Analysis

Sponsor: Representative Kirk Profit
Topic: Garage Keepers' Liens

Position: The Department of Consumer and Industry Services has taken no position on thebill. The Michigan Department of State does support the bill.

Background: The maximum dollar value of a lien that a garage keeper can claim for vehicles under Public Act 312 of 1915 was last updated in 1964. The sum of $600 may have been sufficient in 1964, but the price of vehicles and the cost to fix them have both increased since that time.

Bill Content: The bill amends Public Act 312 of 1915. Much of the act's current language is reorganized or repealed and additional language relating to the process for attaching a lien, paying off a lien and selling a vehicle to satisfy a lien is added.

The maximum amount of a lien which a prior lienholder would have to pay a garage keeper would be increased from the current level of $600. The maximum lien amount would now be determined by a simple formula. If the value of the vehicle is greater than $3,000, then the lien could not exceed 20 percent of market value, or $5,000, whichever is less. Where the value of the vehicle is $3,000 or less the amount of the lien would be $600. In addition to increasing the lien amount for the vehicle, the bill also provides for a lien for the garage keeper's reasonable storage charges for the vehicle.

Provisions relating to aircraft in the act are repealed. This language is now covered in a separate act, Public Act 58 of 1990. Language relating to watercraft is also deleted. This subject matter is covered by House Bill 4983. This bill is currently pending in the Senate Transportation and Tourism Committee. If House Bill 4640 becomes law, legal authority for liens for boat repairs would be at least temporarily ended.

The bill does not change current law which provides that liens for labor and materials on vehicles held by a garage keeper take precedence over other liens. Language has been added to permit the lien holder (e.g. a financial institution) as well as the owner to pay off the lien before sale of the vehicle. It is somewhat unclear what the words "reasonable charges of the garage keeper" in Section 6 (b) means. It probably refers to the lien for reasonable storage charges provided for in Section 4 (2).

Before a vehicle is sold the garage keeper may apply to the Secretary of State for a certificate, which the garage keeper completes and gives to the purchaser of the vehicle. The purchaser submits this certificate to the Secretary of State when making application for a certificate of title or a vehicle registration. The garage keeper pays the Secretary of State $10 for the certificate.

Garage keepers are required to notify the Secretary of State's Bureau of Automotive Regulation when a vehicle for which charges are due is to be sold at public auction. The owner and each prior lienholder must also be notified. Proceeds of the sale of the vehicle are used to pay the lien, the costs of the sale, prior lienholders and reasonable charges of the garage keeper. Remaining proceeds are paid to the owner of the vehicle. If the owner cannot be found, this amount is paid to the Secretary of State and is ultimately escheated to the state.

The bill limits use of the act to those garages who have fully complied with local licensing ordinances during the entire period of time covered by the lien. A garage keeper regulated by the Motor Vehicle and Service Repair Act would be required to be in compliance with that act as to the vehicle in question during the entire period covered by the lien.

Arguments

For: The maximum liens provided for in the current law are insufficient because of the increased vehicle prices and repair costs since 1964, the last time the law was updated. This is a significant financial burden to garage keepers.

Against: The removal of boats may result in hardship for boatyards, marinas and similar businesses. (However, it appears that such liens are few and usually involve storage charges. There are provisions in other laws which may cover unpaid storage charges.)

Supporters/Opponents: The Auto Service Association of Michigan, the National Bank of Detroit and the Michigan Bankers Association supported the bill. The Michigan Department of State also supports the bill.

Fiscal Impact: The bill would affect the Department of State. Under the bill the department will collect a $10 fee for issuing a pre-sale certificate for a garage keeper's lien. It is reported that garages currently place liens on approximately 800 vehicles.