Madison Marcus | Defect Notices - Second-hand Motor Vehicles

Defect Notices: the legal requirements of motor dealers in the sale of second-hand motor vehicles

Mark Yum  | 9 June 2016

Motor vehicle dealers that knowingly sell defective second-hand motor vehicles or sell second-hand motor vehicles subject of “band-aid” repairs are in breach of the Motor Dealers and Repairers Act of 2013 and Motor Dealers and Repairers Regulation 2014.

Defect Notices
Pursuant to the Motor Dealers and Repairers Act 2013 (the Act), motor dealers that knowingly sell second-hand vehicles that have defects are required by law to provide a dealer’s notice that contains a defect notice. A defect notice specifying the defects and condition of the motor vehicle, together with a current inspection report must be available at the time the motor vehicle is offered or displayed for sale.

If the motor dealer fails to provide a defect notice, and the vehicle is sold, the motor dealer is obliged at their own expense to repair or make good the motor vehicle to a reasonable condition with regard to the vehicles age.

If the dealer has sold vehicles which have had band-aid repairs (such as the use of additives to hide major defects to a motor), the dealer is then considered to be committing an offence under the Act and Regulation. This is still the case even if the repairs were not undertaken by the dealer.

Dealers that have committed an offence under the provisions of the Act and Regulation may be subject of a maximum fine of $2,200 per offence.

Compliance
Second-hand motor dealers are responsible for the motor vehicles they sell, and must guarantee that consumers get what they pay for. Under the Act and Regulation, a failure to do this is considered unjust conduct and can lead to fines and repair orders.

To ensure that dealers are not in contravention of the Act and Regulation, motor dealers must undertake reasonable diligence in the inspection of second-hand vehicles. Upon inspection, should the dealer become aware of defects, these must be specified in the motor vehicle’s defect notice.

Exclusion of Dealer Guarantees
Motor dealers are not required to provide a dealer guarantee and will avoid liability with respect to the repair or making good of second hand motor vehicles if they comply with requirements under the Act. This means providing a dealer’s notice containing a defect notice and current inspection report at the time the motor vehicle is offered or displayed for sale.

If the motor dealer can show that it took all reasonable steps to find out the true particulars of a motor vehicle, and the particulars as per the defect notice were, to the best of the dealer’s knowledge, true, the motor dealer will not be in breach of the Act and Regulation. It is therefore a commercial decision for motor dealers to decide whether to pay the upfront costs associated with the preparation of the inspection report or decide not to do this and risk the liability for the repair or make good of the motor vehicle.

For any questions regarding the information contained in this article or if you have any questions in relation to motor industry matters, please contact Mark Yum at mark.yum@madisonmarcus.co or call +61 2 8022 1222.

A printable version of this article can be viewed here.

Madison Marcus Law Firm produced this article. It is intended to provide general information in summary form on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.

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