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An Improperly Transferred Title Can Be a Nightmare

If you sell a car and follow all the rules, yet the buyer doesn't title it properly, you can be in for a world of hurt.

medford, ny people line up waiting outside of the new york state department of motor vehicles office in medford, new york on long island on jan 31, 2020 long lines have resulted from the green light law which allows immigrants in the country illegally to obtain drivers licenses photo by yeong ung yangnewsday via getty images
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While most calls to my office involve defective cars, there's another problem that crops up far too often. Basically, the caller sold a used car a while back and was suddenly contacted, usually by a government official, telling them that the car they sold has turned up in their jurisdiction. Illegally parked, abandoned, involved in an accident – or some combination thereof, and they need to take care of it.

The troubling part about the phone call is how easily this could have been avoided.

Welcome to Lehto's Law, where Michigan-based attorney Steve Lehto doles out useful advice from his 30 years as an attorney specializing in automotive and Lemon Law.

Assuming you are an individual (i.e., not a car dealer) who sells a car to a stranger, it is vitally important to make sure that the buyer titles the car in their name after the purchase. If they don’t, bad things can happen. Whenever the legal system or the government wants to know who owns a car, they usually turn to the titling system. If the buyer never applied for a title, the seller will still appear to be the owner as far as official records go. Let’s start with what can happen when you are the seller and the apparent owner of the same car.

In some states, “owner liability” means that the owner of the car is on the hook for injuries caused by a car regardless of who is driving it. The buyer ran someone over in the car and then fled on foot? Expect a phone call from law enforcement, or perhaps a visit from investigators. Yes, you can explain your whereabouts but wouldn’t you rather avoid the hassle?

The car broke down and was abandoned in a city far away, where it was towed to an impound lot and is racking up storage fees at an exorbitant rate. An issue that needs to be resolved by the owner, the person named on the title.

I have heard countless variations of these stories. And while the former owner of the vehicle can usually resolve the problems, here's how to avoid them altogether.

In some states, the buyer and seller can go to the DMV (or the Secretary of State’s office, like in Michigan) and transfer the title on the spot. You accompany the buyer and stand at the counter while they apply for a new title. When you walk out, you know the title records will be correct. Some people will try to talk the seller out of this, likely because they are hoping to fudge on the title application and say they bought the car for much less than they really paid for it. Why? To reduce sales tax.

I’ve also gotten pushback from people who say that the “go to the office together” concept is silly. Yet, this is what the Secretary of State in Michigan specifically suggests: "It is highly recommended that you and the seller, go to a branch office to transfer the title and complete the vehicle purchase.” Your state might not make such a recommendation, but I would strongly urge you to investigate this possibility.

Many states have methods for the seller to flag that the vehicle was sold. If you fill out the portion of the title that you can send to the state to tell them you sold the car, what is there to worry about? Interestingly, I have gotten calls from sellers in states with this process. The problem occurs when the buyer doesn't apply for a title. What happens then when the car is found abandoned three states away? They run the VIN and it comes back to a car that is 1) titled to you while 2) they have on file the form you sent in saying you sold the car. How good was the information you got from the buyer? The people I’ve spoken to who had this happen told me it eventually got straightened out, but it was a hassle.

Many states do recognize that this situation occurs, and people often think that this will eliminate the problem. For example, the Michigan Secretary of State notes: “If the buyer never titles the vehicle, you aren’t liable for any damages or violations of law caused by the buyer provided that you have kept a written record of the sale.” That final part is so important that the Secretary of State put it in bold.

You will need to have a “written record” of the sale – which can be a photocopy of the title with all the correct information filled out or a bill of sale that contains all of the same elements – but it is still a bit trickier than you might think. Assume you have done everything correctly from that last paragraph. You have a copy of the properly assigned title and – just for fun – a complete bill of sale showing all the information. Then, the buyer takes the car to Capital City where they crash it into a building. Unable to pry the car from the building, the buyer runs away.

The local police run the VIN and it comes back to you. Trust me: They will call you and you will feel inspired to call an attorney. The paperwork you have should get you off the hook, after you have spent some time locating it and showing it to the proper people. In the meantime, you will be wondering why you didn’t just get the title transferred the day you sold the car.

And, in case you are curious, a remarkably large percentage of the people who call me with these problems end up paying something to resolve the issue with the untitled car. Storage fees, legal fees – does it really matter? It’s money out the window because this all could have been avoided.


Steve Lehto is a writer and attorney from Michigan. He specializes in Lemon Law and frequently writes about cars and the law. His most recent books include Preston Tucker and His Battle to Build the Car of Tomorrow and Dodge Daytona and Plymouth Superbird: Design, Development, Production and Competition. He also has a YouTube channel where he talks about these things.

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