Franchise/Manufacturer Relations

Governor Wolf recently signed Act 59 of 2018 which amends the Pennsylvania Board of Vehicles Act (“BOVA”). The amendments to BOVA are effective on August 27, 2018 and significantly enhance the protections provided to Pennsylvania new car and truck dealers. The significant enhancements to BOVA are outlined below and continue to help level the playing field between new car and truck dealers and their manufacturers.

Vehicle Recalls.
Act 59 provides compensation to dealers in the event of certain vehicle recalls. In addition to requiring manufacturers to compensate its same line make new vehicle dealers for all labor and parts required to perform recall repairs, there is also compensation available where the dealer is unable to repair the vehicle within thirty (30) days and the manufacturer has issued a “stop sale order” or a “do not drive order” on the vehicle. In that event, the manufacturer is required to compensate the dealer at a prorated rate of at least 1.5% of the value of the vehicle per month. The right to compensation begins thirty (30) days after the date on which the stop sale order or do not drive order was provided to the dealer.

Act 59 provides that the value of a used vehicle shall be the average trade-in vehicle as indicated in an independent third-party guide. Any claim for reimbursement will be treated the same as a warranty reimbursement claim and therefore must be paid or denied within thirty (30) days after submittal of the claim. A manufacturer does have the right to compensate its dealers under a different program if that program provides compensation equal or greater than that provided under BOVA. There are several other requirements that should be considered but this enhancement to BOVA provides a statutory process to secure compensation.

Dealers should note that the existence of any open, unremedied recalls must be disclosed to a retail purchaser. The dealer should provide the purchaser with a copy of a report obtained from the Internet website safercar.gov. If the dealer does so, it will be deemed to have satisfied this requirement. In the event that a dealer fails to do this (whether a new or used vehicle dealer), there is a maximum fine of $1,000.00 for multiple offenses.

Limits on Facility Modification Requirement.
Over the last 10 to 15 years, facility modification requirements by manufacturers have been a sore point for dealers. Act 59 now limits the ability of a manufacturer to require the expansion, construction or significant modification of facilities within 10 years after the date that the facility had been constructed or any significant image, upgrade or remodeling had occurred. This provision also applies to any successor dealer who has been approved by the manufacturer. A manufacturer may still continue any programs currently in existence, provide facility assistance payments or provide reimbursement for certain cost of making improvements including purchases of goods, signage or an image element.

Temporary Licensure.
Recently, it has become more difficult for dealers to secure a dealer license. Significant delays have been encountered which has caused disruption to a dealer’s business. Act 59 now provides that a temporary permit may be issued to a new vehicle dealer in order to operate. The temporary permit expires at the end of 45 days from the date of closing and allows the dealer to submit after closing such items as a franchise approval letter, telephone business line information, certificate of occupancy, and the lease or deed for the real property. Each of these items has been difficult to obtain (if not impossible) prior to closing and has in some cases significantly delayed the issuance of a permanent license. This temporary permit will allow the new vehicle dealer to immediately engage in the sale and lease of new and used motor vehicles. In order to avoid issues with the issuance of the temporary permit, it is recommended that the dealer submit the necessary paperwork 30 to 60 days in advance of the anticipated closing.

In the event you are in a situation where you need to invoke one or more of these protections, we strongly recommend that you consult with experienced dealer counsel.