9.13 Unlawful Dealer Activities

9.13 Unlawful Dealer Activities

Vehicle Code Section 11713 contains a long list of activities that are unlawful for licensed dealers. This is one of the most important sections of the Vehicle Code for you to know, because violations of Section 11713 are grounds for suspension or revocation of your dealer license. Let’s go through the major categories.

Abandonment: Abandoning your established place of business — closing up shop and disappearing without notifying DMV, your customers, or your surety company — is grounds for immediate license action. If you’re going out of business, there’s a proper process. Follow it.

Failure to maintain bond: As we discussed in Section 3, your bond must be continuously maintained. A lapse in bond coverage automatically suspends your license. Don’t let this happen.

Failure to notify DMV of change of ownership: If your dealership changes ownership — whether through sale, partnership changes, or corporate restructuring — DMV must be notified. A change of ownership typically requires a new license application.

Seller’s permit suspension: Your seller’s permit from the CDTFA must be active. If your seller’s permit is suspended (usually for failure to file or pay sales tax), your dealer license is also in jeopardy.

Lending dealer supplies: Lending your dealer plates, report of sale forms, or other dealer-specific supplies to another person is unlawful. Each dealer must use their own supplies.

Unlicensed location sales: Conducting sales from any location other than your licensed place of business (main or approved branch) without a temporary branch permit is unlawful.

Failure to pay ASF: Failing to remit Administrative Service Fees collected from buyers is a violation — you collected the money, it must be forwarded.

Deposits without vehicle present: Taking a deposit on a vehicle that doesn’t exist or that you don’t have and can’t reasonably obtain is unlawful.

Dishonored checks: Issuing checks that bounce — to customers, to DMV, to auction houses, to other dealers — is an unlawful act that reflects on your fitness to hold a dealer license.

Failure to transfer title: Once you sell a vehicle, you must complete and submit the title transfer within the required timeframe. Holding titles hostage — or simply failing to process the paperwork — harms consumers and is one of the most common reasons for dealer discipline.

Employing unlicensed salespersons: Every person at your dealership who negotiates or participates in vehicle sales must hold a valid California salesperson license. Employing unlicensed salespeople is your responsibility, not theirs.