Collecting past due balances: Executing on a vehicle in Ohio
The vast majority of landlords choose not to pursue their former tenants for unpaid rent, late fees, unpaid utilities, damages to the apartment beyond ordinary wear and tear, and other related charges associated with the tenancy. Most landlords liken such a task to squeezing blood from a stone. Often it is the wiser choice to not pursue the tenant for money owed and to move forward with re-renting the premises to a more reliable tenant. In what will likley be a six part series, I am going to outline the various collection procedures available to landlords who do choose to pursue tenants for money owed and highlight the pros and cons of each. Today’s topic is executing upon a vehicle.
Initial hurdles to executing upon a vehicle
To collect upon a tenant for items such as unpaid rent, late fees, unpaid utility bills, damages to the rental unit beyond ordinary wear and tear, etc., the tenant must either be currently employed, have a bank account with money in it, own a home, or own a vehicle. It is often the case that a tenant who has been evicted for nonpayment of rent no longer has a job. A tenant may have a bank account but that account may have little or no money in it. It is rare for a tenant to own a home although I have run into some situations where a tenant has moved out of an apartment because he/she was buying a home. Most tenants do have a car; however. This may be your only means as a landlord to collect upon what is owed to you. As with any legal process, it pays to do your homework first to determine if executing upon a vehicle is a good idea. Doing your homework often involves an analysis as to the costs associated with the process and the potential return.
After obtaining a judgment against the tenant for money damages owed and after waiting for an appeal period to expire, you’ll need to determine the year, make and model of the tenant’s vehicle as well as the license plate number and vin number. You will then need to find out whether anyone else owns the vehicle with the tenant and whether there are any liens on the vehicle such as an auto loan. If someone else jointly owns the vehicle with the tenant they will be able to claim an interest in the vehicle. If there is an outstanding loan on the vehicle, the bank or financing company’s interest will be ahead of your interest in the vehicle.
In addition, the debtor/former tenant can claim an exemption of $3,675.00 in one motor vehicle under Ohio law (ORC 2329.66). This means that if you attach a debtor’s vehicle and the bailiff later auctions it off, up to $3,675.00 goes to the debtor right off the top. The debtor has a right to the first $3,675.00 of the sale proceeds under Ohio law. It also means that a creditor cannot execute upon a vehicle that is worth $3,675.00 or less.
Vehicle execution process
For example, let’s say you have a judgment against the debtor/former tenant for $5,000.00. You attach the car with a lien and the bailiff seizes the former tenant’s car. There’s an outstanding loan on the vehicle of $1,800.00. The bailiff auctions off the vehicle and it sells for $7,500.00. How are those proceeds distributed?
First, the former tenant would get his $3,675.00 pursuant to the statutory exemption. Next, any costs associated with the sale, storage and towing would be paid. Courts require up to $800-$900 from the landlord to be put on deposit to cover these costs. Expect sales, storage and towing costs to approximate this deposit amount. $800-$900 of the sale will go towards those costs. This means that your deposit made with the court to execute upon the vehicle will be refunded to you.
The bank holding the note on the vehicle would be paid next – $1,800.00. After these deductions, that leaves $1,125.00 remaining to go towards your judgment of $5,000.00. You can quickly see that the tenant needs to own a valuable car and needs to own it outright, free and clear of any liens, for you to collect upon all or most of your judgment through vehicle execution.
Vehicle execution is also an expensive process as it is not uncommon to have to deposit $800-$900 with the court to begin the process, as mentioned above. If the bailiff is unsuccessful in serving the former tenant, then you will get this deposit back. Generally, a bailiff will try for six months to obtain the tenant’s vehicle. After six months, the landlord would need to re-initiate the process through a new filing with the court. If the bailiff is successful in obtaining the vehicle then the landlord would get his deposit back if the vehicle sold for more than the tenant’s exemption amount of $3,675.00.
If the tenant’s vehicle is seized by the bailiff, the tenant will have a right to request a hearing to assert any defenses to the action. This hearing will take place prior to the vehicle being sold.
Despite its high costs and difficulty in obtaining, a vehicle execution may serve as a motivating tool to get the tenant to pay something towards what is owed. A landlord could propose to stop the process in return for payment(s) towards what is owed.
Other forms of collecting upon a judgment include bank account garnishment, vehicle execution, placing a lien on real estate, and attachment of cash drawer funds. My next article on the collection process will delve into bank account garnishments.