In your quest to find a used horse trailer, you come upon the perfect one. It ticks all the boxes and is exactly what you’ve been looking for. You make sure to lift the mats and inspect the floorboards, ensure all the running lights are in working order, and that the brakes and tires are good. The seller provides you with a bill of sale and signs the back of the registration. You hand over the money and proudly take your newly-purchased trailer home.
You obtain insurance and have the registration changed, put on your new license plate, and start heading on the road for show season. Four months later, a licensed bailiff with repossession orders shows up at your property and takes your trailer away, stating there is a lien on the trailer that hasn’t been paid.
This may sound like a far-fetched story but could happen if the trailer you are looking at has a lien on it and no effort was made to complete a lien check before purchase.
What is a lien?
A lien is a lender’s claim for repayment that is registered against a vehicle or trailer. For example, if a horse owner finances a horse trailer through a lender – e.g. a dealership or bank – the lender that they are borrowing from will have an interest in the trailer, as they will use the trailer’s title as collateral until the debt is paid in full. A horse trailer will have a lien if the debt is active. This means the lender co-owns the title and has a legal right to repossess the trailer if the owner doesn’t continue to make their loan payments.
A lien does not automatically disappear when a trailer changes ownership. Once a trailer’s title is signed over to you, you become the new owner and may be responsible for any unpaid debt. A lien will stay registered on the trailer until the debt has been paid in full and the lien is removed.
You will lose your trailer along with the repossession appearing on your credit history and affecting your credit score.
Unfortunately, not all sellers are honest. If there is a lien on your newly-purchased trailer, you will likely have to take over the payments if you want to keep the trailer, along with any interest and penalties that have accumulated. The trailer must be cleared of all liens before you can legally tow it within your province or territory. Otherwise, the lender has the authority to repossess the trailer and resell it to help recover what is owed to them. It is important to note that dealerships are required to release all liens before selling a used trailer.
This means that you will lose your trailer along with the repossession appearing on your credit history and affecting your credit score.
But a trailer can’t be registered if it has a lien on it, right?
This is false. Darlene Kuzek, a former Alberta Registries owner and dressage rider, says, “Most higher-end vehicles and trailers have a lien. Everyone gets a bank loan, or financing of some sort, unless they won the lottery. There will be no alert when a new owner goes to a registry office. The personal property registry system database, where liens are recorded, is separate from the motor vehicles database. There is a “vehicle information report” search that can be done that interfaces with both systems, but the client needs to ask for it and there is a fee, of course.”
While this is the current system for Alberta, the process may be similar in other provinces. Kuzek goes on to say, “If there is lack of due diligence by a purchaser, they would also be on the hook in case of a loss. Insurance pays the lien holder first. If someone sold a vehicle or trailer and did not pay out their loan, a lien remains, and then if there is an accident or loss, the lien gets paid out first. It’s always buyer beware!”
Conducting a lien search
Kuzek explains, “Take a complete Vehicle Identification Number (VIN), year, make, and model of the trailer to a registry office. Some registry offices offer this service online. A “personal property lien search” will show any items that have liens with the same last six digits of the VIN. The clerk should look at exact matches to see if a trailer is the same as the one you are looking at. Some liens are registered with an incorrect serial number, or you may have confused a digit yourself.
“If there is an exact match, the clerk can pull the detail on that lien to determine if it is the trailer in question. A CARFAX Canada vehicle history report, plus lien check, will also state any liens and also lists how many owners (not names, that’s private), stolen, write-off, and insurance claims.”
Most registry offices in Alberta will do a lien search for $10-20; fees are similar in Ontario but may vary from province to province. A CARFAX vehicle history report + lien search is around $65.
How to remove a lien or repossession
Kuzek says, “If there is a lien from a lending agency, you would want to ensure the lien gets removed by making your payment to the owner AND the lender. Always go back and pull another lien search in a month to ensure the lien was in fact removed by the lender.”
In some cases, the lender will issue a notice that the debt has been paid and the lien has been released, but you may still have to contact the provincial body that governs transportation in your province or territory to have the record changed. Make sure to keep all documentation concerning the lien in case of discrepancies later.
Kuzek says, “If the trailer was involved in a repossession, there will be two records on file – one for the civil enforcement and one for the seizure. If the trailer was seized and is now being sold, then it has been taken care of, but you should contact the civil enforcement agency listed to remove the two files. Otherwise, they will show up forever as they don’t automatically get removed.”
Important Points to Remember
- When it comes to liens, consumer protection laws do not apply to private vehicle or trailer transactions, which is why buyers must do their own due diligence before handing over money.
- In some provinces and territories involving private sales, the seller may be required to provide information about existing liens to the buyer before ownership can be transferred. Regardless, it is still important to complete a lien check.
- Make sure the bill of sale states, “Free of all liens and encumbrances.” Although this is not a guarantee that you will be able to get out of a lien later, it may be helpful if you pursue legal action against the seller. If the sales contract states “sold as is” it could be much more difficult.
- Legal action against the seller may not be worth it if the lien amount is small, but in the case of a $65,000 trailer with living quarters and a $35,000 lien, it is worth pursuing, although the buyer would likely need to enlist the services of an attorney.
- A trailer can be registered in more than one province or territory and may have more than one lien.
- A trailer for sale for $5,000 could still have a lien on it, so it is certainly worth paying the $20 for a lien check.