Understanding Private Property Towing Agreements: Essential Components and Considerations

Defining a Private Property Towing Agreement

Private property towing agreements are commonly referred to as PPPA contracts. Rather than being a straightforward set of rules that everyone in the industry touches upon, at our firm we have found these agreements to be particularly essential. These agreements are the rules of the road regarding how to engage in the towing and storage business. PPPA Agreements typically range from 10 to over 100 pages and typically dictate who pays for what under certain situations.
PPPA agreements are not only useful, but they are necessary in the majority of private property circumstances. In Michigan, the PPPA statute outlines requirements for signage and content on signage, charges that may be assessed for towing and storage, limitations on liability for towers, and how to enforce lien claims. However, PPPA agreements can establish solutions for existing problems or situations before they arise. We work routinely with our clients to ensure that they are protected. As such, it is becoming increasingly common to insert a PPPA agreement in-house prior to obtaining the first law enforcement authorization. Too frequently, companies obtain the initial authorization to tow under a city ordinance and as a result, do not implement PPPA contracts until they are already in the middle of a storm. This is a reactive solution rather than a proactive solution.
Every PPPA Agreement consists of three core components: the identification and scope of the property, the property owner and their agent, and the terms. The following outlines these three factors in greater detail.
The scope of the property must be identified for the agreement to be enforceable. The statute requires that property corners must be marked, yet it is not specified whether these corners need to be more than just markings so long as they are identifiable. It is required that the corners and the scope of the property be marked by no less than two corners , and all corners must be on the same parcel. More importantly, the scope of the property must be utilized on signage and in invoices, to ensure that the tower has appropriate charging rights and limits the scope of liability to what is agreed upon between the parties.
The written agreement is made between the landowner and the designated agent. Typically, this agent is either a management company or the property owner themselves. In order for a representative to engage in the towing and storage business on behalf of the landowner, the agent must be listed in the PPPA agreement. PPPA agreements can be tailored to include collection rights for the agent, if one is utilized. If the management company collects and pays out the loads at delivery, then they should have in the PPPA agreement their ability to both collect and distribute funds.
At the heart of any PPPA agreement are the terms of the contract. Both sides of the transaction possess certain rights and obligations that will become enforceable or voidable. For example, a charging rate must be established and followed. For towers, they must charge both the landowner and non-landowner the same rates for each line item. On the other side, the landowner may want to require the tower to adhere to a more stringent requirement. If a tower offers to waive the storage charges on a quarterly basis, only to find out that the landowner bills the full amount, then the tower may have an option to void the contract.
These agreements mean little if not followed through, so it is important to have an attorney look over the agreements – both before implementation and afterwards, as they come into play whenever a dispute arises. That is why working with an experienced attorney can be valuable for you.

Legal Aspects of Towing Agreements

Private property towing agreements, like all contracts, must abide by legal requirements to be considered enforceable. Municipalities often have specific ordinances that apply to any companies or individuals who are conducting business in their jurisdiction. Many municipalities have requirements for the content of such towing agreements, as well as requirements for how they are to be administered. For example, both Pittsburgh and Philadelphia have ordinances that apply to private property towing.
In addition to municipal laws, many states impose certain requirements on private property towing agreements, such as registering or licensing facilities and requiring toll-free phone access. For instance, the above-mentioned state of Pennsylvania requires a tow yard attendant with a means of contacting a live person via a local phone number (reachable at no cost to the call or caller) at all hours, which can be important when your vehicle has been damaged. Additional requirements for towing companies operating within the state of Pennsylvania can be found in Chapter 73.
In addition to laws that apply to the states or municipalities in which they operate, private property towing companies must comply with federal laws that may impose requirements on how they do business. For instance, companies that operate toll booths must comply with the Fair Credit Reporting Act and ensure that all access fees are collected via electronic means.

Crafting a Successful Towing Agreement

An effective towing agreement will comply with the private property towing statute and also meet the needs of the property owner/towing company relationship. A private property owner or manager should begin by hiring a licensed and bonded local attorney to draft a towing agreement that can be used for any type of private property. A good attorney will have samples from a variety of properties and will be able to craft an agreement that is suitable for their particular needs.
There are two issues that must be dealt with in any effective private property towing agreement. The first is the individual(s) authorized to contract on behalf of the property owner. While a property may actually be managed by a professional management company, that does not mean the management company is the property owner for purposes of executing a towing contract. The property owner should execute the towing agreement. This means that a limited liability corporation (LLC) should not provide a manager of the LLC the authority to sign the towing agreement on behalf of its LLC manager. This requirement means that if your LLC’s president wishes to have authority to contract on behalf of your LLC, then the LLC should execute the towing contract in the name of its president. In short, the property owner should execute the towing contract and the property owner must be a legal entity.
The second issue that must be addressed is the scope of the authority you give your towing company. Some property owners grant a towing company broad authority to impound any privately owned vehicle parked in their lots without authority, while others limit that authority to only those vehicles that are illegally parked, with no permit, parked in "customer" spots or parked on the wrong side of the lot. The scope of authority with regards to the property owner/towing company contractual relationship is often, but not always, memorialized in the actual towing agreement. Under California law, however, the statute requires that certain information be included on all private property towing signs. And, if the scope does not comply with the statutory requirements, the sign may not be valid.
We think the best practice is to mandate that the owner/tower work closely with the HOA/Property Owner to determine what kind of authority is necessary. The HOA/Property Owner should ensure their signs contain the elements specified by statute, and the tower should enforce the contracted terms as necessary.
The second step in drafting the agreement is to adhere to each of the specific elements outlined in the statute to ensure that the sign on the property will remain valid. These elements require the sign to be a certain size, color, font, format, and be located at a certain distance. Please review and use the article on Private Property Towings Signs for more details. If the agreement contains these elements, even if the sign itself does not, the sign is still likely valid. However, it is important to remember that a properly written agreement is essential to compliance with the statute and thus the validity of the signs on the property. To the extent the agreement does not reflect the terms set out in the statute, the SPAB has been known to invalidate the agreement.

Duties of Property Owners

Defined agreements are critical to protecting the property owner’s interest and ensuring lawful towing practices. Not only do agreements entitle a property owner to request removal of unauthorized vehicles, but they also empower the owner with legal remedies for unauthorized towing. Assertions to the contrary are often made by towing contractors who, out of self-preservation, endeavor to mislead property owners into believing that towing without a contract will not be lawful. While it is true that state law does not impose any direct duties upon a property owner as to how a particular vehicle should be towed, property owners can elect to (and should) contractually require towing contractors to comply with applicable laws. An independently contracted towing company is bound to act according to the terms of its employment agreement with the property owner, and will face common law and statutory liability for unauthorized or improper towing.

Responsibilities of the Towing Company

It is not enough for the property owner to have the private property towing agreement in place. The towing company must comply with applicable law and the provisions of the private property towing agreement. There is significant risk that a jury will find against the towing company in a lawsuit against a towing company if it fails or refuses to comply with the terms of the private property towing agreement, no matter how benign the violation.
The towing company should provide a schedule for service as part of the private property towing agreement. The towing company should likewise commit to respond to private property owner requests for service by a certain time or within such period of time as requested by the property owner. The towing company must be held to its end of the agreement. Otherwise, the property owner will quickly lose faith in the ability of the towing company to "perform," and the private property towing agreement becomes useless. Too many towing companies work off of a verbal agreement, which can lead to confusion or disagreement as to what the parties are obligated to do. A clear, unequivocal contract is needed. There should not be any ambiguity, loopholes or other problems that can be utilized against you by the property owner when the relationship is no longer profitable (which they always become).
Alarmingly, I have experienced some companies that agree to respond to a call for service as part of the private property towing agreement, but then fail to follow through on their commitments. In one instance, the company told the property managers three times, over two days, that they had just been called to tow several vehicles . However, the towing company never showed up. When confronted by the property owner, the manager informed me that they told the towing company that this had happened on several occasions and that, if this happened again, they would have to find another towing company. I advised the manager that while the private property towing agreement may not impose an obligation to provide a minimum amount of service, the towing company will be held to the limited term of the agreement. Thus, the towing company will be held liable for whatever damages are caused by those failures.
Many times the loss of a profitable relationship is the correct remedy to make the wrongdoer feel the consequences of their actions. We have had to pursue damage and enforceability claims against those that violate the agreement given to the property owner. Part of the private property towing agreement must govern the correct completion of the notice and the correct manner in which the signs are erected, repaired, maintained, and so forth. A poorly erected sign, such as a sign with the bottom bent or in some manner not properly fastened, should be replaced at the towing company’s cost. These costs are typically split between the property owner and the towing company, but since the owner has lost business through the towing company’s actions, the owner should not incur any expenses.
To avoid these penalties, the towing company should make a record of the top and bottom of the signs to show where they need to be and should photograph a sample sign before erecting the signs.

Enforcement and Dispute Resolution

Disputes regarding private property towing agreements may arise either from a party alleging that the owner has breached the agreement or that the property owner has violated the private property towing statutes or regulations. These type of disputes can be resolved through different mechanisms. For example, violation of the private property towing statutes can be resolved through administrative action taken by state or local jurisdiction. In Pennsylvania, for example, a proper class of individuals can file a complaint and seek punitive enforcement through the Office of the Attorney General or local district justices. Any person who suffered injury or damage as a result of unlawful conduct of a towing company or facility owner can file a civil suit against the towing company and/or facility owner for actual damages, attorney fees, and costs. However, the court may award punitive damages if it finds that the facility owner or towing company pursued such unlawful conduct in bad faith.
Other types of disputes may be properly addressed through a provision in the agreement providing for alternative dispute resolution (ADR). Many parties provide for mediation and/or arbitration in the event of a dispute. Mediation is a process involving a third party neutral to bring the parties together to discuss issues and find a solution, while arbitration is designed to be more like court, where the arbitrator hears the matter and acts as a judge, often issuing a pre-determined decision. Either way, sometimes private property towing disputes are resolved through this means, particularly in jurisdictions where the courts have reported that they are obliged to interpret such contracts under the law of contracts rather than the statutory or regulatory scheme.

Best Practices for Parties

A healthy towing agreement is characterized by cooperation and respect between the towing company and the property owner. If at any time either party feels that respect is being undermined, they should seek to ensure that it is restored. If that fails, a mediator can be very helpful and usually will be able to do so without either side incurring significant expense.
The towing company has a very clear legal and statutory obligation to maintain only vehicles that are properly parked on private property. The towing company also has a lot of discretion about when to contact law enforcement. The best practice is generally to contact local law enforcement wherever a vehicle is towed from a private parking space. It is important for the towing company to get the facts regarding the circumstances surrounding the underlying issue directly from the property owner and not rely solely on entrance and exit camera. Entrance and exit camera typically does not provide the information that would be present in other types of videos and vehicle proximity to a parking area entrance is not necessarily decisive in establishing exactly what happened.
The best practice for the property owner is to communicate their desired towing protocols clearly to the towing company, to have signage in good visible condition and to communicate quickly with the towing company if they feel that a protocol has not been followed. It is essential that the property owner is in agreement with respect to fees assessed to the customer regarding the wrecker service. The property owner’s signature should be prominently displayed on the ticket reflective of this agreement. The parking company should use a consistent methodology for logging vehicles and preparing invoices to avoid confusion.

Common Mistakes to Avoid

Many common mistakes occur when drafting private property towing agreements. These include: Selling towing rights for a nominal fee in exchange for no or low fees. Many of these agreements are unenforceable because they are found to induce towing companies to conduct activities without providing proper notice to vehicle owners and increase the likelihood that the towing company will not contact the police. Omitting the requirements of sending a notice to vehicle owners using first-class mail. A notice to the vehicle owner must be sent using first-class mail. Failing to include an identification of the vacant lot that is towed from. Including an address is also helpful for immediate identification. Failing to state the hours of service and providing adequate time for vehicles to be relocated from the property. Failing to include a detailed description of the property that is towed from . This is very important in order to avoid vagueness that may result in a court declaring the agreement invalid as a violation of the plain language requirement of the plain meaning rule. Providing too little specificity regarding the vehicles that are subject to removal. Many of the state statutes require a detailed specification of the types of vehicles that are subject to removal, such as whether or not oversized vehicles or vehicles which are inoperable are subject to removal. If too little specificity is provided, the towing company may opportunistically remove other vehicles, which are not generally authorized to be removed under the agreement.
When private property towing agreements and other contracts are drafted, the worst case scenario should always be considered. Contracts, such as private property towing agreements, must comply with strict requirements that limit their enforceability if those requirements are not met.