Dealer Sales and Home Delivery of Vehicles During COVID-19 Shutdowns

March 26, 2020

Sara Decatur Judge is a partner at Burns & Levinson who specializes in helping clients solve problems. She represents businesses and individuals in a variety of industries including the automotive, distributing, and franchise industries. Sara has extensive experience representing clients in a wide range of commercial matters in federal, state and appellate courts. A significant portion of Sara’s practice is devoted to representing motor vehicle dealers in trade regulatory matters throughout Massachusetts and New England. Her dealer clients rely on her for sound advice and counsel with respect to franchise matters, including dealer appointments, dealer protests, dealer relocations, dealer buy/sell agreements, and dealership terminations. She can be reached at sjudge@burnslev.com or at 617.345.3211.

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On March 23, 2020, Massachusetts Governor Charlie Baker issued an Order requiring all non-essential businesses to close their “brick and mortar” business operations effective at noon on Tuesday, March 24, 2020. Although automotive service and parts sales have been designated as “essential” business (and therefore can remain open at this time), dealership showrooms must be closed to employees and the public. Under the Governor’s March 23rd Order, no sales of motor vehicles can occur at the dealership until after April 7, 2020.

Nothing in the Order limits or restricts the online sale of vehicles. However, if your dealership is going to engage in online sales and home delivery of vehicles, you need to be aware of 3 important legal steps you should take before selling to customers off site:

Step #1: Change your contracts. Dealers engaging in online sales and home delivery must change their sales contracts to provide off-site customers with a 3 day statutory right of rescission under M.G.L. c. 93, § 48.

Under Massachusetts law, an agreement for the sale of goods in excess of $25 which is consummated at a location other than a seller’s place of business automatically provides the customer with a 3 day right of rescission. The 3 day period for the customer to cancel the sale does not begin until the dealership provides the customer with the appropriate disclosures mandated by statute pursuant to M.G.L. c. 93, § 48.

If you do not provide your off-site customers with the appropriate disclaimer language, your customer could come back weeks (and perhaps years) later trying to unwind the sale. You can avoid this problem by making some simple revisions to your contracts and providing your customers with the proper Notice of Cancellation form. If you want to engage in remote selling, please contact us and we can provide you with the appropriate disclaimers and forms.

Step #2: Check your lending agreements. Your lending agreements with the various banks you work with likely require you to immediately assign the loan to the bank after the transaction has been finalized. If a dealer immediately assigns the paper before the 3 day rescission period has expired, it will be the dealer’s responsibility to pay off the loan as well as any interest that has accrued on the loan. If you have questions about your lending agreements, please contact us.

Step #3: Hold on to that trade. If your customers change their minds during the 3 day rescission period, they will be expecting you to return their trade-in vehicles to fully unwind the deal. Your sales paperwork should properly address how trade-in vehicles will be handled. There should be clear language to provide for reimbursement to the dealer for any monies advanced to pay off existing liens on trade-in vehicles. The paperwork should provide the dealer with a security interest in the trade-in vehicle until all advanced monies have been reimbursed.

We are here to help you navigate these steps. If you have any questions about compliance issues in light of Governor Baker’s shutdown Order, please do not hesitate to contact The Automotive Group at Burns & Levinson.