Seize or Sue – Contract vs True Lease

August 26, 2019 11:28 pm Published by 3 Comments

“Q: I just came across a response to a question you had answered some years back regarding seize or sue.
I have just finished paying off the remainder of a car loan because the dealer repossessed the car then sued me and was awarded $250/mth for 5 years.

I missed 3 payments and they told me they would re write the lease  for the remainder and put the missed payments on the back end. I re-signed the new paperwork but defaulted again. they repossessed the vehicle. Took me to court. I got a lawyer and they said because its a finance they have a right to take the vehicle sell it and then sue me for the difference of the loan. Is  this correct? I feel frustrated to see that BC is a seize or sale province rule but I have been paying for years for a vehicle that was seized and sold. 

Is there any recourse?”




From your response is there two car loans?  You mentioned one vehicle being seize, then a court judgement for payment and then defaulted on another vehicle loan?   Did they rewrite the shortfall into another vehicle loan?

Like you, I am also confused with respect to the court decision.  We don’t offer legal advice, so if you are represented by counsel, I suggest you call back and ask the question of your lawyer.  Based on all the cases I have been involved with, the only issue I see that can cause people grief in this area is

  1. Is the vehicle a “consumer good” i.e. was it used as a business asset
  2. whether or not it was a leased vehicle and it met the definition of a ‘true lease”

Firstly, the seize or sue law only applies to consumer goods.  Is it possible that the goods were “business assets”?  Did you own a business and use the vehicles for business purposes?  It will depend on the nature of the loan agreement.  I suggest that you take a look into the loan agreement and make sure its in your name and not in the name of a business.

And, second, there is, or can be, issues with respect to leased vehicles.  This area of the law can be confusing and convoluted.

In summary, ( will go into more detail below) there are some cases where the lease is viewed as a “contract” to use the vehicle, defined as a “true lease” , while other types of leases are used to allow someone to purchase a vehicle over time and the lease contract itself is just simply a financing statement to allow the vehicle to be purchased over time – this can be called a “financial lease” or “capital lease”.

Contract – True Lease

This would occur in cases where you were simply paying for use of the vehicle over a period of time and the vehicle was never your personal asset.   If title did not pass to you (as in, you were not really ever going to own the vehicle) then the seize or sue rules do not apply. The “shortfall” if any if you were to default on your payments,  would be your commitment on the contract to lease the vehicle and you would be subject to “damages” for the default under the lease contract.

Security Lease – “Purchase over Time” – sometimes referred to as a “conditional sales contract”

In these cases, the lease is an intent to “sell” or transfer ownership of the personal who has leased that vehicle (‘lessor”) over time and thus the PPSA of BC will apply.  Which means that under these Security Leases, the section of the PPSA that deals with default applies, and so the “seize or sue” section applies.  In these cases, if the lease payments are not made, and the secured party or “lessor” chooses to seize the vehicle, they will not be able to sue the debtor/lessor for any shortfall upon the subsequent sale of the vehicle as compared to what was required under the lease commitments. (shortfall on the lease)

OK, so now we can get into some of the nitty gritty as to how to figure out which kind of lease do you have –

So, to state again, a TRUE lease is where the seize or sue will NOT apply, and

a SECURITY lease is where the PPSA seize or sue will apply

In the case of 357581 B.C. Ltd. v. Karras, Hons Denton writes:

 The process of characterization is guided by numerous factors. In his article at 285, Professor Cuming refers to a helpful list of factors derived from American jurisprudence. The factors that support a finding that the lease is a security lease include:

  1. whether there was an option to purchase for a nominal sum;
  2. whether there was a provision in the lease granting the lessee an equity or property interest in the equipment;
  3. whether the nature of the lessor in and Pacific lease LTD business was to act as a financing agency;
  4. whether the lessee paid a sales tax incident to acquisition of the equipment;
  5. whether the lessee paid all other taxes incident to ownership of the equipment;
  6. whether the lessee was responsible for comprehensive insurance on the equipment;
  7. whether the lessee was required to pay any and all licence fees for operation of the equipment and to maintain the equipment at his expense;
  8. whether the agreement placed the entire risk of loss upon the lessee;
  9. whether the agreement included a clause permitting the lessor to accelerate the payment of rent upon default of the lessee and granted remedies similar to those of a mortgagee;
  10. whether the equipment subject to the agreement was selected by the lessee and purchased by the lessor for this specific lease;
  11. whether the lessee was required to pay a substantial security deposit in order to obtain the equipment;
  12. whether there was a default provision in the lease inordinately favourable to the lessor;
  13. whether there was a provision in the lease for liquidated damages;
  14. whether there was a provision disclaiming warranties of fitness and/or merchantability on the part of the lessor; and
  15. whether the aggregate rentals approximate the value or purchase price of the equipment.

Another relevant factor is the term of the lease. A lease for a short period generally indicates a TRUE lease, since the leased property will have a significant residual useful life upon expiration of the lease and can be leased again or sold by the lessor (or secured party)

Further, Hon. Denton indicates that as adopted in Re Crown Cartridge Corp., Debtor (1962), 220 F. Supp. 914, by Croake D.J. from the decision of Referee Asa S. Herzog:

“The test in determining whether an agreement is a true lease or a conditional sale (Security Lease)  is whether the option to purchase at the end of the lease term is for a substantial sum or a nominal amount. … If the purchase price bears a resemblance to the fair market price of the property, then the rental payments were in fact designated to be in compensation for the use of the property and the option is recognized as a real one. On the other hand, where the price of the option to purchase is substantially less than the fair market value of the leased equipment, the lease will be construed as a mere cover for an agreement of conditional sale.

The critical issue in every case is the intention of the parties and this depends upon the facts of the case. In Re Speedrack Ltd. (1980), 1 P.P.S.A.C. 109, 33 C.B.R. (S.) 209, 11 B.L.R. 220, for example, the facts led to the conclusion that the lease was a security for the financing of the ultimate purchase of the subject-matter, and the failure to register a financing statement left the security interest unperfected and subordinate to the interest of the trustee in bankruptcy.”

So, each case is different and clearly based on the contract that was signed.  In this case, I once again suggest that you review your details with your lawyer to make sure you understand what your options are and how to make sure they considered the PPSA seize or sue legislations.



See Also:

Seize or Sue in BC – PPSA rules

Seize or Sue – Secured Loans in BC


  1. Dane says:

    So I have 2018 ram st
    And I traded in another vehicle for it
    So it left me 63380 loan and when they called me we talked and I had to remind them it’s sieze or sue and than they said they would be talking to there lawyers and that was about 3 mo ths or so ago and they said I would be receiving a letter from them and I haven’t heard from them what do I do in the meantime

    • colleen says:

      Hi Dane. You have two options. If you continue to want the truck, you really don’t have to do anything. It’s very likely that will take action one way or the other, as a $63,000 loan would be sufficient for them. If you no longer want to keep the vehicle, I have heard that sometimes people call the creditor back and inform them that the vehicle is on the street and is no longer insured, or the plates will be removed. If a vehicle is on the street without insurance or plates, it will be towed by the police, and any tow or impound charges will have to be paid by the creditor if they want to retrieve the truck. You don’t want to actually cancel the insurance or remove the plates, as they may sue, but you simply need to inform the creditor that it’s something that you may do. Anyway, that’s an option if you don’t feel like keeping the truck. If you do, just keep driving it and wait for them to contact you.

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