Pre-estimated liquidated damages, online licensing kits and licence renewals - Motor vehicle industry bulletin #1
Upcoming changes to pre-estimated liquidated damages
From 1 January 2022, the maximum amount of pre-estimated liquidated damages that a dealer may charge will reduce from 15 per cent to five per cent.
16 June 2020
Motor vehicle dealers
Contract cancellations - charging pre-estimated liquidated damages
Consumer Protection has received a number of enquiries from consumers about the amount of pre-estimated liquidated damages a licensed motor vehicle dealer can charge in situations where consumers have signed a contract to buy a motor vehicle but then need to break the contract. Due to the current COVID-19 pandemic these situations are expected to increase as many consumers find themselves in financial hardship.
The Commissioner for Consumer Protection would like to remind dealers of the requirements when faced with a break of contract situation. A dealer may seek up to 15 per cent of the purchase price as pre-estimated liquidated damages if the contract is lawfully terminated as a result of a breach by the purchaser.
Even though 15 per cent is the maximum amount that can be charged, dealers should not be applying it as the default position. Any fee charged has to be an honest and reasonable assessment of losses the dealer is likely to incur as a result of the deal not proceeding.
Returning the full deposit
A dealer cannot make a pre-estimated liquidated damages claim and must return the full deposit if:
- a contract is terminated because the dealer has breached any of their commitments;
- a consumer withdraws their offer at any time before the dealer accepts it; or
- a consumer can’t meet their contractual obligations despite taking all reasonable steps to do so, such as if they’re unable to obtain finance for a purchase subject to it.
Consumer Protection is encouraging dealers and customers to negotiate in good faith in situations where the contract to purchase cannot be met due to COVID-19.
If a consumer feels the amount of pre-estimated liquidated damages sought by a dealer is excessive, they can lodge a complaint with Consumer Protection for investigation.
Dealers must consider the financial loss they will suffer as a result of the sale not proceeding. Dealers must:
- be able to justify the charge as reasonable; and
- demonstrate how the liquidated damages have been calculated by linking the claim to actual loss.
Motor vehicle dealers - online licensing kit
An easy to follow, step-by-step licensing kit has been created and is now available online. The motor vehicle dealers’ licensing kit page also includes a printable flyer entitled “Buying or selling motor vehicles? You may need a licence!”
Motor vehicle repairers
Look for the tick
Motor vehicle repairers are encouraged to display the yellow “Licensed Repairer Tick” logo to show consumers that they are appropriately licensed.
Licensed repairers can access the logo by visiting Consumer Protection’s page, “Licensed repairer tick campaign – information for repairers”.
Motor vehicle repairers - online licensing kit
An easy to follow, step-by-step licensing kit has been created and is now available online. The motor vehicle repairers’ licensing kit and the printable flyer “Motor vehicle repair business licence or motor vehicle repairer’s certificate: what’s the difference?” provide easy to follow information for motor vehicle repairers.
Motor vehicle repairer businesses – licence renewals
Consumer Protection has seen an alarming increase in the number of motor vehicle repair businesses that are failing to renew their licences.
Changes to the renewal notification process mean that renewal reminders will only be sent via email and SMS. Incomplete applications will no longer be accepted.
It is imperative that email address and mobile phone details are kept up-to-date and that you submit a fully completed renewal application, containing all the required supporting documents. You can update your contact details via the Consumer Protection website.
It should be noted that there is no ‘grace period’ for repair business licence renewals. When the licence expires…it expires. You should submit your application with required supporting documents one to two months before expiry to allow processing time.
If you have a renewal due within the next three months, or your business licence has expired, you should submit your application without delay. The penalty for operating a repair business without a valid business licence is $50,000.
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