Vehicle title issues

Car dealers must provide title to the vehicles they sell

A particularly awful form of auto fraud is when the dealer sells a vehicle without being able to provide a title. This puts the buyer in a really bad spot. She can't sell the vehicle without the title and can't prove that she owns it if she is stopped by law enforcement of if she needs to get it back after being impounded. Fortunately, every used vehicle sale by a dealer creates a warranty that the vehicle has a good title that is free from liens. This warranty of title arises by law--so it doesn't have to be in writing--and you don't have to prove that the dealer knew about the title problem. The warranty of title can only be excluded by specific language that gives the buyer a reason to know about the title defect. This means that an "as-is" statement will not be sufficient to exclude the warranty of title.

In general, the warranty of title is breached if:

  • The dealer fails to provide title after the sale. This must be more than just a delay by either the dealer and/or DMV in processing the buyer's new title. Most often, a dealer fails to deliver title to the buyer when the title is being held by one of the dealer's unpaid creditors.

  • The vehicle is subject to an undisclosed lien. Most commonly, this is a lien from the prior owner's lender.

  • The vehicle is stolen.

Most courts have found that the warranty of title is not breached if the dealer delivers a branded title. But there may be other claims against the dealer in this situation, especially if the dealer didn't disclose the title brand.

As with most warranty claims, the buyer must give the dealer notice of the breach of warranty of title. If the dealer fails to fix the problem after getting notice, the buyer will have legal claims for breach of the warranty of title. Depending on the circumstances, these claims may require the dealer to pay the buyer's attorney fees.

Car dealers must disclose if a vehicle has a branded title

Another type of auto fraud is when the dealer fails to disclose that a vehicle has a branded title. A branded title is one with a permanent notation on it that the vehicle has a serious defect. Here's a list of the title brands used by the Minnesota Department of Motor Vehicles:

  • Prior Salvage. This is usually used to indicate that the vehicle has previously been declared a total loss by an insurance company, often because of a prior accident.

  • Flood. The vehicle has suffered flood or water damage.

  • Reconstructed. The vehicle has been altered by the removal or substitution of essential parts

  • Rebuilt. The vehicle has sustained damage in excess of 80% of its cash value and the "Prior Salvage" brand doesn't apply

  • Lemon Law Vehicle. This usually indicates that the vehicle has been bought back by the manufacturer under the lemon law.

Minnesota law requires that a dealer verbally tell you about the brand during the sales presentation--they aren't required to disclose it in writing. This can create a he said/she said situation where the buyer asserts that the dealer never told her about the branded title and the dealer swears that he did. But just because it's your word against the dealers, doesn't mean that you don't have a case. I believe that juries understand that most people would never knowingly buy a branded title vehicle. So if you're stuck with a branded title vehicle because the dealer didn't tell you about it, consider talking to a lawyer who handles auto fraud cases.