THE REPAIRER’S LIEN AS SECURITY FOR PAYMENT
The repairer’s lien is a right under the common law that may assist a business to secure payment by customers for services and parts provided
However, the repairer’s lien does not apply in all circumstances. For this reason, it is important to have an understanding of when the repairer’s lien applies to assist your business to lawfully keep possession of a vehicle until payment is made.
One circumstance in which it is highly unlikely the repairer’s lien will apply is where the service consists only of diagnosing an issue with a vehicle and no repair work is conducted.
Note that this article considers the common law repairer’s lien, it does not consider a lien agreed to under contract which may apply differently to the common law repairer’s lien.
What is a repairer’s lien?
For a mechanic, the repairer’s lien enables a mechanic to retain a vehicle as security for payment for improvements made to the vehicle. Put simply the mechanic can refuse to provide the customer with the vehicle until the customer pays the invoice but only if all the required elements are satisfied.What elements must be satisfied for the repairer’s lien to apply?
Generally, the elements required to establish that a repairer’s lien applies are:
• a repairer receives goods for repair/improvement; and
• the goods have been provided by the owner or a person with authority; and
• the goods have been repaired/improved (or increased in value), by a person with the required skills; and
• possession of the goods has remained with the repairer at all times.
The requirement for improvement
In order for the repairer’s lien to apply an improvement must be made to the vehicle. Case law distinguishes between ‘improvement’ and ‘maintenance’, noting that a lien arises where a vehicle is improved or increased in value, but not where the good is merely maintained (even where labour and skill are expended in maintaining the good).
Putting this in terms of work on a vehicle, although assessing a vehicle to identify the issue required to be repaired is skilled work, there is a high risk that if the repairer retains the vehicle where repair work has not been conducted, that the repairer unlawfully retains the vehicle as the repairer’s lien is highly unlikely to apply.
Retaining the vehicle in the possession of the business
If the business releases the vehicle so that the business no longer has possession of the vehicle, then the repairer’s lien is lost. It is not possible to re-establish the lien by retrieving the vehicle at a later time. For this reason, it is important that the business does not release the vehicle before payment is made.
What if the customer also has other outstanding debts?
The repairer’s lien only extends to work carried out on the vehicle and cannot be used to obtain payment for the customer’s other outstanding debts, including outstanding debts relating to the same vehicle.
Storage fees cannot be charged
The repairer’s lien does not give the repairer the right to charge the customer storage fees. If the business would like to have this option to charge storage fees, then a specific clause to enabling this should be included in the terms of trade used by the business.
Disposal of the vehicle
The repairer’s lien does not give the repairer the right to dispose of, or sell, the vehicle. If the repairer is considering disposing or selling the vehicle, the repairer should consult the uncollected goods legislative regime applicable to the state or territory in which the business is located.
The key takeaways relating to the repairer’s lien arising under common law are:
• the repairer’s lien enables the business to keep a vehicle as security for payment of goods and services;
• the repairer’s lien only applies if an improvement is made to the vehicle;
• the vehicle must be received for repair and the vehicle must have been provided by the owner or a person with authority;
• the vehicle must remain in the possession of the repairer (to retain the repairer’s lien);
• the repairer’s lien applies to work carried out on the vehicle and the vehicle cannot be retained to satisfy the customer’s other debts; and
• the repairer’s lien does not give the repairer the right to charge storage fees or to dispose of the vehicle.
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This document is intended for general information purposes only and should not be regarded as legal advice. Please contact Industry Legal if you require legal advice