Friends and Lovers: Before You Lend Out Your Car...

“Neither a borrower nor a lender be” (Shakespeare)

This is a case of a “love relationship” gone wrong but the principles of vehicle ownership apply to any situation in which you lend a motor vehicle to anyone else.

A widely-held misconception is that if you are the registered owner of a car, it is yours and you are the owner. Not so, as a recent High Court judgment aptly illustrates -


The registered owner unable to reclaim “her” car 

• In what must at the time have seemed like a straightforward agreement between two people “in a love relationship”, a woman agreed to lend her lover a vehicle which she bought from a finance company under a loan agreement.

• They had agreed verbally that he could use the vehicle for his personal use and would repay her for loan instalments, insurance, licencing, servicing, traffic fines and the like.
  
  
• When the relationship soured, the woman asked the Court for an order returning the vehicle to her as owner. 
  
  
• Although there was no dispute that she was indeed registered as owner of the vehicle, the Court dismissed her application on the basis that, whilst possession of a vehicle’s registration papers is prima facie (“at first view”) proof of ownership, it is never conclusive proof of ownership. Nor is any change of ownership required to be registered for transfer to take place. So in this case the registration papers did not prove ownership, the actual owner being the finance company.
  
  
• This is different to the position with land, where registration of ownership in the Deeds Office proves ownership and is necessary for transfer of ownership. That no doubt is the origin of the myth that being registered as the owner of a car proves that you are the owner - an incorrect and dangerous assumption.
  
  
• The woman was accordingly not the owner of the vehicle, rather the finance house was the owner in terms of the lease agreement which provided that it retained ownership until all amounts due under the agreement had been paid in full.
  
  
• End result - the ex-lover keeps the car, for now at least.

Lessons for lending out cars…

• Should you decide to lend out your car, make sure to do it under a written agreement - the parties in this case were lucky that they could agree on the terms of their verbal agreement as our law reports are replete with bitter and expensive litigation over what everyone said and who agreed to what verbally.
  
  
• Include a term spelling out clearly your rights to recover possession of the vehicle. The woman in this case would have been in a far stronger position if the parties had agreed that, even if the man held up his end of the bargain to pay for all the loan instalments and other expenses, the woman still retained the right to reclaim the vehicle if their relationship ended (she still wouldn’t have sued as owner, just to enforce the agreement). 
  
  
• For life partners and cohabiting couples this is yet another reminder that there is no such thing as a “common law marriage” in our law. There are no automatic marital or other rights attaching to your relationship and applicable when the relationship ends, so entering into a full cohabitation agreement is the only way to safeguard both your and your partner’s financial and personal rights.