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Repossessions: 15.14.2 Obtaining Release of the Property

It is never wise for a consumer to attempt to retrieve property unilaterally from a person who is holding it pursuant to a lien. In several cases, consumers have been convicted of larceny or hindering a secured creditor for retaking their property without the lienholder’s consent.277 Retaking the property unilaterally is not theft if there is in fact no valid lien,278 but the consumer runs the risk that the court will not agree that the lien was invalid.

Repossessions: 15.7.1 General

A valid lien, under both the common law112 and many lien statutes,113 requires that the property owner or another authorized person, such as an agent, request and consent to the services provided by the lien claimant.114 This consent may be given through either an express or implied agreement115 or may be implied by operation of law, as with some towing statutes.

Repossessions: 15.7.2 What Constitutes Valid Consent?

A state statute may require a written contract to establish the property owner’s consent to the provision of the services,118 and some of these statutes require that the contract be signed by the property owner.119 In the absence of such a statutory provision, however, consent can be implied from the circumstances surrounding the transaction.120 Nonetheless, mere knowledge that the lien claimant intends to impose charges may not be sufficient

Repossessions: 15.7.3 Parties Who May Consent

Both statutes requiring consent and case law establish that only certain parties may give consent. Unquestionably, the owner of the property may give valid consent. Some statutes expand the parties who may give consent to include the owner’s agents, lawful possessors of the property,125 and persons who are reasonably believed by the lien claimant to be the owner of the property.

Case law has dealt with numerous variations on this theme. Valid consent has been found:

Repossessions: 15.7.4.1 General

Special issues of consent arise when a constable or other official removes a tenant’s personal property during an eviction pursuant to a valid writ and delivers the property to a warehouseman or allows a warehouseman to take possession of those goods and store them.

Repossessions: 15.7.4.2 Warehouseman’s Rights Under UCC Article 7

Most cases involving a tenant not paying for storage of involuntarily stored property after an eviction deal with whether a warehouseman’s lien is created under UCC § 7-209. No valid warehouseman’s lien is created under UCC Article 7 when the constable or other government official is the bailor, and the tenant has not given consent to the bailment.144 This can be seen by analyzing the two Article 7 provisions that might create such a lien on the tenant’s property.

Repossessions: 15.7.4.3 Article 7 Allows Warehouseman to Sell the Property, Without Retaining the Proceeds

While the warehouseman may not have a valid lien against the property under UCC § 7-209 for unpaid storage charges, in certain circumstances the warehouseman can still sell the property, pursuant to UCC § 7-206.149 The policy behind this provision is not to allow warehousemen to recover storage fees, but to allow the warehouseman to “rid himself of the furnishings.”150 The consumer must first receive notice and be given at least thirty days to remove the property.

Repossessions: 15.8.1 When Surrender of Possession Extinguishes Lien

Under the common law, the person who has provided services to the property must retain continuous possession of the property to claim a lien. Voluntary, unconditional surrender of the property to its owner extinguishes the lien.154 The policy behind this requirement is to protect innocent third parties from owners selling property carrying a secret lien.155

Repossessions: 15.8.2 When Surrender of Possession Does Not Extinguish Lien

A few statutes allow a lien to survive the surrender of the property to the owner,161 and when there is no statutory language mandating continuous possession, a few courts have decided not to require it.162 A lien may survive surrender if the property owner and the lienholder agree that it will.163 A lien may also survive the lienholder’s temporary surrender of the property to a third party if the third party has agreed to return the property

Repossessions: 15.8.3 Special Case of “Auto Repair” Lenders

A type of predatory high interest rate loan is the automobile repair loan, which preys on consumers who must make emergency and unaffordable repairs on a vehicle. Such loans may charge triple-digit interest.177 The lender advances payment to the repair shop for the cost of the repairs and the consumer drives away with the vehicle after the repairs are completed.

Repossessions: 15.9 Lienholder’s Waiver of Lien

The lienholder may waive the lien in a number of ways. When a statute provides a limited time period during which a lien may be enforced, and the lienholder does not act during that time, the lien is waived.185

The lienholder may also waive the lien by agreement186 or be estopped from asserting the lien. The lien claimant’s fraudulent actions, or an intentional or bad faith demand for excessive payment, may also waive the lien.187

Repossessions: 15.14.3 UDAP Remedies

Refusing to return property because of a false claim of a lien is a violation of the state unfair and deceptive acts and practices (UDAP) statute.283 Even if a lien is valid, a lienholder may violate the UDAP statute by imposing unwarranted conditions on release of the property so that storage charges mount.284 It is also a UDAP violation to sell property based on an invalid lien claim,285 or without complying with the protections of the stat

Repossessions: 15.14.4 Remedies When Lienholder Damages Property

While in possession of the lien property, the lienholder must maintain it in good condition and can be found liable to the property owner for any damages caused by negligent care, such as vandalism to an automobile parked in a garage lot.290 If the lienholder damaged the consumer’s property while holding it, the consumer has a remedy under the law of bailments.291 The level of care owed by the bailee depends on whether the bailor, the bailee, or both benefit from the arrangement.

Repossessions: 15.14.5 Other Remedies

The statute creating the lien may give the property owner a private cause of action against a lien claimant who fails to comply with the statute.294 When a lien sale is found to violate constitutional due process standards, a civil rights action under section 1983 may be available.295 State law may make attorney fees available to the prevailing party in lien litigation.296 Adding amounts to the lien that are not owed may violate a state debt

Repossessions: Introduction

This appendix is a summary of individual state laws relating to certain key aspects of repossession law. It includes the citation to each state’s enactment of UCC Articles 2A, 3, and 9, and describes significant non-uniform amendments, particularly to Article 9. It also includes the citation to the state’s consumer leasing law and rent-to-own law, if any. It lists any state restrictions on non-purchase-money security interests, grounds for default, acceleration, or repossession, and self-help repossession.

Repossessions: ALABAMA

UCC Article 9: Ala. Code §§ 7-9A-101 to 7-9A-809

Significant non-uniform amendments: Does not adopt expanded definition of “good faith”; amends § 9-604(d) so that no compensation is owed either to debtor or obligor for damage to real property caused by removal of collateral; effective date is January 1, 2002.

UCC Article 2A: Ala. Code §§ 7-2A-101 to 7-2A-532

UCC Article 3: Ala. Code §§ 7-3-101 to 7-3-605

Repossessions: ALASKA

UCC Article 9: Alaska Stat. §§ 45.29.101 to 45.29.811

Significant non-uniform amendments: Tracks uniform version closely.

UCC Article 2A: Alaska Stat. §§ 45.12.101 to 45.12.532

UCC Article 3: Alaska Stat. §§ 45.03.101 to 45.03.605

Consumer leasing law: None.

Rent-to-own statute: Alaska Stat. §§ 45.35.010 to 45.35.099

Repossessions: ARIZONA

UCC Article 9: Ariz. Rev. Stat. Ann. §§ 47-9101 to 47-9808

Significant non-uniform amendments: Adds special provision, Ariz. Rev. Stat. Ann. § 47-9527, giving right to $500 or treble damages plus attorney fees for willfully refusing to correct false record filed in a filing office.

UCC Article 2A: Ariz. Rev. Stat. Ann. §§ 47-2A101 to 47-2A532

UCC Article 3: Ariz. Rev. Stat. Ann. §§ 47-3101 to 47-3605

Repossessions: ARKANSAS

UCC Article 9: Ark. Code Ann. §§ 4-9-101 to 4-9-809

Significant non-uniform amendments: None.

UCC Article 2A: Ark. Code Ann. §§ 4-2A-101 to 4-2A-532

UCC Article 3: Ark. Code Ann. §§ 4-3-101 to 4-3-605

Consumer leasing law: None.

Rent-to-own statute: Ark. Code Ann. §§ 4-92-101 to 4-92-108

Repossessions: DELAWARE

UCC Article 9: Del. Code Ann. tit. 6, §§ 9-101 to 9-809

Significant non-uniform amendments: None.

UCC Article 2A: Del. Code Ann. tit. 6, §§ 2A-101 to 2A-532

UCC Article 3: Del. Code Ann. tit. 6, §§ 3-101 to 3-605

Consumer leasing law: None.

Rent-to-own statute: Del. Code Ann. tit. 6, §§ 7601–7616

Repossessions: DISTRICT OF COLUMBIA

UCC Article 9: D.C. Code §§ 28:9-101 to 28:9-809

Significant non-uniform amendments: None.

UCC Article 2A: D.C. Code §§ 28:2A-101 to 28:2A-532

UCC Article 3: D.C. Code §§ 28:3-101 to 28:3-605

Consumer leasing law: None, but D.C. version of Article 2A includes special consumer leasing provisions.