Michael Ford (post until Oct. 31/19)
Licensing

Dealers must do due diligence, disclose recall information

In light of massive recalls related to defective Takata airbags and Volkswagen diesel software, dealers need to be aware that they are required to disclose a vehicle’s past-use, history or condition to a purchaser or lessee, says Toronto licensing and compliance lawyer Anar Dewshi.

The Globe and Mail reports a worldwide recall of faulty airbags made by Japan’s Takata Corp. includes more than 1.5 million vehicles in Canada, as well as some Honda Civic, Chrysler, BMW and Ford products. Meanwhile, CBC reports that Volkswagen is in the process of recalling 11 million vehicles with software that turns off emissions controls when the car is being driven, although the timetable for a Canadian recall is unclear and dependent on the approval of regulators.

With so many affected cars on the market, what are the requirements for dealers?

“Unless there is a ‘stop sale’ or ‘stop driving’ order issued, a dealer can still sell a car that is subject to a recall,” explains Dewshi, principal of Dewshi Law Practice. “However, there are still disclosure requirements under the Motor Vehicle Dealers Act (MVDA).”

The Ontario Motor Vehicle Industry Council (OMVIC), which regulates and monitors the activities of registered motor vehicle dealers and protects the rights of consumers, suggests serious issues of vehicle safety meet the threshold of “material fact” and should be disclosed in writing on the bill of sale.

While the answer to this question could ultimately rest with the courts, OMVIC’s position is that if the manufacturer deems the problem serious enough to issue a safety recall, that problem is likely to be a material fact to a consumer,” OMVIC management states.

“Bottom line is there is an obligation on the dealer to provide disclosure, even if the car is being sold ‘as-is,’” Dewshi tells AdvocateDaily.com. “What is interesting is disclosure requirements are fairly broad and requires a fair amount of due diligence on the part of the dealer.”

She says dealers are also recommended to tell the customer to register their vehicle with the manufacturer as soon as possible to ensure that the outstanding recall (and future ones) will be brought to their attention.

Dewshi points to OMVIC’s website, which has a helpful webpage on safety recalls. The site provides links so dealers can conduct VIN-specific recall searches.

She notes that if a registered dealer does not follow the disclosure requirements as set out in the MVDA, there can be be a range of disciplinary actions taken, including a fine, loss of license or jail time.

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