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The following information is
provided to inform registrants
about best practices and should
not be construed as a legal
opinion. You are encouraged to
review the relevant sections of
the Motor Vehicle Dealers Act,
2002 ("the Act") and its
regulations and to consult with
your lawyer if you have any
questions.
For the purpose of this
document, a retail consignment is
any agreement between a motor
vehicle dealer (“the consignee”)
and a person (“the consignor”)
who is not a registered dealer
whereby the consignor provides a
motor vehicle they own for the
purpose of resale by the dealer.
The Consignment Agreement
Sections 45 and 46 of the
Regulations to the Act set out
what a dealer is required to
include in a consignment
agreement with a consignor who is
not a registered dealer. The
following list includes
information required by the
Regulations and information
recommended by OMVIC. For further
information about the consignment
agreement, review sections 45 and
46 of the Regulations at
http://www.e-laws.gov.on.ca.
General
Information: The name,
address and contact information
of the dealer and the consignor
Vehicle
Information: A
description of the vehicle
including the year, make, model,
colour, body type, stock number
and VIN
Distance Travelled Disclosure:
The odometer reading and distance
travelled (if different). If
distance travelled is unknown, a
disclosure of the actual distance
travelled as of a specified date,
if available OR a disclosure the
actual distance travelled is
substantially higher than what is
shown on the odometer.
Consignment Terms: An
indication of what the consignor
agrees to pay the consignee upon
sale of the vehicle. This could
be a percentage of the sale
price, a flat fee or some
combination. Dealers are required
to provide a breakdown of what
the fee is for e.g. commission,
administration, cleaning,
storage, safety, repairs etc. An
estimate of the selling price and
a minimum selling price must also
be disclosed. Consignment terms
should be initialled by the
consignor. OMVIC also recommends
consignees indicate whether a fee
is payable if the vehicle is not
sold.
Acknowledgement of Trust:
You will be required to open a
trust account in the name of the
“Motor Vehicle Dealers Act 2002”
and to file this information with
OMVIC. The consignment agreement
should disclose of the
consignee’s obligation to hold
all monies received regarding the
consigned vehicle in trust for
the consignor until the purchase
is completed. Specify that this
includes any trade-in allowance
given by the consignee in
connection with the sale of the
consigned vehicle. The consignor
should initial this section. The
“Acknowledgement of Trust” is an
OMVIC recommended section and not
required by regulation. (For
further information, see “Trust
Account” below).
Insurance: The name of
the insurance company, policy
number, expiry date, name of
agent, agent’s phone number.
Warranties: An
indication of whether the
consigned vehicle comes with a
warranty and the warranty
information such as the warranty
name, number of months and/or
kilometres, warranty description
and whether the warranty is
transferrable. A section on
warranties is recommended by
OMVIC but is not required by
regulation.
Lien
Disclosures: An
indication of whether the
consigned vehicle has a lien on
it and the lien details e.g. net
amount and name of creditor. A
“Lien Disclosure” section is
recommended by OMVIC but is not
required by regulation. (For
further information, see “Liens
and Encumbrances” below)
Consignor’s Disclosure:
A list of all the items required
to be disclosed by you under
section 42 of the regulations for
the consignor to review and
disclose required information.
This section should be signed by
the consignor. (For further
information about disclosure,
review Section 42 of the
Regulations at
http://www.e-laws.gov.on.ca)
OMVIC
Disclosure: See section
on Disclosure. The OMVIC
disclosure is recommended by
OMVIC but is not required by
regulation.
Vehicle
Registration: A
disclosure that the consignor is
not required to provide you with
the original signed ownership
until after the vehicle is sold.
(For further information, see
“Vehicle Registration” below)
Termination Date: When
the consignment agreement is
terminated.
Consignor’s & Consignee’s
Acceptance: The
signature of both parties
confirming they agree to enter
into a consignment based on the
terms set out in the consignment
agreement. OMVIC recommends
including a notification to the
consignor they are entitled to
receive a copy of the agreement
immediately after it is signed.
Terms
and Conditions
OMVIC
recommends the consignment
agreement include the following
terms and conditions. Any terms
and conditions are required to be
disclosed in a clear,
comprehensible and prominent
manner.
• When and how
the consignor will be notified
the vehicle has been sold (OMVIC
recommends no more than 2 days
after the sale)
• How long
after the sale the consignor will
get paid (OMVIC recommends no
more than 30 days after the sale)
• Confirmation
from the consignor they have
disclosed all material facts
regarding the history and
condition of the vehicle
• Confirmation
the vehicle will remain
registered to the consignor until
it is sold
• Confirmation
from the consignor they have
ownership and possess the right
to sell the vehicle
• An indication
of what charges will be deducted
from the sale proceeds (e.g. lien
payouts, selling fees,
consignment fees etc.)
• Who will be
responsible for maintaining
insurance on the vehicle (confirm
with your insurance provider)
• Who assumes
risk of loss or damage to the
consigned vehicle while on
consignment (confirm with your
insurance provider) what efforts
the consignee will use to
promote/advertise the consigned
vehicle
• Confirmation
the consignee won’t use the
vehicle for purposes unrelated to
the agreement
• Under what
circumstances the consigned
vehicle may be removed from the
consignee’s registered premises
or confirmation the vehicle will
remain at the registered
premises.
• What happens
if the consigned vehicle is not
sold as of the termination date
and (if any fee applies to the
consignor) the amount of the fee
or how it will be calculated
(e.g. for consignment or storage)
• Under what
circumstances the consignment
agreement can be terminated prior
to the termination date, if any
(e.g. by mutual consent)
• Under what
circumstances (if any) the
consignee will carry out any
repairs, alterations, servicing,
obtaining safety or
reconditioning of the vehicle
(see “While offering a vehicle on
consignment” below)
You
must provide the consignee with a
copy of the consignment agreement
immediately after it is signed.
Liens and Encumbrances
Dealers have an obligation
pursuant to the Sale of Goods Act
to ensure any vehicles they offer
for sale are free of liens or
encumbrances. Accordingly, before
taking any vehicle on
consignment, consignees should:
• Run a lien
check on the vehicle. Section
45(6) of the Regulations to the
Act requires the consignee to use
best efforts to obtain a Used
Vehicle Information Package
(“UVIP”) from the consignor. This
document will show Ontario liens
and brands (e.g. salvage,
rebuilt, irreparable) UVIP will
not show accident history. OMVIC
recommends consignees obtain one
of the more comprehensive vehicle
history reports available
• Have the
consignor confirm (in writing)
whether the vehicle has a lien on
it
• Confirm the
consignor is the owner of the
vehicle by checking their
driver’s license and vehicle
registration
• Ensure any
liens are paid out before the
purchase is completed. Consignees
should deduct the lien amount
from the proceeds the consignor
would be entitled to receive and
pay this amount to the lien
holder from the trust account
immediately after the purchase is
concluded
Disclosure
Dealers have an obligation
under the Consumer Protection Act
to disclose all material facts
about the vehicles they sell.
Dealers must also provide the
buyer with information pursuant
to Section 5 of the Code of
Ethics when trading with another
dealer, or Section 42 of the
Regulations to the Act when
trading with a non-dealer.
This applies equally to any
vehicles sold on consignment. In
order to meet these obligations,
dealers taking vehicles on
consignment should not rely
solely on disclosures made by the
consignor but should perform
their own due diligence to ensure
the proper disclosures are made
to the buyer.
Dealers should take steps to
confirm the quality and condition
of the vehicle before agreeing to
take it on consignment. Dealers
should:
• Obtain
specific written disclosures from
the consignor confirming whether
statements required under Section
42 of the Regulations would apply
to the vehicle
• Perform a
vehicle history search (i.e. in
addition to a UVIP obtained from
the consignor) and have the
vehicle inspected by a qualified
mechanic
• Provide all
relevant information to the buyer
before they enter into an
agreement to purchase the vehicle
Vehicle Registration
The consignee is not
authorized to transfer vehicle
registration out of the
consignor’s name until the
vehicle is sold in accordance
with the consignment agreement.
However, consignees may obtain
the original ownership from the
consignor when the consignment
agreement is entered into.
While offering a vehicle on
consignment
The consignee must ensure the
vehicle is clearly indicated on
their lot as a consigned vehicle.
This can be done by keeping
consigned vehicles in a
separately marked area of the lot
or by putting a sign in each
vehicle. This is required by
Section 45(7) of the Regulations.
In addition, it is recommended
the consignee obtain the
consignor’s prior written consent
to:
• Sell the
vehicle for an amount less than
the Minimum Selling Price
• Use the
consigned vehicle for any other
purpose besides offering it for
sale
• Remove the
consigned vehicle from their
registered premises for more than
24 hours
• Affect any
alterations, repairs, servicing
or reconditioning other than what
is specified in the original
consignment agreement. This
applies whether or not the
consignee intends to charge the
consignor for these services.
This does not apply to repairs to
be made as part of an agreement
with the buyer for which the
consignor will not be responsible
Trust Account
When a consigned vehicle is
sold, section 58(5) of the
Regulations requires the
consignee to “hold the amounts in
trust until the purchase is
concluded”. (Note:
deposits in excess of $10,000
must also be deposited to the
trust account). This means any
payments received from the buyer
must be deposited in the dealer’s
trust account.
Dealers must set up an account
at an institution that is a bank,
a loan or trust corporation, a
credit union or an authorized
foreign bank under Section 2 of
the Bank Act. The name on this
account should contain the words
“Motor Vehicle Dealers Act, 2002
Trust Account” and the registered
name of the dealership. If there
is not enough room for both,
dealers can just use the words
“Trust Account” and their
registered name.
When a consigned vehicle is sold
The consignee should promptly
notify the consignor—no more than
2 days after the vehicle is sold.
Section 48(5) requires monies be
held in trust “until the purchase
is concluded”. Accordingly, the
consignor should be paid promptly
out of the trust account.
Consignees should pay the
consignor no later than 30 days
after the vehicle is sold
regardless of whether or not the
purchaser has paid in full.
Section 45(8) of the Regulations
also require the consignee to
make “best efforts to ensure the
consignor and the purchaser of
the motor vehicle promptly
receive a copy of the sales
contract”.
Trade ins
As a result of a consignment
arrangement, the consignor is
entitled to receive the proceeds
of the sale of their consignment
vehicle (including any trade-in
allowances given by the consignee
to the purchaser) less any
amounts disclosed to the
consignor in the consignment
agreement (e.g. lien payouts,
consignment fees, sale fees)
Accordingly, any trade-in vehicle
or the proceeds from their sale
should be treated as trust assets
to the extent necessary to ensure
the dealer can meet its
obligations to the consignor.
Consignment Records
Consignment records, including
trust account statements and
monthly reconciliations must be
maintained at the dealer’s
location in accordance with the
Act. Section 60 of the Highway
Traffic Act also requires that
dealers enter consigned vehicles
into their garage register. It is
also recommended dealers maintain
a separate file for each
consignment containing all
documentation relating to the
consigned vehicle (including but
not limited to lien searches,
UVIPs, vehicle history searches,
repair/service records,
consignment agreement, condition
reports, insurance information,
warranties, copy of vehicle
registration and consignor’s
driver’s license, bill of sale
and payment information).
OMVIC Disclosure
Please note the following is
an OMVIC-recommended disclosure
statement and is not required by
regulation
ATTENTION -
In case of any concerns with this
consignment agreement, you should
first contact the consignee. If
concerns persist, you may contact
the Ontario Motor Vehicle
Industry Council as they
administrative authority
responsible for administering the
Motor Vehicle Dealers Act,
2002. You may be eligible
for compensation from the Motor
Vehicle Dealers Compensation Fund
if you suffer a financial loss
from this consignment and the
consignee is unable or unwilling
to make good on the loss. You may
have additional rights at law.
Please contact OMVIC at
1-800-943-6002 or by email at
omvic@omvic.on.ca.
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