Garage Keepers’ Liens 101

The current economic realities have put many businesses in a situation where they are experiencing elevated accounts receivables and a greater number of customers being unable or unwilling to make good on their obligations. One can always utilize a lawsuit as a method of dealing with these situations; however, uncertainty as to the ability to enforce a judgment if the debtor has limited assets and the costs associated with pursuing small value debts, often results in many organizations simply choosing to writ off the bad debt.

The Alberta Personal Property Security Act (“PPSA”) sets out the process and priority for liens, charges and other interests. In addition to the lien rights at common law and rights under the PPSA, there are a variety of statutory liens, which can give one a security interest and a priority in the debtor’s assets, both easing and enhancing the likelihood of realizing upon the debt.

The Garage Keeper’s Lien Act (“Act”) is a short piece of legislation that provides mechanics with a method to secure payment for outstanding debts without a requirement to commence a lawsuit. The Act allows a garage keeper to register a financing statement indicating a claim of lien against the vehicle that the work was performed on. The garage keeper can then utilize the seizure and sale provisions of the Civil Enforcement Act to sell the vehicle and recover the debt and their civil enforcement costs.

The remedies available in the Act are in addition to any other available remedy the garage keeper can utilize to recover an outstanding debt.

Pursuant to the Act, a garage keeper is defined as a person who keeps a place of business for housing, storage or repair of a motor vehicle or farm vehicle and who receives compensation for that housing, storage or repairs. A garage keeper is entitled to lien for the recovery of storage, repair or maintenance and the price of accessories or parts provided for the vehicles. The Act does not allow one to lien for the price of fuel, oil or grease.

Motor vehicles include any vehicle propelled by any power other than muscular power and includes airplanes; however, it does not extend to vehicles that run only on rails. The broad definition will cover most automobiles, recreational vehicles, farm equipment, and heavy equipment.

The garage keeper is entitled to lien the vehicle if they retain possession of the vehicle or they obtain an acknowledgement of indebtedness from the person who authorized the storage, repairs, accessories, or parts for the vehicle. The acknowledgement of indebtedness is generally a signed work order providing particulars of the repairs and the cost for the same or a signed invoice that has been provided once the work has been completed.

The lien terminates on the 21st day after possession of the vehicle is surrendered, or after the repairs were completed, if the garage keeper was not in possession of the vehicle, or after the accessories or parts were furnished, unless the garage keeper registers a financing statement in the personal property registry.

The lien will exist for a period of 6 months after registration, unless the garage keeper, within the six month period provides the satisfactory proof to a civil enforcement agency of the registered financing statement, instructs the civil enforcement agency to seize the vehicle, and the seizure is effected, or prior to the expiry of the six months period, receives an order from the Court of King’s Bench extending the time for seizure for a further period not exceeding another six months.

Once a vehicle has been seized and sold, the proceeds of the sale will be applied to the expenses for the seizure and sale, then in payment of the garage keeper’s debt.

Garage keepers’ liens are a powerful tool for Alberta mechanics to utilize, as they provide a security interest that ranks in higher priority to almost all other registrations. It is important for a garage keeper who is considering returning a vehicle to an owner who hasn’t paid for the debt, to consider the likelihood of a civil enforcement agent being able to locate and seize the vehicle.

When one is registering a garage keepers’ lien, they must be very precise and detail oriented, as any error in the registration, such as an incorrect serial number, may invalidate the registration and lien. A garage keepers’ lien is a powerful tool to ensure a debt is realized upon. If one is not familiar with the process or is looking to extend the lien period, seeking the assistance of a lawyer is always recommended.