by LANCE FORMWALT

Dealing with customer issues certainly falls into this category. I often hear from dealers that have the following problems:

• My customer won’ t pay the repair bill.

• We quoted a customer for work on a machine but the customer won’ t approve the work and just left the machine here.

• We sold a customer equipment through an auction and the customer won’ t pick it up.

It’ s a safe bet that these types of situations occur with relative frequency at each of your dealerships. The frustrating part is that you either ignore the problem and let the equipment take up space at your dealership or your staff spends an inordinate amount of time trying to contact the customer and figuring out how to address the problem.

Customer Non-Payment / Repair Liens

The biggest economic headache with these types of situations involves non-payment for service work. In these situations, most states have some type of law that gives dealers a lien against the equipment that at least allows you to hold on to the equipment until you are

30 EQUIPMENT DEALER MAGAZINE • U. S. EDITION

The problem with using the concept of“ abandonment” is that there is no black and white rule to say when equipment has been abandoned and, if there is a dispute, there must be proof that the customer intended to abandon the equipment. As a result, treating a customer’ s equipment as abandoned will often be viewed as a calculated risk.

paid and, in some cases, allows you to sell the equipment and recover your bill from the proceeds of the sale. While this can be a good tool to help encourage collections from problem customers, actually using this process can pose a number of challenges, including the following:

• The laws often require several steps, including notices, advertising, waiting periods and filing legal action, before the equipment can be sold.

• Since the laws are very specialized, forms often don’ t exist to use the process and government officials that need to be involved are often not aware of the laws.

• Under certain laws, proceeds from the sale of the equipment may only be used to recover your bill and not your costs of complying with the law.

• Some laws allow the customer’ s finance company to claim priority over your claim, meaning that there might not be enough( or any) proceeds to cover your bill.

The upshot of these challenges is that once dealers understand the process involved and analyze the situation, it becomes apparent that following these processes may only make sense for repair bills of a significant size with equipment that is worth a lot more than the bill itself.

Using“ Abandonment” as an Alternative

For situations where it doesn’ t make sense to go through the hoops and formalities of using the repair lien process or to address situations with other equipment that has simply been left at your dealership, you should evaluate whether you can treat the equipment as abandoned. The concept of“ abandonment” is a legal concept that is often only established in a state by judge-made law arising from lawsuits. In general, if the owner of the equipment has abandoned the equipment, the legal consequence is the application of a sort of“ finder’ s keeper’ s” rule that allows the person possessing the equipment to claim ownership. As a result, if your dealership is in possession of equipment that has been abandoned by your customer, this would allow you to treat it as your own, including the right to sell it and keep the proceeds( or simply junk it if appropriate).

LANCE FORMWALT is the leader of the Equipment Dealer Group at Seigfreid Bingham, P. C. The firm serves as legal counsel to the North American Equipment Dealers Association and many individual equipment dealers. Lance may be contacted at lancef @ sb-kc. com or 816-265-4106. Also see www. sb-kc. com. This article is intended to provide general recommendations and is not intended to be legal advice. You should always consult your attorney for advice unique to you and your business.

LANCE FORMWALT is the leader of the Equipment Dealer Group at Seigfreid Bingham, P. C.