Repair and Storage Lien Act (RSLA)
The Repair and Storage Liens Act (RSLA) can be both powerful and frustrating from a bailiff’s perspective. It can be a valuable business tool, or if used improperly, a dangerous weapon.
Like many Ontario statutes, the RSLA came out of a mash-up of earlier regulations, in this case, the Federal Mechanics Lien of 1873 and the Warehousemen’s Lien. It first came into being in 1989, and is very closely associated with, and influenced by, the Personal Property and Securities Act of 1990.
These earlier acts were limited in scope, as they addressed only unpaid items that were still in the possession of the person doing the repair. When an item remains with the repair person, the repair person has a lien on the item until the moment the customer pays in full for the repair work. This is called a possessory lien.
The acts offered no protection to a repair person if the article was released back to the owner without full payment for the repair, or on credit terms. Imagine, for example, repairing a customer’s car that had been making a strange noise. The customer says, “Thanks! Let me just drive it around the block to see if that weird noise is gone.” Instead of returning to your shop to settle up, the customer drives away, and you have not been paid. Up until passage of the RSLA, the repairer had no protection.
Possessory and Non-Possessory Liens
Changes in commerce and in the courts over the years demanded the recognition of non-possessory liens. In the car repair case above, this means the moment the customer drives the car away and disappears, you, the repair person, no longer have a possessory lien, but you automatically have a non-possessory lien to protect your work and to help enforce payment.
As a result, the Repair and Storage Liens Act states that an RSLA lien attaches to an article, regardless who removed the item from your repair site, and regardless where it may now be found. The act clearly defines the two types of RSLA liens: Possessory and Non-Possessory. You either have the item secured in your possession or you don’t. If you don’t, then you will need to register your lien in Ontario’s Personal Property Security Register (PPSR).
The RSLA also provides similar protections for people and companies that provide storage as a service. A person who hires someone to store their property or pays a monthly rent to store property at a location is now subject to a possessory or non-possessory lien until the storage fees are paid in full.
The Consumer Protection Act (CPA)
Some businesses, including vehicle repair shops, have strict industry rules defined within the CPA for providing services to consumers. It is the business owner’s responsibility to make sure those regulations are applicable to them, and if so, that they are followed and documented. Non-compliance, or lack of compliance evidence, might extinguish an RSLA claim, meaning it will be too late for a bailiff to come and help you retrieve the property. It is vital that you learn and comply with your industry requirements.
LIEN – a security right against an article declaring that a person or entity is owed money against it.
LIEN CLAIMANT – the person or entity entitled to claim a lien.
REPAIR - defined as service(s) performed, money expended, labour and/or skill that restores, improves, maintains, or alters an article. This may include towing or salvage services.
REPAIRER - a person or entity that performs a repair on the understanding that they will be paid for the repair.
STORER - a person or entity that receives an article for storage or storage and repair, with the understanding that they will be paid for the storage or storage and repair.
NOTE: These definitions are not limited to mechanics or body shops or simply vehicles. They apply to all types of property that can be brought in for storage or repair, such as jewelry, appliances, motorcycles, snowmobiles, planes, musical instruments, construction equipment, and much more.
Whether you are an owner of property needing storage or repair, or someone providing these services, it’s important that you speak to a lawyer or an experienced bailiff to learn your rights and obligations.
The Good Stuff About RSLA Liens
They are powerful: An RSLA lien on an item not only takes priority over the owner’s rights, it also overrides other competing security interests, possibly even the leasing company or loan organization that the owner used to buy the item in the first place. This applies whether the item is in Possession (no registration required) or Non-Possession (with proper registration). This formidable priority is at the heart of the RSLA and is there to provide significant protection to repairers and storers that maintain or protect the value of the owner’s property or of the loan organization’s collateral.
They are speedy: an RSLA lien automatically takes effect when a service is provided, or as debt is incurred. The process does not require a court order. If requested, seizure or repossession of a non-possessory article (able to be liened) can take place within hours of the lien being properly registered.
They have endurance: an RSLA claim does not have a time limitation as to when a lien can be registered and can be asserted even though the debtor has declared bankruptcy. The only exception is if the item changes ownership. The new owner cannot be subject to the RSLA lien.
The Not-So-Good Stuff about RSLA Liens
Forfeiture: As just mentioned above, if an owner gives up possession of an unpaid article, this may forfeit a lien claimant’s rights. The lien claimant must act quickly, pay the required fee, and register a non-possessory lien pursuant to the PPSR.
Time is of the Essence: A lien claimant should register their RSLA lien as soon as possible. While there is no prescribed time limitation to register an RSLA lien, a lien claimant needs to be aware their lien is not enforceable against a third party that acquires ownership in the subject article BEFORE their Non-possessory lien is registered, since that third-party could not officially have been aware of the RSLA claim when acquiring the article.
Lien Limited To 3 Year Duration: Once registered, an RSLA lien will expire after three years and cannot be extended beyond that, unlike PPSA liens that can be extended over and over.
Strict Regulations: Documentation and notices produced and delivered in support of an RSLA lien must comply with detailed requirements throughout the RSLA to ensure the lien remains enforceable.
If the Item Sells Short: As a repairer or storer, if you sell the article for less than the amount you are owed, or if you keep it for yourself, you are deemed to have chosen to take the article in full satisfaction of the debt, meaning you cannot sue the debtor for the unpaid balance.
A lien can be applied to an article if you are owed money within the definitions of the Repair and Storage Lien Act. Keeping an article in your possession until you are paid in full is your legal right and is the best method to collect what you are owed. Things get a little more complicated in the real business world, if you choose to release the article, and then weeks later find out you aren’t getting paid.
That’s when the timely deployment of an RSLA lien is a very powerful collection tool.
Bear in mind however, there are several technical rules that, if not strictly followed, will render a lien unenforceable. If that happens, the repairer or storer will not be able to collect the debt and may even end up owing money to the owner and/or their lender.
Always seek professional advice from a lawyer or a qualified bailiff to see if the RSLA could work for you.
WHAT IS AN ONTARIO BAILIFF?
There are two types of bailiffs in Ontario
- Provincial Correctional Service Bailiffs who escort prisoners, and
- private sector bailiffs.
Napier Bailiffs Ltd. is a private corporate Civil Enforcement Agency appointed by the Ontario Government to act on behalf of business, individuals, or municipalities to seize or repossess property and Commercial Landlords to evict Tenants. Pursuant to regulations within the Personal Property Security Act, Repair Storage Lien Act, Commercial Tenancies Act and Municipal Tax Act.
DISCLAIMER: We are not a law firm, the information provided is not intended to substitute for legal advice. Always seek appropriate legal counsel for your unique circumstances.