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HOW TO HAVE A SUCCESSFUL (AND VIOLATION-FREE) VSF INSPECTION

HOW TO HAVE A SUCCESSFUL (AND VIOLATION-FREE) VSF INSPECTION

By Brian Edward Walters, Attorney at Law

            VSF inspections are triggered by one of two events. Either it is just time for your periodic inspection (which is required at least once every two years) or an inspection can be the result of a complaint filed against your vehicle storage facility at TDLR. Regardless of the cause of the inspection, there are several rather simple things you can do to properly prepare for a VSF inspection.

            First, be aware of when your “every two years” inspection is coming up. You may not receive notice from TDLR of when you will be inspected, but you can make a fairly good estimate of approximately when it will occur based on your last inspection date. For example, if it has been 18 months since your last inspection, the odds are just about certain that your inspection will occur in the next 6 months.

            Second, look at what TDLR uses when they inspect your facility. A VSF inspection checklist is available on TDLR’s website. As of Aug 1, 2019, it was located at this web address: https://www.tdlr.texas.gov/towing/forms/vsfchecklist.pdf. While many VSFs do not utilize this document, it is effectively you being given the answers to part of an examination that you know you will have to take. Why any person would choose not to study and review the TDLR VSF Inspection checklist is a mystery, but it happens. We strongly recommend that you conduct a personal inspection using the checklist – it will help you not only familiarize yourself with the VSF inspection process, but it will shed light on areas where you may find that you have problems. If those problems are capable of being fixed before the inspection, you will have saved yourself thousands of dollars in administrative fines.

            Third, know where your documents and records are and be absolutely certain that they are complete. If you store your records off-site, you should be certain that those off-site records will be easy to locate and bring to your VSF. If you store records on site, you should ensure that you have met the minimum information and document retention requirements under Texas law (if you have questions on what is required and which documents to keep, please see our record retention and information articles on that subject for VSFs).

            Fourth, remember that an inspector is not a lawyer and may not be the end-all authority on towing and storage laws in Texas. We have heard many complaints from towing companies and vehicle storage facilities alike that sound like this, “The inspector was out here last time and said that my signs were fine!” That may well be the case, but you should always remember that it is a prosecutor (a licensed attorney at TLDR), not the inspector, who makes the final determination on when to prosecute a violation and when a violation will be alleged to have occurred.

            Fifth, be polite and cooperative. Some inspectors are professional and, from time to time, some are less than professional. However, regardless of how the inspector behaves, you should always maintain a cool and professional approach to inspections. This is, after all, an examination of your business that the state has given you a license to perform. That license, like all other licenses, can be forfeited if the state determines you have failed to follow the law or the rules. If a violation is found, that does not mean that you have already lost. It simply means that a non-lawyer representative of the state believes, based on his or her personal opinion and knowledge, that your vehicle storage facility failed to follow the law. It is certainly not a finding of guilt or liability.

            Finally, know the law! Even if you are not a lawyer, operating a vehicle storage facility in Texas requires a good deal of understanding in relation to both the Texas Vehicle Storage Facility Act, the Texas Towing and Booting Act, and the administrative rules that govern vehicle storage facilities and towing companies. To a certain degree, an inspection will be a test of your knowledge of those laws. If you do not know what you need to write down, what documents you need to keep, or what you need to do to charge a fee for a particular service, you will certainly find yourself on the receiving end of a TDLR administrative violation. These laws are available on TDLR’s website and a few other websites on the internet. A Google search for these terms, “Texas Vehicle Storage Facility Act” or “Texas Towing and Booting Act” will likely get you what you need. Read them in full and then read them again. They may be confusing and written in legalese, but as a licensee, you have the responsibility to comply with those laws and rules.

            This article can best be summarized as follows: Be Prepared and Be Professional! VSF inspections are a frequent source of administrative violations on everything from sign lettering to sign content to broken windows on vehicles stored in the yard to fence height in the yard. Inspectors have a great deal of latitude in conducting an inspection and will very likely dig into documents and areas with the intent of finding a violation (even if it is difficult to fine or only a minor violation). Prosecutors are not present during the inspection process and must base their decisions on the information they receive from inspectors. The most successful (i.e. the “no violation”) inspections will be at VSFs that maintain a strict level of diligence when it comes to maintaining their yard (protecting vehicles), keep all required documents, document and saving all required vehicle information, and being prepared ahead of time for inspections. If you can implement office systems that help your employees to maintain compliance year-round, you will dramatically reduce the need for of pre-inspection preparation and find that administrative violations are few and far between.

JUSTIFICATION FOR ADOPTION OF ADMINISTRATIVE RULES VEHICLE STORAGE FACILITIES 16 TAC, Chapter 85, amendments §85.722

JUSTIFICATION FOR ADOPTION OF ADMINISTRATIVE RULES
VEHICLE STORAGE FACILITIES
16 TAC, Chapter 85, amendments §85.722

The Texas Commission of Licensing and Regulation (Commission) adopts amendments to an existing rule at 16 Texas Administrative Code (TAC), Chapter 85, §85.722, regarding the Vehicle Storage Facilities Program, without changes to the proposed text as published in the August 16, 2019, issue of the Texas Register (44 TexReg 4281). The adopted changes are referred to herein as “adopted rules.”

EXPLANATION OF AND JUSTIFICATION FOR THE RULES

The adopted rules under 16 TAC, Chapter 85 implement Texas Occupations Code, Chapter 2303, relating to Vehicle Storage Facilities.

The adopted rules implement House Bill (HB) 1140 of the 86^th Legislature (2019 Regular Session), which amends Occupations Code, Chapter 2303, by: (1) allowing the Commission to biennially adjust daily storage fees and impoundment fees at vehicle storage facilities (VSF) based on changes in the Consumer Price Index for All Urban Consumers (CPI-U); and (2) removing the authority of the Commission to set fees that VSF operators may charge for environmental hazards. The adopted rules are necessary to create consistency with the amended statutory language and to implement the biennial adjustment of fees for 2019.

SECTION-BY-SECTION SUMMARY

The adopted rules amend §85.722(d) by: (1) reflecting the amended statutory language setting the daily storage fee amount that VSF operators may charge; (2) adding new Subpart (d)(1) to include the daily storage fee amounts resulting from the 2019 biennial adjustment; and (3) renumbering the remaining subparts accordingly.

The adopted rules amend §85.722(e) by: (1) reflecting the amended statutory language setting the impoundment fee amount that VSF operators may charge; and (2) including the impoundment fee amount resulting from the 2019 biennial adjustment.

The adopted rules repeal §85.722(g) to remove the environmental hazard fee and renumber the remaining subsection accordingly.

PUBLIC COMMENTS

The Texas Department of Licensing and Regulation (Department) drafted and distributed the proposed rules to persons internal and external to the agency. The proposed rules were published in the August 16, 2019, issue of the Texas Register (44 TexReg 4281). The deadline for public comments was September 16, 2019. The Department received comments from one interested party on the proposed rules during the 30-day public comment period. The public comment is summarized below.

Comment: TDLR received one comment during the public comment period. The comment was authored by an insurance company which expressed its support of the proposed amendments. The comment further expressed concern that the insurance company often receives what it considers to be “inflated charges” relating to gate fees, admin fees, and tow bills.

Department Response: The Department thanks the commenter for submitting its support of the proposed amendments. It also notes that the commenter did not submit any suggested edits or propose any alternative language.

The Department also thanks the commenter for expressing its concerns about what it perceives to be “inflated charges” relating to various aspects of towing and storage fees. However, HB 1140 does not address towing fees and limits itself to storage fees relating to impound and daily storage rates at Vehicle Storage Facilities and to the elimination of an Environmental Fee. The Department, therefore, cannot provide a response to any portion of the comment that does not relate directly to HB 1140 or the fees which are subject to the proposed amendments.

The Department did not make any changes to the proposed rules in response to this comment.

ADVISORY BOARD RECOMMENDATIONS AND COMMISSION ACTION

The Towing and Storage Advisory Board (Advisory Board) met on September 23, 2019, to discuss the proposed rule and the comment received. The Advisory Board recommended adopting the proposed rule without changes. At its meeting on October 1, 2019, the Commission adopted the proposed rules without changes as recommended by the Advisory Board.

STATUTORY AUTHORITY

The amendments are adopted under Texas Occupations Code, Chapters 51 and Chapter 2303, which authorize the Texas Commission of Licensing and Regulation, the Department’s governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department.

The statutory provisions affected by the adopted rules are those set forth in Texas Occupations Code, Chapters 51 and Chapter 2303. No other statutes, articles, or codes are affected by the proposed rules.

§ 85.722. Responsibilities of Licensee--Storage Fees and Other Charges.

(a) For the purposes of this section, "VSF" includes a garage, parking lot, or other facility that is:

(1) owned by a governmental entity; and

(2) used to store or park at least 10 vehicles each year.

(b) The fees outlined in this section have precedence over any conflicting municipal ordinance or charter provision.

(c) Notification fee.

(1) A VSF may not charge a vehicle owner or authorized representative more than $50 for notification under these rules. If a notification must be published, and the actual cost of publication exceeds 50% of the notification fee, the VSF may recover the additional amount of the cost of publication. The publication fee is in addition to the notification fee.

(2) If a vehicle is removed by the vehicle owner or authorized representative within 24 hours after the date the VSF receives the vehicle, notification is not required by these rules.

(3) If a vehicle is removed by the vehicle owner or authorized representative before notification is sent or within 24 hours from the time VSF receives the vehicle, the VSF may not charge a notification fee to the vehicle owner.

(d) Daily storage fee. A VSF may charge $20 for each day or part of a day for storage of a vehicle that is 25 feet or less in length and may charge $35 for each day or part of a day for storage of a vehicle that exceeds 25 feet in length, subject to a biennial adjustment as set forth in Texas Occupations Code §2303.1552(b)(1).

(1) Per the 2019 biennial adjustment, the maximum amount that a VSF may charge for a daily storage fee is as follows:

(A) Vehicle that is 25 feet or less in length: $20.64.

(B) Vehicle that exceeds 25 feet in length: $36.11.

(2) A daily storage fee may be charged for any part of the day, except that a daily storage fee may not be charged for more than one day if the vehicle remains at the VSF less than 12 hours. In this paragraph a day is considered to begin and end at midnight.

(3) A VSF that has accepted into storage a vehicle registered in this state shall not charge for more than five days of storage fees until a notice, as prescribed in §85.703 of these rules, is mailed or published.

(4) A VSF that has accepted into storage a vehicle not registered in Texas shall not charge for more than five days of storage before the date the request for owner information is sent to the appropriate governmental entity or to the private entity authorized by that governmental entity to obtain title, registration, and lienholder information using a single vehicle identification inquiry.

(5) A VSF shall charge a daily storage fee after notice, as prescribed in §85.703, is mailed or published for each day or portion of a day the vehicle is in storage until the vehicle is removed and all accrued charges are paid.

(e) Impoundment fee. A VSF may charge a vehicle owner or authorized representative an impoundment fee of $20, subject to a biennial adjustment as set forth in Texas Occupations Code §2303.1552(b)(1). Per the 2019 biennial adjustment, the maximum amount that a VSF may charge for an impoundment fee is $20.64. If the VSF charges a fee for impoundment, the written bill for services must specify the exact services performed for that fee and the dates those services were performed.

(f) Governmental or law enforcement fees. A VSF may collect from a vehicle owner or authorized representative any fee that must be paid to a law enforcement agency, the agency's authorized agent, or a governmental entity.

(g) Additional fees. A VSF may not charge additional fees related to the storage of a vehicle other than fees authorized by these rules or a nonconsent-towing fee authorized by Texas Occupations Code, §2308.2065.

REVIEW BY AGENCY COUNSEL

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State, on October 8, 2019.

Brad Bowman
General Counsel
Texas Department of Licensing and Regulation

Judicial Foreclosure of VSF Liens on Low-Value Vehicles

JUDICIAL FORECLOSURE OF VSF LIENS ON LOW-VALUE VEHICLES

THE METHOD OF LAST RESORT

By Brian Edward Walters, Attorney at Law

            Sometimes it feels as though Texas Department of Motor Vehicles offices have different standards for when you can foreclose on a vehicle storage facility lien depending on who is in the office and what time it is. We have heard stories about requiring different levels of documentation, including things like the certified mail tag, certified mail tag with stamp from the post office, the return receipt, the return receipt signed by the former owner, and even requirements that the DMV send out a notice to the owner before a title will be issued.

These differing paperwork requirements can quickly create a situation where the VSF cannot foreclose on its lien and sell a stored vehicle even if the VSF has done everything that is legally required. Bureaucracy at its finest, folks! So, what options do you have when your VSF has a vehicle that is abandoned, ready for sale, but you cannot get title through the usual channels? The answer depends both on the value of the vehicle and on how much money you must invest in the process. This article discusses the process for vehicles that are valued at or less than ten thousand dollars.

            The standard process for VSF lien foreclosure is what is known as a “non-judicial” foreclosure. Simply stated, that term means that you have avoided taking a trip to the courthouse in order to execute the VSF’s lien rights on the vehicle. It is similar in many respects to a foreclosure on real estate where the property is sold at the courthouse steps. In both cases, title to property transfers hands in a “lack of payment” situation without anyone going before a judge. There is, however, another method of foreclosing on the VSF lien known as the “judicial foreclosure.”

            Judicial foreclosure involves filing a lawsuit with the appropriate court and asking that court for an order granting the foreclosure of the lien. Which court you file in will depend on many factors, each of which is very important to getting an enforceable court order. It should be noted that this is not the same process as suing for title to a vehicle (which is only appropriate in a district court or, in some cases, a county court-at-law). Also, as previously stated, this discussion is limited to low-value vehicles (less than $10,000 in value).

            Justice courts (formerly known as “small claims courts”) are courts of very limited jurisdiction. Typically, they only hear claims involving $10,000 or less in controversy, whether in a lawsuit, eviction, or debt claims. However, justice courts are also allowed to hear cases where a person seeks foreclosure of a lien on personal property (i.e. not real estate) that is valued at $10,000 or less. In many cases involving damaged or abandoned vehicles, the vehicles will be within that range, giving justice courts the ability to grant the foreclosure request.

            Despite justice courts being able to grant the foreclosure, the process is far from simple. Rules about where to file, who to include in the lawsuit, and how to get the judgment are complex. It is almost always necessary to hire a lawyer for a judicial foreclosure because if you fail to include a necessary party to the proceeding, the court order will not be worth the paper on which it is written. Additionally, the parties involved (whether the justice of the peace, state agencies, or their attorneys and paralegals) will have questions about the proceeding that you will probably not be able to answer. That being the case, it is strongly recommended that you lawyer up for this process.

            Despite this being a bit of a law-intensive process, it is a good solution under many circumstances. First, if you have a vehicle that can’t be sold or junked without a title, it will simply waste away on your property forever. Second, if the DMV in your area is requiring paperwork you cannot get, you are stuck with that vehicle. Third, if there was someone left off the notice letters, you typically cannot go back and “re-notice” them because the delivery timelines have passed. In each of these situations, judicial foreclosure is a good last resort.

            While judicial foreclosure costs more in time and money than non-judicial foreclosure, it can be a handy tool under the right circumstances. It will require an attorney who is familiar with towing and storage laws as well as one who can educate the judge and, likely, opposing counsel on the subject. Finally, like any lawsuit, it absolutely must be done the right way the first time or it will be a fruitless endeavor. If, however, you can get the right person on the job (and typically do this for a few vehicles to get a better price), you can end up with title to vehicles that were otherwise stuck in legal limbo.

No State Income Tax - Vote Yes for Proposition 4 in Texas

On November 5^th, voters will go to the polls to vote on proposed constitutional amendments that were passed by the Texas Legislature.  In order to be the most informed on each proposal, you can access information at the following link. 

https://lrl.texas.gov/scanned/Constitutional_Amendments/amendments86_tlc_2019-11-05.pdf

There are 10 propositions that contain the language that will be on the ballot, the easy to understand analyses, and then comments from supporters and opponents.  Although this is a long document, it reads very quickly.  We believe it is a very good tool to  help you decide how you would like to vote.

We want to bring Proposition 4 to your immediate attention.  The way the ballot language is written, is confusing.  This proposal would amend the Texas Constitution to prohibit the Legislature from imposing a state income tax on individuals.  If you are opposed to a state income tax, you will want to vote YES on this measure.  Information regarding this ballot proposal is in page 19 of the document.

At Southwest Tow Operators, we believe it is important to keep you informed on what is upcoming.  If you have any questions about any of the 10 propositions, please feel free to contact us.