Buyer beware
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Hauliers who innocently buy currently leased vehicles have little protection in law. But a proposed scheme may place the onus on finance companies to register their interest.
• Buy a vehicle which is the subject of an existing finance agreement and you will get a writ from a finance company seeking repossession, or an immediate payment to settle the outstanding finance. In addition there will be a substantial claim for damage for any work, such as signwriting. that you may have done to their property. By then, the person from whom you bought it may well have disappeared, together with your money!
It is estimated that in 1991 there were more than 4,500 cases of vehicles being sold in this way and, although the problem is not a new one, it is getting worse.
As those who have been caught will know, the general legal rule in such a situation is clear; the innocent buyer will not get any better title to the vehicle than the fraudulent seller had; he has no rights to ownership. While a number of limited exceptions to this rule exist, they do not always apply and there are now increasing calls for the law to be changed to give greater protection to innocent buyers, finance houses and dealers alike (see Used Truck Focus page 25).
Currently, to have any hope of keeping the vehicle if this happens, the buyer must show that one of the following exceptions apply: • He is a private buyer acting in good faith and the vehicle is the subject of a hire purchase or conditional sale agreement.
• The buyer is able to claim that because of the conduct, actions or instructions of the true owner, that owner should be legally prevented from denying the seller's right to sell.
• The goods have remained in the possession of someone who has sold them but who then resells them to an innocent buyer.
• An agreement exists to buy goods and the buyer takes possession of them before completing the sale only to resell them, then a subsequent buyer may obtain good title if he is innocent of such facts
• The sale is within a Market Overt area; a legally recognised market. • The sale is by a Mercantile Agent in possession of the goods with the owner's consent to a bona fide buyer.
In relation to commercial vehicles, the hire purchase and conditional sale exemption will not apply if the buyer is not private or the vehicle is subject to a lease agreement leaving business purchasers with a defective title. Clearly, the circumstances in which the rest of the exemptions will apply are rare.
A number of changes are therefore proposed by those who wish to see some other party in the sale or supply chain bear the loss besides the innocent dealer, finance company or buyer. In practice the FLA (Finance and Leasing Association) and RMI (Retail Motor Industry Federation) have operated a Memorandum of Understanding for several years to safeguard their members' interests when buying vehicles which are still subject to existing finance agreements.
REGISTRATION
At the moment there is no legal duty for finance houses or dealers to register their financial or legal interest in a vehicle and it is not a condition of membership that members' interests in a vehicle be registered with HPI (Hire Purchase Information). Their registers are not a complete record and they do not purport to be as it is the policy of some members not to register.
Merely failing to register an agreement, knowing that this might lead to an innocent buyer suffering loss, is not enough to make a finance company liable for that loss r was confirmed recently, in March, in Court of Appeal.
One proposal for change is a Certii Title scheme. A legal duty would be to ensure the compulsory registratio: ownership and a vehicle's certificate would be suitably endorsed showing financial interest in it. A finance corn which failed to register its interest w have it subordinated and buyers woi under a duty to search the certificate purchase. The FLA is currently rese the possibility of such a system and Stephen MP is considering the terms private member's bill.
These proposals involve a shift in emphasis on to those who have a finr interest in a vehicle to do more to pro risk surrendering it to an honest buy However, any new system will requii active support of both the Departm€ Transport and the DVLA which has concerns as to funding
In an area which has seen many fa starts and ill-considered suggestions quick fixes, the Government probabl needs convincing that the losses inct innocent buyers are significant enon require these sort of changes. In the meantime, with more vehicles than e being sold while still subject to some finance, losses will keep on rising. C by Lee Callaghan, assistant leg adviser, the Society of Motor Manufe and Traders.