Clearing a Vehicle Title Crucial to Avoiding Legal Fiascos

Jim Luff
Posted on August 22, 2013

Imagine the surprise when Fred Moore, an operator from Louisville, Ky., received a call from a lawyer in California to advise him of his liability in a fatal crash. The owner of CAAL Worldwide had barely remembered the car he sold eight years earlier, recalls his business partner, John Strickland.  

The vehicle in question was traced back to Moore as the legal owner through governments sharing reciprocal registration information. Although the car had made its way to California with expired tags and eight years had passed, the subsequent new owners failed to ever legally register the vehicle. They elected to gamble the possible risk of an observant police officer noticing the expired, out-of-state plates.

So when the attorney notified Moore that he was about to be named in a lawsuit for allowing a negligent driver to operate the unlicensed vehicle resulting in a fatality, he was, needless to say, blindsided. He was still the owner of record with the Department of Motor Vehicles. Fortunately, Moore had retained a Bill of Sale clearly showing the date he sold the vehicle and to whom he sold it to. Without this document to clear his name, the situation could have been a very expensive lesson on why you must clear your name from the title of the vehicle with government officials.

Proper Documentation
Having proof from key documents and knowing where they are stored are critical factors in protecting you and your assets in the event blame and liability are directed your way. For example, Avis Limousine, based in New York City, experienced a fire in one of its stretch limousines in New Jersey in May. Its documentation, including an insurance certificate and ownership information from the Department of Motor Vehicles, were destroyed in the fire that totally consumed the stretch. While Avis was spared the media frenzy surrounding other limousine fires, the owner declined to complete an interview with LCT Magazine. Instead, he issued a statement that details of the incident were inaccurately reported by a single media outlet. There was a question about whether the vehicle was registered and insured at the time of the fire. Company officials quickly ordered duplicate paperwork and the matter was cleared up without further concern. The key lesson is to always keep photocopies of documents in the vehicle and the actual documents in the office file or safe.

How Can You Be Sure?
Tim Wiegman of Boulevard Limousine in Olathe, Kansas wanted to dispose of a limousine that was ready for pasture. He was sure it would never be used in passenger service as even a new engine couldn’t help a 20-year-old beat-up heap of junk. So Wiegman set out to sell the beast on Craigslist.com (a popular place for operators to dispose of retired fleets vehicles for as much as he could get. Eventually, Wiegman received an offer for $500. When asked what the new owner planned to do with it, Wiegman was told it would be used in a destruction derby. As a result, no paperwork was done and the vehicle Wiegman assumes was destroyed in the derby may or may not have a “salvage report” filed with DMV indicating the car had gone to a salvage/wrecking yard for destruction. It is common for salvage yards to demand this filing to make sure they are not unwitting participants in a chop-shop operation using stolen vehicles.

Vehicle Deals With Relatives
In the mid-1980s, I decided to sell my motorcycle to my then brother-in-law. I was in my early 20s and liability was the last thing on my mind. I needed cash. Since it was all in the family, there was no Bill of Sale, no receipt, no release of liability or transfer of ownership paperwork completed — just a simple hand-to-hand exchange of cash. Two years later, I was served papers at work asking me to pay for the repairs to a door that was apparently broadsided by my wonderful relative. To add insult to injury, the motorcycle was impounded at the crash scene and apparently I was the only one who could get it out of impound because I was still the legally registered owner. The amount of hawk owed to the tow company far exceeded my resources when I found out this information. I needed my brother-in-law to come to court and tell the judge his story to get me released from the lawsuit. You can see what problems can happen when registrations are not updated at the time of sale.

File a Release of Liability
The most important thing you can do when selling a chauffeured fleet vehicle is to file a Release of Liability. This document is your statement to the DMV that you have divested yourself from the vehicle. In this same document, you will provide the DMV with information about who you sold the vehicle to. This does not register the purchaser as the registered or legal owner of the vehicle. It simply informs the DMV that you no longer are in possession or control of the vehicle. The new owners still have to appear at the DMV to register the car and pay a title transfer fee, at which time they will become the official titleholder of the vehicle. They may be required to pay a sales tax based on the selling price of the car, pass a smog test, and pay other fees. Although this may not happen right away, if the vehicle is involved in any incident where liability arises, you will be in the clear once this document is filed.

Regulatory Agencies Notified
As a permitted operator, make sure to notify airport authorities, the Public Utilities Commission, the Department of Transportation, and other agencies that track or permit your vehicles by license plate or VIN. Remove all decals, ID numbers and company insignia before the transfer to the new owner. A California operator was once contacted by Oregon authorities when their former vehicle was observed operating for hire in Oregon with a California TCP number on the bumper. The new owners of the retired limousine falsely reported they held a license in California and were merely crossing the state border incidental to their passenger’s travels just inside the state of Oregon.

Quick Guide to Private Party Vehicle Sales

If you elect to buy or sell a vehicle from a private party, you can complete the transaction by following this step-by-step guide:

1) Agree on a selling price exclusive of any sales tax or other fees

2) Create a Bill of Sale that includes the following:

  • Seller’s name & address
  • Buyer’s name & address
  • Selling price
  • Payment method
  • Vehicle description (make, model, year)
  • Vehicle identification number (VIN)
  • Date of sale
  • (*You can visit Rocketlawyer.com and buy a Bill of Sale for $1)

3) Each party receives a copy of the signed Bill of Sale

4) Issue a receipt to the buyer acknowledging receipt of payment in full

5) Buyer and seller complete a Transfer of Title application together

6) Buyer files above document with the DMV

7)Seller files a Release of Liability with the DMV

8)Seller cancels any insurance policy on vehicle when providing a copy of the Bill of Sale to insurance carrier

9) Remember to notify PUC or other regulatory authorities of your sale

10) Keep copies of all sale documents with other important documents such as insurance policies, vehicle titles, operating permits etc.

Related Topics: fleet management, Legal Issues, Southern U.S. Operators, used vehicles, vehicle sales

Jim Luff General Manager
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