Taking counsel: Making sense of title and registration in car sales

  • 2007-05-02
  • Liene Abramovica [Kronbergs & Cukste]
Many are aware of the impending new taxes on luxury cars and automobiles with large engines. But not everyone may be aware of a fundamental aspect of automobile purchase and sale transactions 's that is, at what point is an automobile actually transferred from a seller to a purchaser?

The transportation registration regulations provide that a vehicle in Latvia not previously registered must be registered with the Road Traffic Safety Department. The initial registration requirement is set out clearly in the law. But the law is silent on the transfer of the vehicle from the first registrant to the subsequent registrant. In fact, it is not stated under the law that a subsequent owner of the vehicle must have the vehicle registered in his or her name.
This gives rise to some interesting potential outcomes. What happens, for example, when the title to a vehicle is transferred to a subsequent owner, but for registration purposes it remains registered with the seller and not the subsequent owner?
In such cases there may be undesirable consequences to the seller even after transfer of possession to the buyer if the seller remains the party registered with the authorities as the owner of the motor vehicle.

For example, if the subsequent owner is not yet registered as the owner, and such subsequent owner commits a traffic violation which is ascertained by a fixed device recording, for example, the speed and plates of the vehicle, the fine will likely be imposed upon the registrant under the Road Safety Department (CSDD) pursuant to subsection 6 of section 42.2 and subsection 8 of section 43.6 of the Road Traffic Law, even if the registrant is the seller (who has failed to de-register himself).
Crucially, failure to pay the fine bars the motor vehicle from the annual technical inspection. And failure to have an up-to-date technical inspection is also subject to penalties.

Is registration in general a reliable indicia of title? It depends upon what the object is. If it is an automobile, then the answer may be "no." If the object is real estate, then the answer is in most cases "yes." The Civil Law states that property rights to immoveable real estate are obtained when the title to the real estate is registered in the Landbook. (Civil Law s. 1477.) Such an approach helps third parties understand who owns the real estate.
But in transport vehicle registration, the foregoing principle does not apply. The Road Transportation law provides that one of the necessary documents for registration of transfer of title to a vehicle is a document verifying the ownership of the vehicle. Such a requirement in and of itself shows that the title to the vehicle passes prior to, and is a precondition to, registration of title to the vehicle. (Subsections 1 and 4 of section 11 of the Road Safety Law)

Accordingly, it can be concluded that titles to motor vehicles pass in accordance with the general principles of transfer of title contained in the Latvian civil law. And basically that means that title passes to the subsequent owner as of delivery. This is clearly so in the case of a gifting of title, with title passing upon delivery (section 1917 of the Civil Law). In the case of a purchase and sale, title is also transferred upon delivery, with the caveat that it is paid for or the term for payment has been extended (Section 2034 of the Civil Law).
The implications here are simply that a third party should not rely solely upon the registration of a vehicle as proof of the registrant's title to the vehicle. The seller is responsible about his rights to sell the automobile and the purchaser will rely on it. In case of any disputes the Latvian civil law shall be applied. And it is also advisable for both the purchaser and seller to ensure that transfer of title is registered.

It may not serve as iron-clad proof of ownership, but it will prevent the seller from being vicariously liable for any fines incurred by the subsequent unregistered owner.

Liene Abramovica is an associate at Kronbergs & Cukste, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms which includes Teder, Glikman & Partnerid in Estonia and Jurevicius, Balciunas & Bartkus in Lithuania, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.