Buying Supercars: Legal Issues

Buying a supercar or a full racing track car may be a rather complex procedure that involves controls on many different aspects concerning title, ownership, identity of the vehicle, possible claims and, of course, technical issues. The purchase of a supercar or of a racing car that has previously raced in F1 or other similar sport competitions is particularly difficult as such vehicles do not have a plate and are not registered with a public record from which the buyer can be sure of the ownership of the car.  In addition, the fact that racing cars have competed on tracks requires that the buyer shall know the full history of the vehicles including possible accidents.

This article aims at providing a general overview of the potential legal issues that may incur to buyers when purchasing a unique and expensive object of desire such as a former F1 car or a full racing track version of a supercar.

  1. Misinterpretation

We strongly recommend buyers to double check all the relevant information provided by the seller regarding the vehicle, such as service history, mileage, origin. Such details are fundamental in order to carry out a successful purchase, which will make sure that the buyer is satisfied with his brand-new car.

In addition, in order to avoid the occurrence of the above issue, we recommend inserting a specific clause in the sale and purchase contract, indicating that the contract shall automatically terminate if the seller provides false or inaccurate information. The Italian Supreme Court, with its decision no. 24855/2019, stated that the contract may terminate upon the buyer’s request if the car presents serious defects not compatible with the state of wear and tear declared by the seller at the moment of the execution of the sale and purchase contract. In such case, the seller had altered the car’s mileage counter and had lied about its registration date.

Unfortunately, this kind of issues are common in purchases of supercars and it is in our interest to protect our clients also in relation to identity disputes.

  1. Identity disputes

It is fundamental that buyers make all the appropriate controls in order to ensure that the seller is the actual owner of the car. It may happen that two or more cars have the same chassis number or the same VIN, which is the so-called “car cloning”. Additional controls shall be carried out in order to verify that the car has not been stolen and it is not heavily damaged or unrecorded. It should be mentioned that the purchase of race track cars used and purchased only for racing purposes may easily generate both identity and title disputes, since such vehicles are not registered with a public record.

Therefore, we strongly recommend requesting to the seller all the relevant documents proving ownership, including corporate official documents in case the seller is a legal person. Documents regarding the VAT status of the car shall be requested as well (i.e., bill of lading, import document, etc.).

In relation to the identity disputes described above, the Italian Supreme Court intervened with its decision no. 37944/2017 stating that the registration of a vehicle with the Public Motor Vehicle Registry by an individual, who has not the actual possession of the vehicle, but is only the fictitious owner of the vehicle in virtue of a simulated purchase, may be ascribable as a crime.

  1. Title disputes

Title disputes may arise in different cases. For example, it may happen that the owner of a supercar engages a broker or another intermediary to sell his car and, in the meantime, the vehicle may be sold to a third-party without transferring the money received to the seller or without carrying out the relevant transfer of ownership. It may also occur that a supercar is sold with an ongoing loan and the relevant financial institution may claim the ownership of the vehicle.

In order to avoid the occurrence of such issues, we recommend owners to rely on reputable and trustworthy intermediaries and to make sure that any loan or encumbrance on the vehicle has been duly registered.

We also suggest buyers to insert specific clauses in the sale and purchase contract in order to protect themselves. In particular, the payment terms and transfer of ownership shall be regulated in detail in the sale and purchase contract. We usually advise our clients to appoint an escrow agent for the payment of both the deposit and the balance of the price; this would prove to be particularly beneficial if the supercar is with the seller who may be in a different country. Such provision may be either included in the sale and purchase contract by inserting a specific clause or regulated under a separate escrow agreement.  It shall be pointed out that it is common in the sale and purchase of full racing cars that these are kept and managed by a race team or are part of a racing program such as, by way of example, Ferrari Corse Clienti program.  In such cases the buyer may more easily rely on a well-known organization that has the full control of the vehicle.

Furthermore, it is of uttermost importance to include in the sale and purchase contract all the necessary representations and warranties that shall be guaranteed by the seller for making sure that the purchase is successfully and safely concluded. For instance, the seller shall warrant that the vehicle is free from any loan and encumbrance whatsoever, that he is the actual owner of the vehicle and that the vehicle has been duly imported/exported and shall provide all the supporting documents requested by the buyer, as indicated in the sale and purchase contract.

As mentioned above, title disputes may arise in connection with purchases of race track cars, since they are not registered. In this regard, it may happen that the car may be sold by an individual, who is not the actual owner of the vehicle.  Italian law protects buyers who acted in good faith, i.e., all those who purchased a good without knowing that the seller was not its actual owner. Such form of protection, provided by articles 1153 et seq. of the Italian Civil Code, is called “possesso vale titolo”.  When purchasing any movable property from an individual who is not its actual owner, the buyer acquires ownership of such good by only having the actual availability of the good, if the buyer was in good faith at the time of delivery and if there is a suitable title to the transfer of ownership. In other words, if the buyer is in possession of a bill of sale or any other document which proves the transfer of ownership, he did not know at the time of delivery that the seller was not the actual owner of the car, the buyer becomes its legal owner when he takes possession of the car after it has been delivered to him.

  1. VAT and customs issues

When purchasing a supercar, the buyer shall pay attention to the VAT and customs issues especially if the vehicle is bought by an individual who is not based in the EU or the car has been exported.

VAT and customs issues are particularly complex and need to be examined in detail and on a case-by-case basis in order to prevent bad surprises.  For example, if a buyer purchases a supercar that has been exported from the EU to a third country (i.e., US, China, Japan) VAT at 22% rate shall be applied when importing the car into the EU.  However, if the buyer is a non-EU resident (i.e., UAE or US citizen with no personal link to the EU) then it may be possible to keep the car in the EU on a temporary importation basis which will last for 6 months but may be renewed.

All such issues are of great importance when purchasing a supercar or a full race track vehicle that are worth several millions of euros.

  1. Conclusions

As outlined in this article, the purchase of a supercar may be a landmark moment in the life of a lover of speed and cars but one should not underestimate the risks that are connected with the purchase of vehicles that are not sold as ordinary ones.  Therefore, all the parties involved in such transactions, especially buyers, who are certainly the most exposed, should be assisted by appropriate legal professionals in order to avoid unpleasant inconveniences.

PG Legal has a wealth of experience in assisting buyers throughout all the steps of supercars or race cars’ purchases and our team of professionals is ready to assist you in order to avoid the arising of any kind of disputes related to such vehicles.