The existing Ontario Motor Vehicle Dealers Act is set to be repealed and replaced with the Motor Vehicle Dealers Act, 2002, (the “Act”) and its General Regulations. A Code of Ethics has also been provided as a Regulation to the Act. It essentially mirrors the General Regulations but places additional duties on dealers to act with a certain degree of accountability and professionalism. Being familiar with these significant changes to the legislative regulation of dealers and salespeople will ensure compliance when the changes take effect. The effective date of these changes had been set for April 1, 2009, however the Ministry of Small Business and Consumer Services has pushed back the implementation date to January 1, 2010. It is anticipated that during this time, further changes will be made to the legislative scheme in an effort to assist the industry with this transition. Below is a discussion of the highlights of the current version of the new legislation, but should not be considered an exhaustive list of changes. Our firm will continue to monitor the progress of this Act and provide further updates as they become available.

Registration

Every dealer and salesperson, subject to some exemptions, must register with the Ontario Motor Vehicle Industry Council (“OMVIC”) under one of seven classes of licences. Unless notice was provided to OMVIC prior to February 27, 2009, registrants will be deemed general dealers on the implementation date. When current licences need to be renewed, it is at that time the registrant will prove its new class to OMVIC. OMVIC has provided notices to existing registrants explaining the different classes of licences so the class that best reflects their business may be chosen. In addition, all registrant dealers must appoint a “person in charge” who is assigned and accepts responsibility to ensure the dealer complies with the Act and Regulations.

Each registrant dealer has a continuous duty to inform OMVIC of all changes in directors and officers of the corporate dealer, commencement and termination of employment of salespersons, and change of address.

Disclosure

The Act and Regulations place additional disclosure obligations on a dealer with respect to the business and related companies of the dealer and the vehicle’s condition, history and prior usage. The contract for sale or lease of a vehicle must contain certain statements about the rights of the purchaser, and various details about the vehicle itself. A customer may revoke the contract within 90 days of receiving the vehicle if certain information is inaccurate or missing, particularly with respect to:

• odometer issues and distance traveled;
• prior use of vehicle for police, emergency services, taxi, limo or daily rental;
• make, model, trim level and model year; and
• prior salvage or rebuilt vehicles.

This remedy may be exercised whether or not the dealer knew about the breach. A lessee who buys the vehicle at the end of the lease may not use the above revocation right. A customer may still have other remedies after 90 days within the common law, the Consumer Protection Act and the Sale of Goods Act.

When receiving a vehicle on a trade-in, the dealer is responsible for obtaining certain information about the vehicle and its condition. OMVIC has always had the power to inspect a dealer’s premises and records, but these powers have been increased.

There is an increased obligation to keep records of every vehicle that comes into its inventory for a period of at least six years. There are a number of particulars that must be included in an advertisement:

• the full price of a vehicle must be disclosed, including all fees, freight, delivery and inspection fees, levies, and taxes (unless the advertisement says taxes are not included in the price);
• details of any warranty included in the price;
• a statement of prior use if vehicle was used for police, emergency services, taxi, limo or daily rental;
• a statement that the car is used if current or previous model year; and
• the name and telephone number of the dealer, however classified ads can just use the word “Dealer”.

Warranties

A dealer may not sell an extended warranty, or facilitate the sale of an extended warranty, to a purchaser or lessee unless the warranty is insured by an insurer licenced under the Insurance Act, or they have provided an irrevocable letter of credit to the Motor Vehicle Dealers Compensation Fund up to a certain amount. The contract of warranty must disclose similar information about the vehicle as found in the contract of sale or lease, plus particular information about the warranty.

Auctions

The new disclosure obligations are very similar to the current ADESA Auctions Canada policies, and only minor chang- es are required. However there will be changes to the way auctions will be conducted. Auction attendees will be restricted to registered motor vehicle dealers only, no guests will be permitted in the actual or virtual bidding area.

If you would like to discuss this matter further, we would be pleased to review the new requirements with you.

Sarah MacDonald
Business Law Group
Tel: 905.276.0416
E-mail: smacdonald@kmblaw.com

The comments in this newsletter are of a general nature and are not designed to replace professional advice in specific situations. If you would like extra copies of this newsletter, or you know of anyone who would be interested in joining our mailing list, please contact Cheryl Woolcott at (905) 276-9111.