Don’t Make the Classic Mistake
Robert Woodhouse of our Dispute Resolution and Litigation team looks at the legal considerations for potential investors in classic cars.
Investing in classic, vintage, or collector cars is increasing in popularity. Not only do you become the owner of your dream car but there is also potential for lucrative returns when selling on which do not attract capital gains (providing you are not trading). However, the very factors that determine the car’s worth also give rise to potential legal pitfalls and dangers and, as in other markets where considerable sums are changing hands, there are risks.
There are a number of key points that you must consider before purchasing a classic, or vintage, vehicle. For example:
Legal Title to the vehicle
You will need to ensure that the person who purports to own the car does in fact own it and has the right to sell it to you. This may not be easy to ascertain.
Only the legal owner of the car can pass “good title” i.e. ownership, to a purchaser. A “thief” cannot therefore pass good title of a car to you, even if you bought the vehicle in good faith, because they never had good title in the first place. The same applies to someone who unwittingly purchased from a car from the thief and sells on to you. The true, original owner will be entitled to have their car back.
If you are purchasing from a trader it is an implied term of the sale contract that they own the goods in question. If you are dealing with agents or auction houses, check they have the authority to sell the car to you. Review their terms and conditions. If you decide to purchase, ensure that the funds will be passed to the legal owner of the car.
Whoever is selling you the car, as far as you can, check that there is no outstanding finance, security or lien over the vehicle or you may have someone competing for an interest in the car.
Once you have satisfied yourself that the seller has good title to the vehicle, your next task is to make sure you are buying the actual car the seller says you are. Relying solely upon the seller’s representations is risky. The provenance of a classic car largely determines it worth. If you have been misled as to the car’s identity and history, you may end up with good title to the vehicle, but the vehicle is worth a fraction of what you paid for it.
Dual identity and Replicas
Like determining ownership, it is not easy to determine the identity or the history of a vehicle.
Old classics and collectable cars are likely to have been subject to considerable maintenance and restoration over the years. Original parts may have been replaced or the classic may have been broken into many parts and used to rebuild more than one car. As a result you could find another owner may each have claims to have the “original” potentially leading to a “dual identity” claim. Whilst chassis plates are a key feature of a car’s identity they can be faked.
A classic car is likely to have been restored over the years and you should satisfy yourself that work has been carried out properly. Similarly, if you are buying an old car with the view restoring it, be assured that you are not taking on more work than anticipate or the price you pay overall for the vehicle could significantly increase.
What you can do
There are various ways you can limit your exposure to the above risks. You should start by carrying out due diligence on any vehicle you are considering buying in order to verify its identity and market value. This may be more difficult when the car is vintage, and relevant documents may be old, replaced or lost. However, there are various resources open to you such as:
- Request and review all documents relating the car, its service history, logbook, invoices for repairs, old tax discs, and historic sale documents;
- Check the car’s MOT history and mileage on the DVLA website ;
- Note the car’s vehicle identification number (VIN) and ensure it is the same on the car’s current and historic registration documents;
- Obtain a HPI Check Report to investigate whether the car could be stolen, if there is any outstanding finance on the vehicle, and the car’s historic ownership;
- The RAC also offer a service providing basic information. A full check has to be paid for, but an initial enquiry is free (at the time of writing);
- Look for information on the motor vehicle licensing website, such as the car’s first date of registration, engine size etc;
- Join the relevant car owners’ club and make contact with experienced owners;
- Make enquiries of other car enthusiasts on classic car or owners club forums;
- Auction houses may have records of previous sales;
- A search on Google may reveal useful information;
- Instruct professionals to investigate title;
- Ask a specialist mechanic to carry out a check and provide a report on the condition of the car.
Lastly, once you have thoroughly researched the car and made a decision to purchase, ensure that your agreement with the seller is recorded in writing and includes full details of the car and the price paid. If you are paying a significant sum for a car, spending a little money on a properly drafted contract which includes both parties’ rights and remedies if something goes wrong, could be priceless.