Under the Repair and Storage Liens Act (RSLA) in Ontario, mechanics and towing companies can legally keep a customer’s vehicle until the bill is paid. If the customer takes the vehicle, you must register a non-possessory lien for a small government fee ($8 per year, up to a maximum of $24 CAD) and you can eventually sell the vehicle after 60 days of non-payment. Towing and storage operators must also fully comply with the Towing and Storage Safety and Enforcement Act (TSSEA) for a valid lien to arise.
Running a commercial garage, towing company, or storage facility in Ontario comes with its share of challenges. One of the most frustrating situations is when a customer refuses or is unable to pay their repair bill. 💰 Fortunately, Ontario law protects businesses in these exact situations. This guide explains how you can secure your unpaid invoices using the Repair and Storage Liens Act (RSLA).
Understanding your rights under the RSLA is critical to maintaining a healthy cash flow. It prevents you from having to immediately write off an unpaid invoice as a bad debt with the CRA. By following the correct legal procedures, you can force the sale of the asset to recover your labour and parts costs. However, if you are a towing or storage provider, your rights are strictly governed by the Towing and Storage Safety and Enforcement Act (TSSEA), which came fully into force on January 1, 2024. Under recent amendments to the RSLA, complete compliance with the TSSEA-including holding a valid operator certificate, charging within registered maximum rates, and obtaining formal customer consent-is a mandatory prerequisite for a valid lien to arise. Without complying with the TSSEA, you legally cannot charge storage fees or enforce an RSLA lien.
Step-by-Step Process in Ontario
Whether your business operates in Toronto, Mississauga, Ottawa, or a smaller rural municipality, the rules under the RSLA remain consistent across the province. Generally, commercial law in Ontario requires you to strictly follow these administrative steps to enforce your lien.
Step 1: Exercise Your Possessory Lien
The easiest and most effective way to guarantee payment is to simply not release the vehicle. Under Ontario law, you have an automatic possessory lien from the exact moment the repair work is completed or the storage period begins. This means you have the absolute legal right to keep the car, truck, or industrial equipment on your commercial lot until the customer pays the invoice in full. Do not hand over the keys if you doubt their ability to pay the final bill. Note that for towing and storage services, this lien only exists if you have strictly met all TSSEA requirements, including obtaining the required customer consent and charging rates that do not exceed your registered maximums.
Step 2: Register a Non-Possessory Lien
Sometimes, a customer may promise to pay later, or they might retrieve the vehicle using a spare key without your permission. If you lose physical possession of the vehicle, you must act quickly. You will need to register a non-possessory lien through the Ontario Personal Property Security Registration (PPSR) system. 📝 Because RSLA registrations are statutorily restricted to a maximum of three years, you must select a registration term between one and three years. You generally have a limited window of time to register this lien before you lose your priority to other secured creditors, like the bank that issued the auto loan.
Step 3: Issue a Notice of Intent to Sell
If the customer still refuses to settle the account, you are not expected to hold the vehicle indefinitely. If the bill remains unpaid for at least 60 days, you can begin the process of selling the vehicle. You must send a formal Notice of Intent to Sell to the vehicle owner, as well as anyone else who has a registered interest on the PPSR. This notice gives all interested parties a final statutory opportunity to pay the debt and reclaim the property.
Step 4: Sell the Vehicle to Recover Costs
If the deadline in your official notice passes and the debt is still outstanding, you have the legal authority to sell the vehicle. You must sell it in a commercially reasonable manner, which typically involves listing it at a public auction or obtaining multiple independent quotes from local dealers. 🔨 The money generated from the sale first pays off your legal fees and storage costs, followed by your original repair bill. Any leftover funds must go to the next secured creditor or back to the original owner.
Possessory vs. Non-Possessory Liens
| Feature | Possessory Lien | Non-Possessory Lien |
|---|---|---|
| Vehicle Location | Stays securely on your commercial property. | Customer has taken the vehicle off-site. |
| Action Required | Simply refuse to hand over the keys. | Must officially register on the provincial PPSR system. |
| Legal Priority | Highest priority over almost all other debts. | Can lose priority if not registered fast enough. |
How Much Does it Cost in Ontario?
Enforcing your rights under the RSLA involves a few distinct administrative and legal costs. Here is a breakdown of what a local business can expect to pay:
- PPSR Registration Fee: Registering a non-possessory lien with the provincial government costs exactly $8.00 CAD per year. Because the RSLA limits registrations to a maximum of three years (with no option for renewal), the total filing fee will range between $8.00 and $24.00 CAD.
- Bailiff Fees: If you need to physically seize the vehicle from the customer’s driveway after registering a non-possessory lien, a licensed Ontario bailiff may charge anywhere from $500 to $1,500 CAD for the recovery.
- Lawyer Fees: If the customer formally disputes the lien and the matter goes to the Superior Court of Justice, hiring a commercial law firm will usually cost between $350 and $700 CAD per hour.
- Storage Costs: You continue to accrue daily storage fees, but these are typically added to the customer’s final bill.
How Long Does the Process Take?
A possessory lien takes effect immediately the moment the repair is finished. However, if you are forced to sell the vehicle to recover your funds, the RSLA mandates that you wait a minimum of 60 days from the day the payment was originally due. After sending the formal Notice of Intent to Sell, you must give the vehicle owner and other creditors an additional 15 days to respond before you can officially complete the sale or auction.
Frequently Asked Questions (FAQ)
Can I keep the customer’s personal belongings inside the car?
No. Your lien only applies to the vehicle itself and the mechanical parts you installed. You must allow the customer to retrieve their personal items, such as a child car seat, clothing, or a laptop, even if the bill is unpaid.
What happens if I charge too much for daily storage?
Storage fees must be commercially reasonable and ideally agreed upon in advance in writing. If a customer feels the fees are extortionate, they can pay the disputed amount into the local courthouse and get their vehicle back immediately while a judge reviews the case.
Do I need a law firm to register an RSLA lien?
While you can register a lien yourself through ServiceOntario or the PPSR portal, it is highly recommended to speak with a local commercial lawyer. A small typographical error on the registration form, such as a wrong VIN, can completely invalidate your legal claim.
Can I report the vehicle as stolen if they drive away without paying?
Generally, this is treated by local police as a civil contract dispute rather than a criminal offence (such as theft over $5,000). The police will likely advise you to pursue a non-possessory lien or take the customer to Small Claims Court.
What happens if the vehicle is worth less than the repair bill?
If the auction proceeds do not cover your entire invoice, you can apply the funds to the balance and then sue the customer in Small Claims Court for the remaining shortfall as an unsecured debt.
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