Transferring car ownership back to Manitoba?

[DeanOMac]

I need some help figuring out this situation from a legal perspective and since it seems too complex for google, I am turning to CP for your help.

Background on the situation:

- My girlfriend (Calgary resident) is trying to sell her car back to her sister (Winnipeg resident)

- Sister is underwater on the car right now and still owes on the loan she took from the dealer to buy it in the first place

- Sister couldn't afford payments anymore and my girlfriend needed a car, so to avoid defaulting it was agreed my girlfriend would drive the car and make the payments to her sister in the meantime and the loan would remain in her sister's name. In order for my girlfriend to get insurance there had to be a bill of sale, which they made for a buck.

- The arrangement was always temporary and now she is attempting to give the car back. Manitoba registries, public insurance or whoever is the governing body is saying there will be a tax bill depending on the value of the car (and you can't use the $1 amount on the newly completed bill of sale which was made to give the car back to the sister)

Now the purpose of this post isn't to try and avoid a tax bill, although that would be nice, since it was a car being loaned for all intents and purposes, but rather I want to make sure nothing can happen to my girlfriend or her sister from a legal standpoint. Since the car had a large amount left owing on it and the loan is secured by the car, wouldn't the original bill of sale to Alberta, actually be illegal? The dealership likely wouldn't have approved it even if they continued to make the payments and will continue to make the payments to the dealer. This sale is most likely illegal (I would think). Is there any case for some kind of charge against one or both of them? If it was an illegal bill of sale, she shouldn't have been insuring the car in AB obviously and can this lead to any problems? Please note this was all done purely from not knowing (which I know in itself isn't a defense), and all payments have and will continue to be made, I just want to find a way to make it all legit and be rid of the car.

Or would it have been legal and thus they do need to make another transfer and just pay the tax, even though it was a MB to AB to MB car?

[ken0042]

Manitoba has some funky laws on this. It's been 15 years since I did this- but at the time I could not sell my car to my dad for $1. Same tax implications. However I was allowed to gift it to him.

Here's where it gets weird. I seem to recall I could gift it to my dad, but not my mom. My parents cars were in her name, but my dad had to register my car in his name.

I would look up gifting and see what you find.

[sa226]

My reading comprehension is a little low right now, but from what I can tell you have an Alberta registered vehicle that you want to transfer the ownership AND registration over to Manitoba? But because it is family, you are not "Selling" it, just "giving it back"?

The tax thing is true. Manitoba public insurance will charge you retail tax on the highest of the selling price or wholesale value. So even if you sell it to them for 1$ They will still charge you the tax on the wholesale value (only 7% I think, no PST)

I think ken is right though, your best bet is to go the "gifting route"

Car insurance in Manitoba is public, so most of the information you will need can be found on one website. http://www.mpi.mb.ca/

Not the easiest to navigate, but should have the info you need.

[DeanOMac]

Originally Posted by sa226

My reading comprehension is a little low right now, but from what I can tell you have an Alberta registered vehicle that you want to transfer the ownership AND registration over to Manitoba? But because it is family, you are not "Selling" it, just "giving it back"?

The tax thing is true. Manitoba public insurance will charge you retail tax on the highest of the selling price or wholesale value. So even if you sell it to them for 1$ They will still charge you the tax on the wholesale value (only 7% I think, no PST)

I think ken is right though, your best bet is to go the "gifting route"

Car insurance in Manitoba is public, so most of the information you will need can be found on one website. http://www.mpi.mb.ca/

Not the easiest to navigate, but should have the info you need.

Thanks to both of you for the gifting idea, I will explore this. The reason for the novel of the post was just to ensure that my girlfriend can actually gift it back as I am unsure if her sister could legally sell it to her in the first place. Also to clarify that if the car originated in MB it can still be taxed again?

[DownhillGoat]

Originally Posted by DeanOMac

- Sister is underwater on the car right now and still owes on the loan she took from the dealer to buy it in the first place

- Sister couldn't afford payments anymore and my girlfriend needed a car, so to avoid defaulting it was agreed my girlfriend would drive the car and make the payments to her sister in the meantime and the loan would remain in her sister's name.

someone can correct me if I'm wrong, but if the car is collateral for the original loan, and your gf "bought" the car with a lien on it, your gf will be held responsible for the loan if the sister ever defaults.

I realize that this situation is a bit different, but I've always done lien checks on used vehicles for that reason.

[pylon]

Technically the original transaction could be interpreted as a form of a straw deal, which is illegal, and if you read the original loan agreement, there would be a condition in there, allowing the lender to call the loan had they known what was transpiring. In fact, had your girlfriend wrote the car off, there is a very high likely hood, the claim would have been denied. As

A) The insurance company was not properly notified the car had a lienholder.

B) The bank could make the determination, they never would have approved the transfer of title with the outstanding lien, and would have repossessed the car otherwise. And yes, I have seen this happen before. I have a client in year 3 of fighting it out with an insurance company.

Essentially, your sisters girlfriend made the determination that her sister, was qualified to care for the banks collateral. Whether she was or not, that is the banks decision to make. And their answer would have been 100 times out of 100... "We would be more than willing to refinance the car in her name, but unfortunately, if she is the primary driver, she will need to re finance the loan in her name or jointly with you.... especially if the car is leaving the province."

On ALL car loans I do now with commercial lenders, there is a third party determination form, where the buyer signs off, acknowledging they are not taking the loan, for the benefit of a third party." Hence, not partaking in an illegal straw deal. If the bank ever caught on to a scenario like this, you would never be able to borrow another nickel from them again.

I know it seems trivial because it is a family member, but your girlfriends sister made a very risky move. I have seen scenarios like these end up in court rooms. It is amazing how blood is thicker than water, but cash is thicker than all else.

I am sure you could sneak this thing under the radar with the gifting scenario, seeing as it is family member to family member. But if it was me, I wouldn't risk it, and would pay the tax on a fair value so as not to raise any red flags... especially if you are only talking about $500 or something.

[pylon]

Originally Posted by kunkstyle

someone can correct me if I'm wrong, but if the car is collateral for the original loan, and your gf "bought" the car with a lien on it, your gf will be held responsible for the loan if the sister ever defaults.

I realize that this situation is a bit different, but I've always done lien checks on used vehicles for that reason.

It depends. If you buy a used vehicle privately, always have the seller hand write, and sign off "As the seller, I guarantee this vehicle to be free of all liens and encumbrances." If a lien shows up, you have a leg to stand on, but in reality, someone pulling that scam, likely won't have the means to be collected from. I would also go as far as to ask to see photo ID from the seller, to make sure they actually are the person on the registration, and not a broker, or a shifty friend. If they say no, that is a huge red flag.

Doing a carproof national lien search, and a Alberta registries search is always the smartest thing to do up front, before any cash changes hands.

edit: You do not need this disclosure on a bill of sale from an AMVIC licensed dealer, as it is assumed, unless stated otherwise, that all vehicles sold by licensed dealers in Alberta, are free of liens.

Also, if the car does have a lien, you are not responsible for the balance on the loan, however, the bank, has a right to recover the car as they would have registered a lien registered under the personal property security act. So essentially, you would be out whatever you paid for it, and would have to fight it out with the person that sold it to you in court.

[Deegee]

Originally Posted by kunkstyle

someone can correct me if I'm wrong, but if the car is collateral for the original loan, and your gf "bought" the car with a lien on it, your gf will be held responsible for the loan if the sister ever defaults.

I realize that this situation is a bit different, but I've always done lien checks on used vehicles for that reason.

All you need to do is look at who signed the promissory note note. Whoever signed the note is 100% responsible. You can't sue people who aren't on the promissory note. In DeanOMac's case, his girlfriend is still responsible for the loan, even though she sold the car to DeanOMac's sister. I'm not sure the sale is valid if DeanOMac's sister didn't disclose the lien information on the bill of sale.

That being said, depending on the dollar amounts, the financial institution might not do anything provided they are getting paid. Sometimes the cost of realizing on the security doesn't make it worth it.

If there is $3,000 left owing to satisfy the lien and the person sales it to you for $4,000 you simply do a draft made payable to the seller and the fi jointly. I would look to verify the lien will be satisfied, however.

[DeanOMac]

So this went through last month. Basically we opted to pay the taxes and do it the regular route, rather than gift it. The Manitoba registries registered it no problem. All a relief as I thought there may be some backlash from the initial transfer to AB.

Thanks to everyone for your input, it helped in making the final decision.