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.

Having recently advised clients in commercial transactions where one or more parties lacked legal capacity, we were reminded of the essential role of Durable General Powers of Attorney in an estate plan. Though none of us wants to think about ourselves or our older family members losing mental capacity, we have to accept that it does happen. When the family matriarch can no longer make sound business decisions she needs to rely on a substitute decision maker to manage her interests. Without advance planning to appoint an Agent under a power of attorney, the only solution may be to petition the local court to declare the matriarch incapacitated and appoint a person or a financial institution as guardian. That’s a time-consuming and potentially expensive process involving family doctors, lawyers and a court hearing. When the time comes to sell a business interest or real estate, the guardian will have to seek separate court approval, resulting in more delay and more expense.

A Durable General Power of Attorney (“DGPOA”) can in most cases, avoid that cost and delay. Under a DGPOA, a person (the “Principal”) appoints one or more other persons as “Agent” to exercise certain powers on behalf of the Principal relating to financial and business matters, all for the benefit of the Principal. Crucially, the DGPOA is effective after the Principal lacks legal capacity. If and when the Principal loses capacity or the willingness to conduct financial or business dealing, the Agent steps in to assist or make decisions for the Principal.

Every Dealer and every owner of corporate stock or other equity interests in a dealership entity should have a DGPOA. An Agent acting under a DGPOA has the discretionary authority to vote the stock to approve mergers and acquisitions, sell real estate and manage other dealership matters without court approval. By making an early decision about who should step in if necessary, the Principal executing a DGPOA saves valuable time and the very real costs of working through a guardianship later on.

In 2014, Pennsylvania enacted significant changes to the law governing Powers of Attorney which changes became effective January 1, 2015. We advise our auto dealer and other business clients on the inclusion of effective and flexible DGPOAs in their succession plans. We encourage clients to review existing documents and can assist in determining if revisions are needed.

Questions involving DGPOAs in particular or business succession planning in general may be directed to any member of McNees’ Auto Dealer Practice Group.

Surely, a vehicle dealership cannot imagine functioning without its inspection licenses. Yet, in the past year I have seen dozens of state inspection licenses (safety and emission) have suspensions imposed for sticker security concerns. Part of the reason this happens is because a first violation of inspection sticker security is a warning, so often it is not seen as a serious threat to a license. However, when that second violation occurs, the penalty is a three-month suspension of the inspection license. Now everyone is at attention.

In my many years of practicing law, I have never seen PennDOT as aggressive with sticker security issues as they are of late. If you have not done so, now would be an excellent time to review your sticker security obligations and practices, to hopefully avoid even the first offense for sticker security concerns. The law requires licensed inspection stations to do the following relative to sticker security:

  • A record must be kept of every inspection sticker issued – the sticker number issued for a vehicle should be noted both on the customer repair order and in the station’s inspection log (MV-431).
  • Retain certificate of inspection requisition forms for each campaign – retain these for a minimum of three years.
  • Upon receipt of stickers from PennDOT, audit the order against what was received. Report any errors, no matter how slight, to PennDOT’s Vehicle Control Division.
  • Retain the old sticker when replacing a sticker – typically, this will still be affixed to the portion of the windshield cut out when replacing the windshield. The Quality Assurance Officer (“QAO”) will ask to see these old stickers during each audit visit. We recommend retaining these under lock and key so that they are easily available when the QAO conducts the station audit.
  • All inspection certificates and temporary inspection approval indicators must be kept under lock and key in a safe place.
  • Retain all unused certificates of inspection; they will be reviewed during the QAO audit.

During a QAO audit, the station must be able to account for every sticker it was issued. If a station cannot do this, the high likelihood is that PennDOT will assert a sticker security violation. To ensure the highest level of sticker security compliance possible, we recommend the following steps:

  1. Retain all inspection stickers (unused, current campaign, voided, replaced) in a locked safe, accessible only by several people, typically management level or service advisors.
  2. Require technicians to request a sticker only upon completion of an inspection and provide technicians with only one sticker at a time.
  3. Audit records routinely, preferably every day but no less than once per week, to ensure that all stickers can be accounted for and that the records of all stickers issued are complete.
  4. Retain sticker requisition forms and sticker order receipts under lock and key.
  5. Audit all stickers received, to be sure you received what was ordered and not less than or more than was ordered. Report any concerns regarding stickers received (or not received) to PennDOT’s Vehicle Control Division immediately.
  6. Report any concerns regarding missing stickers or sticker security generally to your QAO upon discovery.
  7. In the event any stickers go missing, we recommend an immediate internal investigation be conducted. If it is believed stickers have been stolen, law enforcement should be contacted – retain all police and internal investigation reports.

You cannot be too vigilant with inspection sticker security. Even doing so, you may have stickers go missing or for which you cannot account during an audit. However, the likelihood of that happening is lessened with good accountability on the front end, which can also mitigate penalties in the event there is a breakdown in sticker security.