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Repossessions: 15.5.3 Enhancement of Value of Property

Most lien statutes limit liens to situations in which the lien claimant enhances the property’s value.61 Thus, negligence in the performance of services that would otherwise enhance the property’s value may be an affirmative defense against a claimed lien.62 Several courts have held that supplies required for ongoing maintenance of property, such as gasoline, oil, and antifreeze, do not constitute materials that enhance the property’s value.63

Repossessions: 15.5.4 Lien Is for Reasonable or Agreed-Upon Charges

Many state statutes require that a lien be for only the reasonable cost of services.69 Defects in workmanship may constitute a defense to a mechanic’s lien and reduce the amount due on the contract.70 Violation of UDAP regulations governing the underlying work may invalidate a lien.71 But one court has held that a lien is valid even though the property owner may have an unrelated claim against the lienholder that a court may set off against t

Repossessions: 15.11.1 No Right to Sell Property for Common Law Lien

Under the common law, a lien only creates the right to detain property until the owner makes payment for the services rendered. There is no common law right to sell the property if payment is not made.205 The right to sell lien property thus exists only when there is a statute that authorizes this remedy. Most states have enacted such provisions.

Repossessions: 15.11.2 Sale Requirements of State Lien Statutes

Many of the state lien statutes that allow the lienholder to sell the property also require that the property owner receive prior notice of the impending lien sale.206 Typically, these provisions require notice to the property owner within a specified time period, public notice through posting or a newspaper advertisement, or notice to some government agency such as a motor vehicle registry.

Repossessions: 15.11.3 Special Protections for Active Duty Servicemembers

The Servicemembers Civil Relief Act (formerly the Soldiers’ and Sailors’ Civil Relief Act) prohibits non-judicial enforcement of any lien on the property or effects of a servicemember while on active duty or for ninety days thereafter.211 This protection applies regardless of the type of lien or the type of property.212 If the lienholder seeks a court order to foreclose on the lien and the servicemember’s ability to comply with the obligation is materially affected by military service, the c

Repossessions: 15.12 Conduct of Sale

Many lien sale statutes require some type of judicial or other official involvement prior to or during the sale. This requirement serves to safeguard against clearly unreasonable sales or sales that ignore the rights of a third party to the lien property (for example, the rights of a party holding a purchase-money security interest).

Repossessions: 15.13.1 Does the Lien Sale Involve State Action?

For a lien sale to violate a consumer’s due process rights requires that the lien process involve sufficient state action to trigger Fourteenth Amendment protection. There must be state action or private conduct that “may fairly be treated as that of the State itself.”226 When the challenged activity is private, the United States Supreme Court requires a showing that the state has “significantly involved itself.”227

Repossessions: 15.13.2 Procedural Protections Required by Due Process

If sufficient state action is involved, the Due Process Clause will generally require that the property owner be given notice and an opportunity to be heard before being deprived of a property interest.239 Non-owners who have rights in the property may also be protected.240 The existence of the lien does not eliminate the owner’s property interest.241 The specific procedural protections that due process may require are discussed in more detai

Repossessions: 15.13.3 Towing Cases

Many successful constitutional challenges have been brought to towing liens. Courts are easily convinced that there is state action for Fourteenth Amendment purposes when automobile towing is carried out by state or municipal police or by a private party who tows at the request of the police.242 Police involvement in towing may also result in an unreasonable seizure in violation of the Fourth Amendment.243

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