Clear Title Risks
I've been trading emails with a potential boat buyer that just can't get past
the fear that a boat may have undiscovered liens. How real is this risk? Is
there more or less risk based on how the boat is titled or documented? I've
bought 5 boats in the last 10 years and never gave this much thought. Either
I'm overly trusting, naive, or it nothing to fear. Unlike a home where you
may purchase title insurance I don't believe I've heard of an equivalent
protection for boats. That too may mean the risks are few or the buyer's
obligation to make right passed liens is limited after the passing of title or
USCG documentation.
Thanks,
Gil
Gil,
A lot depends on whether the lienholder recorded the lien, and if so, how.
Of course, that doesn't even begin to address a maritime lien which could
also be present (i.e. for repairs that were never paid for, pollution,
etc.).
While true that boats may have liens, if those liens are not recorded, the
lienholder would have a very difficult time recovering the asset.
Additionally, it may be very difficult, if not impossible to completely
research the full title history on an undocumented vessel. In some states,
the lienholder does not hold title and those are the states you have to
watch out for. An owner could hold free and clear title and then at some
point, pledge the boat as collateral on a loan. Since the owner already
holds free and clear title to the boat, it would never be recorded on that
title, which could then be subsequently used to sell the boat in the future.
There are a number of commercial services available that will do a
reasonably thorough title search based upon data contained in a number of
databases.
Realistically, if you can trace ownership back to the last 10 years or so,
you are reasonably safe since most lienholders would have probably written
the debt off by that point and wouldn't be looking to repossess the
collateral.
Two other points -- If you are dealing with a high value vessel, it would be
prudent to have your attorney make sure the documents are in order and the
title is truly "free and clear". Second, vessel title insurance is
available and can be required by the lender on larger loans.
-Ryan
----- Original Message -----
From: "Gil Johnson" dogtrawler@yahoo.com
To: "TWL" trawlers-and-trawlering@lists.samurai.com
Sent: Monday, November 16, 2009 6:00 PM
Subject: T&T: Clear Title Risks
I've been trading emails with a potential boat buyer that just can't get
past
the fear that a boat may have undiscovered liens.
Gil-
New England Marine did my last 2 documented boats. Have the buyer contact
David Haywood (contact info follows) to satisfy himself.
Michael Wilkie
Dancin' Dolphin II
Willow Berm Marina, Cal.
David Hayward
CA Notary
U.S.SAILING Certified Instructor #394006P
U.S. C.G. Masters Lic #1149145
New England Marine Title
1150 Ballena Blvd., Suite 108
Alameda, CA 94501
Ph: 510-521-4925
Fax: 510-521-4928
www.boatdoc.com
----- Original Message -----
From: "Gil Johnson" dogtrawler@yahoo.com
To: "TWL" trawlers-and-trawlering@lists.samurai.com
Sent: Monday, November 16, 2009 4:00 PM
Subject: T&T: Clear Title Risks
I've been trading emails with a potential boat buyer that just can't get
past
the fear that a boat may have undiscovered liens. How real is this risk?
Is
there more or less risk based on how the boat is titled or documented?
I've
bought 5 boats in the last 10 years and never gave this much thought.
Either
I'm overly trusting, naive, or it nothing to fear. Unlike a home where
you
may purchase title insurance I don't believe I've heard of an equivalent
protection for boats. That too may mean the risks are few or the buyer's
obligation to make right passed liens is limited after the passing of
title or
USCG documentation.
Thanks,
Gil
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[demime 1.01d removed an attachment of type image/gif which had a name of 04.gif]
I was a yacht broker for a short period in my life and this is what I
learned:
Federal, ie US Coast Guard title (documentation) trumps all state titles, so
USCG Documentation is best. If it is a USCG Documented vessel, order an
abstract of title. That will tell you if there are any liens. It isn't like
real estate where you have to look at the county's property file and
possibly miss a recorded lien. If the USCG abstract tells you the boat is
clear, it is clear of RECORDED liens.
But maritime law allows unrecorded liens for non payment of marine services,
so there is a slight risk that the yard or whoever could make a future
claim. The claim is against the boat, not the owner so the new owner would
be at risk of loss.
Boat title insurance is available but has lots of loopholes and was
generally considered not worth it.
Our brokerage would check with the yard that the boat was stored for unpaid
bills. Otherwise there was no further research. We did this to protect our
customers and our own peace of mind
Caveat emptor.
David
----- Original Message -----
From: "Gil Johnson" dogtrawler@yahoo.com
To: "TWL" trawlers-and-trawlering@lists.samurai.com
Sent: Monday, November 16, 2009 4:00 PM
Subject: T&T: Clear Title Risks
I've been trading emails with a potential boat buyer that just can't get
past
the fear that a boat may have undiscovered liens. How real is this risk?
Is
there more or less risk based on how the boat is titled or documented?
I've
bought 5 boats in the last 10 years and never gave this much thought.
Either
I'm overly trusting, naive, or it nothing to fear. Unlike a home where
you
may purchase title insurance I don't believe I've heard of an equivalent
protection for boats. That too may mean the risks are few or the buyer's
obligation to make right passed liens is limited after the passing of
title or
USCG documentation.
Thanks,
Gil
http://lists.samurai.com/mailman/listinfo/trawlers-and-trawlering
To unsubscribe or modify your subscription options (get password, change
email address, etc) go to:
http://lists.samurai.com/mailman/options/trawlers-and-trawlering
Trawlers & Trawlering and T&T are trademarks of Water World
Productions. Unauthorized use is prohibited.
Marine Title in Seattle, is not only is a very good service provider
for searches and transfers, their website provides much useful information:
Best,
Steve
David wrote in part:
I was a yacht broker for a short period in my life and this is what I
learned:
But maritime law allows unrecorded liens for non payment of marine services,
so there is a slight risk that the yard or whoever could make a future
claim. The claim is against the boat, not the owner so the new owner would
be at risk of loss.
Caveat emptor.
Reply:
I was about to give the common answer involving UCC searches and reliable
closing agents when I read about unrecorded liens. So what is the answer
for a careful buyer who is concerned about unrecorded liens? Sometimes
paranoid people have reason to be... Obviously, the seller can give a
warranty that the title is clear (making himself the target if there are
liens). But sellers (and their money) can disappear. How about a little
money left in escrow for 60 or 90 days for the peace of mind of the buyer?
In fact, maybe just enough money to cover the broker's commission. Hah!
Just kidding...
Eric Thoman
Abyssinia
I'm certainly no lawyer. But, of what value is an "Unrecorded Lien"?
Maybe one of our law experts can enlighten us.
David wrote in part:
But maritime law allows unrecorded liens for non payment of marine services,
Paul:
I am not a lawyer either, so take what I am about to say .....
Liens are recognized by law as putting a block or encumbrance on a piece of
property to secure a claim. A lien does not mean that there is a legal
obligation to pay, it just means that someone has made a claim and is
blocking that property to force you to pay the claim, negotiate a resolution
or litigate the claim. If you lose in litigation then that property is used
to satisfy the judgement. Paying the claim can be as straightforward as
making your mortgage payments every month, or as horrible as losing your
home in a foreclosure.
Most liens are recorded- homes, cars, even boats. But somewhere in ancient
maritime history the law (the law is this vague etherial body of stuff, some
written, some not written that developed over time) realized that boats were
different. A trading ship could pull into port, get some work done and slip
out without paying. How could the shipyard file (record) a lien in that case
and enforce it. The ship may never come back to that port.
So the law recognized a defacto, non recorded lien, any time work was done
on a boat and not paid for. It is automatic. The yard doesn't have to do
anything to put it into force. The problem for a buyer is that there is no
way to know about a non recorded lien, ie that someone thinks that they did
work on that boat and never got paid. The lien never goes away. You could
buy a boat in Massachusetts, sail to North Carolina and discover that some
North Carolina yard claims they did work on this boat 5 years ago and wants
YOU to pay the bill.
The yard could "arrest" your boat- the legal term for holding it until the
claim is satisfied or resolved in a court. But in practice this almost never
happens. Like I said earlier, when I was a yacht broker in Annapolis we
would check with the yard where the boat was stored (unpaid dock fees are
part of this work that can lead to a lien) to make sure the yard was paid.
If that was clear, we didn't look further. And we didn't have to because I
don't believe there was a single case of a long ago lien being enforced.
But it is possible, so caveat emptor.
David
Wow! This unrecorded lien thing seems a bit arcane. If a yard in NY is not
paid for a valid(?) claim and the boat travels to NC and is sold there how
in the world does the NY yard get paid. No record of any lien! Seems as
though the yard in NY is on the short end of a stick.
Paul
Paul:
I am not a lawyer either, so take what I am about to say .....
Liens are recognized by law as putting a block or encumbrance on a piece of
property to secure a claim. A lien does not mean that there is a legal
obligation to pay, it just means that someone has made a claim and is
blocking that property to force you to pay the claim, negotiate a resolution
or litigate the claim. If you lose in litigation then that property is used
to satisfy the judgement. Paying the claim can be as straightforward as
making your mortgage payments every month, or as horrible as losing your
home in a foreclosure.
Most liens are recorded- homes, cars, even boats. But somewhere in ancient
maritime history the law (the law is this vague etherial body of stuff, some
written, some not written that developed over time) realized that boats were
different. A trading ship could pull into port, get some work done and slip
out without paying. How could the shipyard file (record) a lien in that case
and enforce it. The ship may never come back to that port.
So the law recognized a defacto, non recorded lien, any time work was done
on a boat and not paid for. It is automatic. The yard doesn't have to do
anything to put it into force. The problem for a buyer is that there is no
way to know about a non recorded lien, ie that someone thinks that they did
work on that boat and never got paid. The lien never goes away. You could
buy a boat in Massachusetts, sail to North Carolina and discover that some
North Carolina yard claims they did work on this boat 5 years ago and wants
YOU to pay the bill.
The yard could "arrest" your boat- the legal term for holding it until the
claim is satisfied or resolved in a court. But in practice this almost never
happens. Like I said earlier, when I was a yacht broker in Annapolis we
would check with the yard where the boat was stored (unpaid dock fees are
part of this work that can lead to a lien) to make sure the yard was paid.
If that was clear, we didn't look further. And we didn't have to because I
don't believe there was a single case of a long ago lien being enforced.
But it is possible, so caveat emptor.
David