When a borrower applies for a loan, most lenders require the borrower to pledge an asset as security for the repayment of the loan, i.e. collateral. In the event the borrower defaults, usually by failing to make loan payments, a secured creditor has a right to take possession of the collateral. § 679.609, Fla. Stat. The quickest and cheapest way for a secured creditor to take possession of the collateral is by self-help repossession. In Florida, a secured creditor may use self-help repossession without going to court, provided it does not “breach the peace.” § 679.609(2)(b), Fla. Stat. For a secured creditor to properly use self-help repossession, it needs to know what it means to “breach the peace,” and what the consequences are if it does breach the peace.
What Does it Mean to “Breach the Peace”?
Florida courts have established a two-part test to determine if a secured creditor “breached the peace” within the meaning of Section 679.609(2)(b) of the Florida Statutes: “(1) whether there was entry by the creditor upon the debtor’s premises; and (2) whether the debtor or one acting on his behalf consented to the entry and repossession.” Northside Motors of Fla., Inc. v. Brinkley, 282 So. 2d 617, 624 (Fla. 1973).
Florida courts have also found a secured creditor breached the peace, if the secured creditor damaged the debtor’s property during repossession efforts, or used force to repossess the collateral. Quest v. Barnett Bank of Pensacola, 397 So. 2d 1020, 1024 (Fla. 1st DCA 1981); Northside Motors of Fla., Inc., 282 So. 2d at 625 (Fla. 1973).
1. Entry Upon the Debtor’s Premises
Determining whether a secured creditor must enter “upon the debtor’s premises” to repossess the collateral is likely obvious. If the collateral is located, for example, in the debtor’s home, garage, enclosed structure, or business premises, then it is “upon the debtor’s premises.”
2. Debtor’s Consent to the Entry and Repossession
Determining whether the secured creditor has consent to enter and take possession of the collateral is more complex. Florida courts have held that “the debtor’s consent, freely given, legitimates any entry,” but “the debtor’s physical objection bars repossession even from a public street.” Quest, 397 So. 2d at 1023 (emphasis added).
Secured creditors must be mindful of whether the debtor’s consent is “freely given.” Consent will not be considered freely given, if the secured creditor obtains consent by fraud, deceit, or force. For example, a secured creditor cannot repossess a car by promising to extend future credit, or by promising to repair the car. Id.
Express permission is always required for a secured creditor to enter the debtor’s home, garage, business, or any enclosed structure. Id. However, repossession efforts from the debtor’s yard, driveway, carport, and the public street—absent the debtor’s express objection—may be fair game. For example, a secured creditor can probably tow a vehicle from the debtor’s driveway without incurring liability, unless the debtor objects. Id; Marine Midland Bank-Central v. Cote, 351 So. 2d 750, 752, (Fla. 1st DCA 1977) (“when a vehicle is covered by a valid security agreement providing the creditor has a right to repossess the vehicle upon default, repossession of the vehicle from the debtor’s enclosed carport without threat or use of force is not trespass, regardless of whether the security agreement specifically authorizes entry upon the debtor’s premises”).
What Happens if a Secured Creditor Breaches the Peace?
A secured creditor that breaches the peace will have to compensate the debtor for any injury or loss that resulted from the repossession efforts. For example, a secured creditor may be liable for: trespass, which is the unauthorized entry onto another’s property; assault, which includes injury to any person during repossession efforts; conversion, which is the wrongful or unlawful taking of another’s personal property; and/or negligence. If the secured creditor used force to repossess the collateral, it may also be liable to the debtor for punitive damages, which are awarded to punish the secured creditor for their actions.
Other Considerations to Keep in Mind
The duty of a secured creditor to take possession without breaching the peace cannot be waived or varied by the debtor. § 679.602(6), Fla. Stat. For example, the loan agreement may provide that the secured creditor may “enter land in possession of the debtor, for the purpose of taking possession of the collateral and removing it from the land.” However, this type of contractual provision does not give the secured creditor consent to enter the debtor’s home, garage, business, or other enclosed structure, to repossess the collateral. Secured creditors must always be mindful of the “breach of peace” requirement, regardless of whether the loan agreement specifically authorizes entry upon the debtor’s premises. § 679.609(2)(b), Fla. Stat.; Marine Midland Bank-Central, 351 So. 2d at 752.
In addition, secured creditors have a non-delegable duty to ensure that repossession efforts do not breach the peace. This means that if a secured creditor hires a third party to repossess collateral, and the third party breaches the peace in its efforts, the secured creditor will be liable for any damages caused by the third party. Sammons v. Broward Bank, 599 So. 2d 1018, 1020 (Fla. 4th DCA 1992).
Best Practices to Avoid Liability
Secured creditors should:
- Get legal advice to help determine if exercising self-help repossession is even possible without breaching the peace;
- Confirm that the debtor is in default in accordance with the loan documents;
- Ask the debtor to voluntarily bring you the collateral;
- Always get express permission from the debtor to enter and take possession of the collateral, if the collateral is in the debtor’s home, business, garage, or any enclosed structure;
- Immediately stop self-help possession efforts, if the debtor says no or physically objects to the repossession; and
- Document everything, including every interaction with the debtor, a detailed description of repossession efforts taken, and the dates and times of every interaction and repossession effort, along with picture or video evidence.
Secured creditors should not:
- Damage any of the debtor’s property, or the collateral, during repossession efforts;
- Use force, threat, deceit, or break and enter to take possession of the collateral;
- Continue repossession efforts if the debtor is hostile, not cooperative, or expressed their objection to the repossession.
Before a secured creditor decides to exercise self-help repossession, it is important to consider whether it can be done without breaching the peace. If a secured creditor fails to repossess collateral properly, it may incur liability. If you’re a secured creditor and you need to repossess collateral, consulting with the experienced attorneys at Jimerson Birr can help you repossess the collateral without incurring liability.