What are my options for recording
a boat lien?
Your options for recording a boat lien are somewhat limited
depending on how the boat is registered or titled. On non-documented
boats, you would need the owner's written consent to record a lien
or security interest on state registration records. In this case,
the title and/or registration certificate would need to be
surrendered and re-issued. It may be possible to implement a Uniform
Commercial Code filing unilaterally, but this venue is intended for
financing interests such as boat loans. If the vessel is Coast Guard
documented, you can file a "notice of claim of lien" without the
owners consent. However, this type of recording does not
particularly validate your claim. Financing interests on documented
boats should be recorded via a preferred vessel mortgage.
How do I foreclose on a boat lien?
On non-documented boats, you may have the option of conducting a
summary or non-judicial foreclosure by following certain procedures
as set forth under state laws. In states which do not accommodate
such actions, it will become a matter of going through the
appropriate court of law. On Coast Guard documented boats, liens or
claims other than preferred mortgages will likely have to be handled
through a federal court and then sold by the U.S. Marshals Service. In any event,
you should consult with an attorney when enforcing any type of boat
lien as you may become liable if not implemented properly.
How important are notarizations on boat transaction forms?
In today's busy environment, signature acknowledgements are often viewed
as stumbling blocks in getting through a myriad of paperwork that often
accompanies vessel transactions. This is especially evident when forms
are transmitted long distance for execution in remote areas where public
notaries are less than accessible. A valid acknowledgement is however, one of the most critical elements of any document
when it comes to protecting the interests of a vessel buyer, seller, or lender.
acknowledgement is so important, notary standards must be taken very
seriously. If not, there can be repercussions for both the notary and the party that may suffer damages.
Although public notaries are regulated by state law, their requirements are for
the most part uniform throughout the country. In general, the notary must
witness a personal appearance by the signer, obtain sufficient
identification, and determine that a signer has
the capacity to understand the document while exercising free will in
its execution. Notaries are also bound by common ethical considerations in
performing their duties.
transaction is a complex vessel purchase arrangement or a simple refinance,
timing is usually one of the primary concerns. Seasoned professionals such
as sales agents and finance officers will accordingly structure their
deadlines to cover the inevitable possibility that remotely executed
documents will contain defective acknowledgements. They also understand that
an expedient quick-fix which violates notary standards can turn into a major issue should the
underlying transaction ever become contested.
How should a boat be identified in court actions?
Governmental recording agencies will not typically accept court
directives unless the subject boat is sufficiently identified. Year,
make, model, length, boat names, and hailing port designations are
helpful with respect to clarification, but these will not by
themselves qualify as unique descriptions. The manufacturer's hull
number, official documentation number, and state registration number
should all be included as applicable. The Coast Guard will always
recognize its assigned official number as they consider this a
vessel's primary identifier. A manufacturer's hull identification
number may suffice, but only if a cross reference is shown on their
records. Such nexus is less likely for state registration numbers.
As for state registration agencies, they will accept a
manufacturer's hull identification number and perhaps the state
registration number if still shown on their records. An official
number for state level recordings may be acceptable, but only when
supported by an abstract of title from the Coast Guard. In any
event, all known boat identification numbers should be included
whenever possible just to cover all bases.
Should I consult with a regular or maritime attorney about my boat transaction?
It all depends on the kind of transaction your are
considering and the situation at hand. In dealing with state level
issues on a smaller boats, a regular attorney may be quite
sufficient. On Coast Guard documented vessels or those which will be
used in commercial operations, a maritime attorney would likely be
your better choice. In any event, you should ask a prospective
attorney whether he or she is qualified in your particular area of
interest. If not, you can request a recommendation or check the
marine attorney listings on our Resources page.
When must I discharge a boat loan or lien recording?
With respect to vessel liens and encumbrances, it is natural to
think only in terms of an owners indebtedness to a lien-holder.
However, in the event of a settlement, the lien-holder actually
incurs a converse obligation to the debtor in the same amount as the
original debt. In order to fulfill this obligation, the lien-holder
must offset any recorded claims it may have filed against the
vessel. Furthermore, there are certain state and federal regulations
that require lien-holders to implement this in a timely manner. In
fact, the holder of a preferred marine mortgage on a documented
vessel can incur substantial civil penalties for not recording a
discharge upon payment.
There are also some practical reasons for getting releases of interest
issued promptly. A good case in point pertains to debt settlements that
arise in conjunction with vessel sales transactions. In these
situations, the closing is precipitated upon paying off any underlying
liens or encumbrances. On settling these claims, any subsequent titling or documentation
recordings can not be completed until
the respective releases have been filed. Lien-holders, who
fail to do this within a reasonable time, can inflict damages upon the
affected parties. This usually results from a buyer's inability
to operate or encumber the vessel until proper titling, registration, or documentation
can be attained.
Who guarantees a boat or vessel title?
The words "caveat emptor" represent what is arguably one of
the most important concepts you should bear in mind when purchasing
a vessel. This Latin phrase, which means "let the buyer beware", is
further defined in legal terms as "an axiom or principle in commerce
that the buyer alone is responsible for assessing the quality of a
purchase before buying". In the marine industry, this is true not
only as it pertains to a vessels condition, but also as it relates
to the quality its title.
insurance is not available in the marine industry and it is unlikely
that a broker, titling agent, attorney, or any other party would be
willing to offer such assurance. This means that buyers must
generally rely on the sellers representation regarding the boat's
title or lien status. Accordingly, the buyer becomes subject to the
sellers good faith in rectifying any title deficiencies that may be
encountered subsequent to the closing.
As an offset to these
conditions, you should be diligent in gathering as much information
as possible about the seller. This way you will know where to turn
in the unlikely event there are some hidden liens or title
deficiencies which may become evident after the closing. On or
before closing, the seller should also be required to execute an
explicit title warranty statement regarding any existing liens,
encumbrances, or adverse title conditions. An additional
precautionary measure would be to hold back a reserve from the
purchase funds to deal with any such contingencies. You should of
course seek the assistance of an attorney in structuring any
mechanisms by which the seller can be held accountable.
It is also prudent to
investigate the title's condition as opposed to simply relying on
the seller's representations. There are various methods of doing
this depending on whether the vessel is documented with the Coast
Guard, state titled, or foreign registered. Information, guidelines,
and resources for researching vessel titles on the federal, state,
and foreign levels is available from our web site.
What should I get when my boat loan is paid off?
If the boat has been mortgaged under Coast Guard
documentation, your lender must implement a satisfaction or release
of mortgage recording on the boat's abstract of title. In this case,
you should require the bank to furnish a copy of the instrument
showing the recording information. If it is state titled, the bank
will typically send you the title certificate showing their release.
In some paperless title states, they will need to handle this
directly through the registration agency. In a non-title state, the
bank would have typically filed a Uniform Commercial Code (UCC)
recording to secure their interest. You should then insist on
evidence that a termination statement was filed. In any event, you
should require proof that the appropriate title or mortgage releases
were implemented as it may be extremely difficult later on when the
lender has moved, merged with another institution, or gone out of
Can I trade my boat on paper for a tax reduction?
Some states will allow a reduction in sales or use tax on the
purchase of a boat for the value of a trade-in. This has created a
scenario where buyers who are transferring their existing boat
directly to a third party may ask the seller to simply facilitate it
as a trade. Such transaction is then evidenced only by bills of sale
and the buyer maintains possession of the trade pending delivery to the third party. The respective state could however
disallow such deduction if not viewed as a bona fide trade. This is especially true where it is not structured into the Purchase
Agreement or the seller is insulated from any financial risk on the subsequent sale. A facilitating seller could also inherit certain
liabilities when stepping into the chain of ownership, even if it is only on paper. The ultimate buyer of the trade could
furthermore relinquish any direct recourse to the actual seller under these circumstances. All parties to a paper trade
should seek legal advice if concerned about any of these ramifications.
Is boat title insurance available for my purchase?
Boat title insurance for vessel purchase transactions is not
currently available within the marine industry. Attempts have been
made in the past by various title insurance companies to offer this
much needed service, but they have all withdrawn from the market
place. This means that buyers must basically rely on the seller for
any title guarantees or warranties. You should therefore take all
possible measures to ensure that the seller can and will stand
behind any representations of a clear title.
Is it safe to hand over my purchase money before getting a title?
It is very difficult to re-title or register any boat without the
previous title certificate or proper ownership releases. If the
state where you are registering does not offer bonded or conditional
titles and registrations, it will likely be a matter of obtaining an
award of ownership from the appropriate court. You should therefore
never close on a purchase transaction without at least knowing the
condition and whereabouts of the boat's title.
In order to obtain the
appropriate certificates and releases of ownership, you will first
need to know how the boat was previously titled or registered. This
will determine the type of certificates, assignments, or transfer
instruments you will need. These can vary considerably depending on
whether the boat was Coast Guard documented, state titled,
registered only, foreign registered, or a combination thereof. Each
boat registration agency has their own rules and policies when it
comes to evidence or proof of ownership requirements. It would be
worthwhile to seek the assistance of a boat titling professional If
you are unsure about any of these factors.
What are the implications of placing my boat in a charter or timeshare program?
Time share and bareboat charter programs remain quite popular with
vessel owners, even though some of the earlier IRS tax advantages
have vanished. A well managed program can not only help defray the
financial burden of ownership, but also qualify the vessel for state
level tax reductions in certain jurisdictions. Unfortunately, these
advantages are offset by the fact that you may end up sharing your
vessel with some less than desirable individuals. In some states,
you must also turn over management of the vessel to an independent
third party for tax purposes.
With regard to vessel
titling and registration, there are some additional factors to
consider. The Coast Guard classifies bareboat charter and timeshare
operations as recreational usage, therefore, documentation is not
required. However, it is required were the owner or owner's
representative will be skippering or operating the vessel.
Documentation is also necessary in certain states before the vessel
can become eligible for tax relief. In any event, most owners who
place vessels into these programs will opt for documentation in
order to strengthen the title.
Should my surveyor verify all boat identification numbers?
One of the more important aspects of a surveyor's report pertains to
the vessel's description. Although often underrated, this can be as
vital to the buyer and marine lender as the vessel's underlying
condition. In addition to the exact specifications, any
identification numbers that are affixed to the vessel must be
clearly stated. Such items all serve to link the vessel itself with
those documents which evidence ownership and a lender's security
represents an additional effort on behalf of the surveyor, it is an
excellent practice to incorporate stencils or "rubbings" and
photographs of all identification numbers into the survey report.
This will help eliminate even the remotest possibility of drafting
errors. These are often required anyway whenever conflicts arise
over previous deficiencies. Furthermore, the surveyor should always
rely on self-observations rather than the existing ship's papers in
defining the vessel's specifications. In selecting the right
surveyor, a prudent buyer should make sure these services are
What are temporary boat operating or travelling papers?
Boat operating or travelling papers are copies of documents proving
that you own the boat. This may include a signed off state boat
title, a bill of sale, or other evidence that the title or Coast
Guard documentation has been assigned into to your name. In most
cases, such papers will also include evidence that you have applied
for a new registration, state title, or Coast Guard documentation.
These may also be supported by a letter from your title or
documentation service agent when applicable. Although such items are
not fully legitimate for operating purposes, most law enforcement
officials will honor them if they are complete and reasonably
current. However, you should always check with the enforcement
agency for the area in which you will be operating to confirm
whether these will suffice.
Am I responsible for sales tax as a boat seller?
As the seller, you are not generally responsible for paying taxes
related to the sale of your boat. A buyer is typically responsible
for any applicable sales, use, or excise taxes. However, you may be
required to collect and report sales tax from the buyer if you are a
business entity. Be sure to check with the respective revenue
collection agency for the state in which the sale will occur to
confirm this information.
Should I sell my boat without using a broker?
There are many good reasons for enlisting the services of a yacht
broker, especially for sellers who lack the time or inclination to
undertake such effort on their own. However, the "for sale by owner"
option is becoming easier due to the advent of online shopping via
the internet. In fact, most vessel transactions now originate from
web listings which are posted by both brokers and private sellers.
This has resulted in an enormous market place for boat owners who
wish to advertise and sell directly to the boating public.
Our web site provides
numerous services, forms, databases, guidelines, record search
tools, and other valuable resources which are designed specifically
for direct seller to buyer transactions. You can realize a
considerable savings in titling,
closing, and brokerage fees by utilizing our complete array of easy
to use self-service kits and boat transaction forms.
How do I get a boat lien release from a failed bank?
You can obtain a boat lien release from a failed, closed, or defunct
bank by contacting the Federal Deposit Insurance Corporation (FDIC).
They will need information about the boat loan and proof that it was
paid off. This would include a copy of the paid note, copies
of payment checks, or anything else that would indicate payment.
How important is reporting the sale or transfer of my boat?
The "report of sale" is an important item often overlooked by boat
sellers during the commotion of finalizing a sales transaction.
Almost all state and federal titling agencies require some type of
written notification when a boat is transferred, stolen, abandoned,
or destroyed. Most jurisdictions require the seller to file a
"report of sale" form within 10 to 15 days. If the vessel is
documented with the U.S. Coast Guard, the owner must notify the
National Vessel Documentation Center by filing a written request for
removal from documentation.
A prudent seller
should ensure these steps are taken even when relying on a broker or
some other party to handle the transfer. Failure to report the sale
could not only involve penalties, but the state or federal agency
will presume the seller still owns the boat until it is re-titled by
the new owner. A new owner may refrain from recording the transfer
of ownership for certain reasons, or may pass on the ownership
without ever recording the interim ownership at all. This could
prove troublesome if the boat is subsequently
involved in some type of entanglement. The burden would then be upon the
owner of record to disclaim ownership.
Should I participate in a paper trade on the sale of my boat?
Many states allow a reduction in sales or use tax on a vessel
purchase for the value of a trade vessel. This has created a
tendency among buyers to request passage of title to their existing
vessel through the seller and then on to a third party. In a paper
trade situation, the buyer maintains control and possession of the
trade pending delivery to the third party. As the seller, you
should should be concerned the implications of stepping into the
chain of ownership, even if only from a technical perspective.
Having become the seller of the trade, you could become liable
for product or title warranties. This may also create tax
obligations depending on the jurisdiction and values of exchange. It
may be worthwhile to consult with an attorney or tax expert before
making such a commitment.
What kind of funds should I accept on the sale of my boat?
As a general rule, any written instrument such as a check or bank
draft can be stopped or dishonored. This applies even to cashier's
checks, but these would be more difficult as they are considered a
direct obligation of the issuing bank. In this case, payment could
unlikely be declined unless there is a condition of fraud,
conversion, or theft. Checks drawn on or through foreign banks are
especially vulnerable as they may not be subject to the same
regulations that protect U.S. consumers. Of course, there is always
a matter of insufficient funds in the account on which a check is
Wired funds are typically
viewed as more secure unless placed into your account by error. When
accepting a check or draft of any kind you should first make sure
the payer is properly identified. It would then be prudent to
contact the bank on which drawn to make sure the account is valid
and that it contains sufficient funds. You should also be aware that
large amounts of cash must be accounted for when depositing into
your bank account.
In any event, you should
consult with your bank representative to determine which type of
payment you can be most comfortable with when selling your boat. Your banker can also advise
you on the typical amount of time in which certain types of deposits
can be reversed. In some cases, especially where large amounts are
involved, you may wish to consult with an attorney to determine your
Must all sellers sign off on boat transfer documents?
In most cases, all of the owners will need to execute a title
certificate, certificate of documentation, bill of sale, or other
transfer instrument. Some exceptions would include an "or"
indication between the owner's names or a survivor of a joint
tenancy. Many state titles will also show "and" designations which
means that all respective owners must sign. The U.S. Cost Guard does
not use these types of qualifiers on documented boats and will
usually indicate the individual percentages owned or reveal the full
method of ownership. Special rules for releasing interest may also
apply to estate situations or trust arrangements. If the subject
vessel is owned by a legal or business entity, all transfer
documents will need to be signed by an authorized representative.
Boat registration or titling agencies may not always require proof
of such authority, but you should require this for your own
protection. In any event, you may wish to consult with the
respective governmental agency or an attorney if you have concerns
in this regard.
How can I secure a boat loan on a floating home?
As a matter of perspective, just about anything afloat with living
accommodations could be viewed as a floating home. However, floating
homes, house barges, and house boats fall into different categories
with respect to the manner in which they are moored, utilized,
titled, registered, and taxed.
Floating homes are building structures that are situated on a platform supported by
floatation devices. House barges are similar to floating homes, except
they are supported by a rectangular hull. House boats are self-propelled
cruising vessels with rectangular cabins situated on displacement type
hull structures. Although not designed for self-propulsion, many floating
homes and house barges are equipped with outboard motors
to avoid city or
county residential classifications.
Coast Guard documentation, state titling, and state registration are
generally available for all three categories of such vessels. This is important
with respect to financing because it provides the lender with a
means of perfecting its loan via a preferred ships mortgage or state level
boat recording. If the structure is not titled, it may become
classified as a mobile fixture to the wetlands property over which
it is moored.
How do I foreclose on a boat loan?
Boat loans are typically foreclosed through actions taken within the
courts or performed non-judicially under state regulations. Such
options are generally governed by the terms of a financing contract
or security agreement and the manner in which the loan was
perfected. These choices can also determine whether deficiencies may
be pursued for any shortfalls from liquidating the collateral.
Caution should also be exercised when using self-help foreclosure
methods as you may become liable if not performed in precise
accordance with state regulations. In any event, you should seek the
guidance of an attorney in determining the best method of
What is the optimal method for securing a boat loan?
Coast Guard documentation with a preferred mortgage is
typically viewed as the optimal security for vessels exceeding twenty five
feet in length. However, this may not
always be the best answer with regard to realities of
the marketplace. Although a
preferred mortgage is generally recognized as the best method for
perfecting contractual boat liens, it is usually more expensive and cumbersome
to deal with than state titling. Accordingly, lenders are often confronted
with varying degrees of resistance from borrowers who are usually the ones
to bear such burden. This is especially true on smaller vessels where
documentation may not otherwise be advantageous.
The issue of
optimal security can not, therefore; always be viewed in
precise terms. It may instead come down to a matter
of calculated choices based on certain loan
conditions. While some lenders have established parameters within
which a preferred mortgage is required, others may call for it on
every qualified vessel. In order to best resolve this equation, a
lender should look carefully at all of the various implications. In
doing so, the services of a marine attorney may well be worthwhile.
Where can I find marine, boat, or vessel escrow services?
You are not likely to find the equivalent of typical real estate escrow
services in the marine industry. Boat or vessel escrows are for the
most part handled by yacht brokers, commercial lenders, a few
documentation companies, and perhaps an attorney who is willing to
become involved in such transactions. Other than attorneys and
commercial lenders, there is very little by way of bonding,
accountability, and governmental oversight with respect to the way
marine escrows are handled. Brokers are regulated in some states,
but documentation companies are usually not subject to any such
constraints. You should accordingly conduct a great deal of
investigation before handing large sums of purchase funds over to an
independent marine escrow agent.
When should I file a boat Uniform Commercial Code (UCC) financing statement?
A Uniform Commercial Code ( UCC ) recording is appropriate for
perfecting an interest in a boat, trailer, or outboard motor that is
neither state titled or Coast Guard documented. However, many
lenders elect file UCC statements as a precautionary measure until
higher level recordings have been implemented. UCC filings are most
common in states that register boats, but do not issue corresponding
titles. You should keep in mind that a UCC filing may not be the
best long term protection on boats that can become subsequently documented or
How can I detect existing boat loan security interests?
In order to become perfected and prioritized, boat loan
security interests must be properly recorded. The manner in which
this becomes implemented depends on how the boat is registered,
documented, or titled. Where to search for loan security interests
is therefore based on such circumstances.
If a vessel is documented
with the U.S. Coast Guard, it will be necessary to obtain an
abstract of title that corresponds to the respective official
documentation number. This will show all mortgages that have ever
been recorded against the vessel and any releases or satisfactions
which have been filed as evidence of their discharge. Abstracts are
sometimes complex and difficult to interpret so you may wish to
retain the services of an experienced documentation specialist. An
abstract should be inspected even if the vessel is reportedly no
On state titled
vessels a lender's secured interest is recorded on the respective
title and/or registration records of the issuing state. In most
cases, the secured parties will be shown on the title certificate
itself. However, this is not always the case and you should never
rely on the face value of boat title certificates. The appropriate
recording agency should be queried with regard to the certificate's
validity and further evidence of any liens or secured interests.
Certain states do not
issue boat titles and offer registrations only which serve as
evidence of ownership where the boat is not Coast Guard documented.
Lender security interests are not typically recorded on such
registration records, but this should always be verified with the
respective jurisdiction. Uniform Commercial Code ( UCC ) recordings
are the appropriate venue for recording financing interests in
non-title states. Such records should be searched under the owners
name and address as shown on the registration certificate along with
any other known aliases.
Titling and registration
methods are less than consistent due to the various means by which
boats can become titled, documented, or registered. Lines of
communication among various states and federal agencies with regard
to the exchange of boat information are inadequate at best. Tracking
ownership and boat loan security interests can therefore become