by Armando Martinez
When you buy or sell a vehicle, it's crucial to get the paperwork right. While the bill of sale and title transfer is the most obvious documentation you need to exchange, you should also be aware of the Department of Motor Vehicles (DMV) release of liability.
A release of liability form notifies the DMV that ownership of a particular vehicle got transferred and that the previous owner is no longer liable for any incidents involving it. It protects the sellers and ensures a smooth transaction between both parties.
The DMV release of liability form often gets accompanied by the notice of transfer. In this guide, learn more about the importance and benefits of notice of transfer and release of liability forms.
What Is a Notice of Transfer and Release of Liability (NRL)?
The notice of transfer and release of liability is a notice a transferor gives to a transferee, informing them of their responsibility for the purchased car. The transferor is no longer legally responsible for any damages or liabilities of the sold vehicle, such as unpaid parking tickets, towing charges, etc.
Both parties must sign the notice of transfer and release of liability for it to be legally binding. Here's how to prepare this document:
- Get the Buyer's Information: You'll need the buyer's full name, address, driver's license number, and signature.
- Get the Seller's Information: The same information about the seller goes on the form too.
- Car's Information: You have to enter the vehicle identification number (VIN) in the form. The VIN is commonly under the car's hood, on the driver's side door, or on the car's dashboard.
- Odometer Reading: The odometer is a gauge that measures the mileage of a vehicle. DMVs across states require this information.
Every state has a timeline in which the form needs to be submitted. For instance, the California DMV gives you five calendar days to file the form.
How a Release of Liability Protects Private Party Sellers
The DMV release of liability form is essential in the private party sale process. It legally and officially releases the seller from any liability concerning the vehicle. Plus, it serves as a transfer of ownership, indicating that the seller has successfully relinquished ownership of the car.
Here's how the release of liability protects sellers:
From Parking and Traffic Violations
If the buyer gets a parking or traffic ticket after the sale, the DMV release of liability form ensures that you are not held responsible for these violations. Once the form is complete and on file, you are no longer the vehicle's owner. Thus, you are not responsible for any parking or traffic tickets associated with the motor vehicle. If there's no release of liability form, you might have to pay these fees since you are legally still the owner.
From Civil Litigation
Suppose a private seller sells their car and does not fill or submit the release of liability form. The new buyer gets into an accident in the car and is found at fault, legally responsible for covering damages caused due to the accident.
Since the seller did not execute a release of liability form, they may still be potentially liable for the damages. In some cases, even if the seller has already got paid in full, they could still be liable in a civil lawsuit. A DMV release of liability helps avoid such a situation.
When a Release of Liability Must Be Filed With the DMV
You should fill out the DMV release of liability form as soon as you've finalized the purchase. Get the form from the DMV when you get other forms, such as the title transfer form.
Most states have a strict deadline to file the DMV release of liability form. The deadline usually falls 5 to 30 days after the sale or transfer. Failure to fill out the release of liability form could result in the seller's responsibility for violating traffic laws or being liable for any accidents.
Once the DMV has the release of liability form on file, it will no longer hold the outgoing owner accountable for any violations or accidents.
What Information Must Be Present on a Completed NRL Form?
The form should contain both parties' proof of identity and crucial vehicle data. Here's the information you'll need to fill out the release of liability form:
- Vehicle license plate number
- Vehicle identification number
- Model year
- Vehicle manufacturer
- Name and address of the new vehicle owner
- Odometer reading as of the date of vehicle title transfer
- Seller's name and address
- Date of sale
The license plates of some vehicles have symbols, such as a heart or a star. Do not include these in the form.
What You Should Know About a Release of Liability
If it's your first time selling a used vehicle, here are a few things you should know before you fill out an application for transfer of ownership and liability.
Not Every State Requires Them
While a release of liability form protects the seller, it's not mandatory in every state. In some states, you must fill out the release of liability form and submit it along with the title transfer. These states have a timeframe in which you must submit this document.
In other states, a release of liability form for a car or any other vehicle is not necessary. However, signing this form is in your best interest to protect yourself from lawsuits and traffic violation fines.
You Might Need Proof of Liability Insurance
In some states, you will need proof of liability insurance to transfer the title of a used vehicle. Every state has different car insurance requirements, but you need insurance as long as the car is yours. Otherwise, you could be financially and legally responsible for accidents or violations during the selling process. You should only cancel the insurance once the title gets transferred and you get released from liability.
What Happens If You Don't File?
It depends on your state laws. If you're in a state that does not necessitate DMV release of liability, you won't have any trouble from the department. However, you could be held liable in court or face civil action if someone were to pursue a case against you.
Failing to file in states requiring liability release could lead to similar concerns. If the new owner gets a speeding ticket or causes an accident and the police can trace it back to you, you may be liable. Plus, the state's DMV will send you reminders for registration renewal.
Even if there are no legal ramifications in your state, filing the release of liability form should be on your checklist. It can provide peace of mind in knowing that you won't be responsible for any future incidents involving the car.
Title Transfer vs. Release of Liability vs. Bill of Sale
There are three documents you should sign when selling or buying a car privately:
- Title Transfer: The title transfer is proof of ownership. It's the document that transfers ownership of the car from the seller to the buyer. Most states require it and call it a Certificate of Title.
- Release of Liability: The release of liability form is for the seller's safety. It releases the previous driver of the car from any future liability or responsibility if the buyer is involved in an accident. The form includes personal information about both parties plus the vehicle record.
- Bill of Sale: A Bill of Sale outlines the terms of the sale and provides evidence that an item got sold. It includes essential information, such as the name and contact information of both parties, and general information about the car, such as the make and model.
The title transfer is mandatory in every state. The DMV will need this document to process the sale. If you do not submit this document in the state-specified timeframe, you are likely to face a penalty or impoundment. Most states also require the release of liability, but while some are strict about its submission, others don't make it necessary.
The same applies to the bill of sale. The following states require it:
- New York
- Rhode Island
- South Dakota
- West Virginia
Some states require the bill of sale notarized for it to be considered valid. These include:
Make Sure All the Right Documents Are Signed With Caramel
It's essential to check if the paperwork is complete before you consider a private party vehicle sale done and dusted. Besides the title transfer (mandatory), you may have to submit the DMV release of liability form and the bill of sale.
If you're selling a car with a loan, you must also pay the loan off and provide the buyer with a lien release. Similarly, if your insurance company can transfer the policy to the buyer, check if you have followed the correct procedure. After you've signed and filed all the paperwork, you're ready to hand over the keys to the buyer.
This article was written by Armando Martinez. Armando Martinez is among the nation’s experts on automotive titling, registration, DMV services and document operations. With nearly two decades of experience across a broad range of financial services functions and some of the largest names in auto, from Wells Fargo to Uber, Armando combines vision and ingenuity with a wealth of information so auto shoppers and sellers can learn from his experience.