have a car or truck or trailer, motorcycle, whatever, and I’m in Florida or Texas or anywhere and I don’t have a title. I bought it, I lost a title, I never got one from the seller. So instead of… I went to my DMV and they said forget it, you need to have a title. So what I’m going to do is I’m going to go to Vermont by mail. You don’t have to physically go there, but I’m going to apply by mail, get a registration and then sneak it in the back door of my DMV to get a title.” Well, your DMV knows about this, right? It says in many instances the registration ownership is being issued to persons who did not present a title to Vermont, who do not live in Vermont, nor were the vehicles ever located in Vermont. So this is the Florida DMV, right? They’re saying we know that the person who has this registration never had a title, they don’t live in Vermont, and they did not bring the car to Vermont. So they know this, they’re not stupid.

Florida DMV Additional Requirements
So what does that mean? Customers are appearing in Florida attempting to use the registration forms as a proof of ownership. This alternate proof does not offer the same safeguards as a traditional title, which it doesn’t. That’s why it’s easier to get because it doesn’t have the same demands that getting a title does. It’s easy to get this registration from Vermont, it’s hard to get a title. Due to the possibility of fraudulent transactions, they’re not saying it’s always fraud, but due to the possibility, effective immediately, additional documentation is now required when a Vermont registration is submitted to obtain a Florida title. So they’re going to make you jump through a bunch of hoops, right? Florida residents who purchase a vehicle must provide the following: title and sales tax. So you have to pay tax twice. You already paid it to Vermont. Most states let you not pay the tax again in their state if you show you paid it to Vermont. Florida says you have to pay the tax again in Florida. You have to have the original registration, no copies. You have to have a Vermont residence address, which you’re not going to have. You have to have a bill of sale with all the same information reflecting the seller. So they’re going to make you jump through a bunch of hoops because they know that there’s a possibility that some people are using this to get titles for vehicles they’re not supposed to get.

Conclusion on Vermont Loophole
So in conclusion, effective immediately, all transactions with the registration must follow these instructions, this fraud alert instructions. So this is just one state, this is Florida. Other states have sometimes similar procedures and sometimes it comes and goes. This just came out less than a year ago, right? There was a period of time where Indiana didn’t accept these at all. They had a big notice in their window of their DMV saying don’t bring us any Vermont registrations, we’ll throw you out. That went away, now they’re accepting them again. Florida at some point might change this. Different states at different times have gone through periods where they didn’t like this. What does that tell you? That tells you is there’s some resistance to it.

Bonded Title Process
So why not look at some other things? Well, what else does, let’s say Florida, offer? Really a lot of states offer what’s called a bonded title. This is a bonded title bulletin. We’re going to keep it consistent here, we’re going to look at Florida, but many states have a bonded title process. What does a bonded title mean? A bonded title means you don’t have the proper old title for the vehicle and in order to convince the Department of Motor Vehicles that they’re able to give you a title, you give them what’s called a surety bond affidavit. What that means is you sign an affidavit saying how you got the vehicle, right? You have to tell them, “I bought this car on Craigslist, I didn’t get a title, I got a bill of sale.” So you tell your story, you can hand write it on a piece of paper. And then what you have to do is you have to get a surety bond from a bonding agent that backs you up.

Details on Bonded Titles
So what you’re saying isn’t true, the Florida DMV is going to take your word for it, or any state that does bonded titles, but they have a backup meaning that if you’re telling us a lie, then this bonding company is going to fix the problem, right? It’s going to cost you some money for that bond, probably cost you a hundred dollars, maybe 200 for a bond. Now there are some other restrictions. Look at the first couple of segments: Vehicles eligible for a bonded title, vehicle is not eligible for bonded title, and what is required. Well, let’s take a look at vehicles eligible. Bonded titles may only be issued for vehicle truck wing less than eight thousand pounds, vehicle has a Florida current paper title, meaning that if the last title came from out of state, no good, and also model years. So the vehicle has to be more than 10 years old but not more than 30 years old. So in 2023 that means from 2010 to 1994, right? So if you have a vehicle that’s newer than 2010, no good. If you have a vehicle that’s older than 94, no good. It has to be in between those years. Every state has some different rules, but you have to realize that bonded title is going to have some restrictions.

Restrictions on Bonded Titles
What kind of things are not eligible? Well, let’s look at the first one. Bonded titles can’t be issued if it has the word replica or homemade in the title. Meaning that if you have a kit car or something you made from parts, you can’t get a bonded title. If it has a VIN plate removed or destroyed, can’t get it, right? You can’t have a salvage vehicle that you can’t get a bonded title for. Some states will let you, but if it’s a salvage vehicle, no good. If there’s an active lien, no good, right? Meaning that if somebody has a loan on it. And it cannot be declared by the DMV, which means that in some cases they’ll let you get one, in some cases they won’t.

What is Required for Bonded Titles
So what do you have to do to get one? We just mentioned the vehicle affidavit. We talked about the surety bond affidavit. You also have to get an HSMV 82042 form. You get this right online from the DMV website. It’s just a one page form you fill out. And you have to do an inspection. This is a document that gets filled out by a law enforcement officer or in some states the DMV does the inspection. They’ll come out, take a look at the car, and sign it off. Then you pay your money and you get a bonded title. So this is something that most states offer. This is an example from Florida, but you can get a bonded title in most states if you don’t have the proper paperwork for the vehicle.

So that talks about the Vermont loophole, it talks about the bonded title process, but there’s other ways you can get titles, you can talk to DMV if you have any other questions.

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