You have the right to retain a client’s property if the client fails to settle your account… if you comply with the necessary requirements of course. Clients have requested us to focus on these requirements. In the motor industry, one would mostly deal with the category of retention rights known as the so-called “debtor – creditor” retention rights. These retention rights vest when the owner of property owes money to the retention right holder in terms of a contract i.e. to repair a motor vehicle.
The requirements for a lawful retention of such property are as follows:
- there must be a debt owing to the holder of the retention right;
- the owner and the holder of the right must be parties to a contract in terms of which the debt is owed;
- the debt must be owed by the owner of the property to the holder of the right;
- the debt must be in respect of the specific property retained; and
- the holder of the right must also hold and be in control of the property.
The purpose of a retention right is to enforce the payment of a debt by the owner of the property to the holder of the right. In other words, the property acts as security for the payment of the debt by the owner of the property to the holder of the retention right. Although a holder of a retention right may refuse to return the property to the property owner, the holder of the right may not dispose of the property i.e. sell the property to a third party in order to recover the debt. Such property may only be sold on auction by a sheriff acting in terms of a warrant of execution issued subsequent to a valid judgment obtained against the owner of the property by the holder of the retention right. This means that you first have to take legal action against the owner before you will be able to recover the debt.
To refuse to return the property upon a tender of sufficient alternative security for the payment of the debt is unlawful. On many occasions it has transpired that an attorney acting on behalf of a debtor offers to set security in the form of money equal to the amount owed by his client and requests the dealer to release his client’s car, just for the dealer to refuse and end up on the losing side of an urgent court application. When alternative security is offered in the form of money in return for the release of a vehicle, it is advisable to release the vehicle as the court will in most instances find that the purpose of retaining the vehicle is being met by the monetary security while the owner of the car is still in the position to use the vehicle. However, prior to returning the property, one must ensure that the alternative security is real and that it is received.
Condition of contract:
Utilising a retention right properly is dependant on entering into a properly drafted contract with the property owner prior to rendering any services to such owner. Such a contract should, amongst other things, contain the correct details of the property owner, an address for the service of court process and the exact services for which he will be charged as well as the amount which he will be charged. It is advisable that you approach an attorney to assist you with such a contract.
Barnard Incorporated is a firm of attorneys situated in Centurion, Pretoria.