I am buying a boat through a yacht broker and the sea trial and survey will be completed next week. In the interim I asked my broker and the documentation company to start the title search, but I quickly learned that the title search process for a yacht is a lot different than it is for a house. For example, the documentation service has ordered an Abstract of Title from the Coast Guard, but they advised that they cannot confirm that the boat has a clear title even after reviewing the Abstract. Can you shed some light on the maritime title search process and the role of a vessel documentation service?
A title search for a vessel differs considerably from the procedure for a house. This is due in large part to the fact that a vessel may be registered or titled anywhere in the world, while the title records for real property are generally found in the state and county where the property is located. As such, the respective roles of a vessel documentation service and an Abstract of Title differ considerably from their counterparts in a real estate transaction.
A vessel documentation service provides guidance, research, and clerical assistance in the processing of claims against a vessel and vessel title transfers. Most qualified documentation service companies are members of a national trade group known as the American Vessel Documentation Association (on the web at http://www.americanvessel.com/). AVDA members provide a valuable service and we highly recommend using them for any vessel title issues. They are not, however, a title insurance company, and they are not obligated to clear up a title problem that may have been undisclosed or overlooked prior to the purchase of a boat.
A Coast Guard Abstract of Title is a record of all of the documents submitted to the Coast Guard for a particular boat and accepted for recording by the Coast Guard. An Abstract is available for all Coast Guard documented vessels, either through a vessel documentation service or directly from the Coast Guard’s National Vessel Documentation Center (www.uscg.mil/hq/cg5/nvdc/).
Many people view an Abstract as a vessel title history, but this is not exactly correct for a number of reasons. First, it lists only materials that were accepted for recording by the Coast Guard during the time that the vessel was Coast Guard documented. As such, there may be lengthy periods of time that are not accounted for if the boat was ever registered in a state (such as through the California DMV) or in another country.
More importantly, the recording of a lien with the Coast Guard is optional. As such, a valid lien may not be listed on the Abstract, and a claim that is listed may not be a valid lien. An Abstract is therefore not a definitive “title history” for a vessel.
Notwithstanding the shortcomings of an Abstract as a title history, a wide range of information is listed on the document, and in view of the fact that title insurance is not available for a yacht, the document should be reviewed carefully.
The Abstract starts by identifying the vessel by name, Coast Guard Official Number, and Hull Identification Number, together with a discussion of where, when, and by whom the vessel was built. This information by itself is helpful. A prospective buyer should be sure to compare the Hull ID Number and Official Number on the Abstract with the numbers that are permanently marked on the boat, and confirm that the numbers match.
After the identifying information, the Abstract lists a series of documents in chronological order. Most users of an Abstract are concerned with three principle documents: A Bill of Sale (to evidence a transfer of ownership), a Notice of Claim of Lien, and a Preferred Ship Mortgage. It also lists a Satisfaction of Mortgage and a Satisfaction of Claim of Lien, which are used to cancel the original mortgage or lien claim, as well as various lesser-used documents such as for the recording of a court order or for Coast Guard administrative purposes.
When lenders review an Abstract of Title, they start from the top and confirm that the transfers of ownership accurately track the history from seller to buyer, they confirm that every prior mortgage is followed by a satisfaction of mortgage, and that every Claim of Lien is followed by a Satisfaction of Claim of Lien. They understand that the lien information may not be conclusive, but on the other hand, an outstanding claim of lien is a problem whether or not it is legitimate.
Most people who review an Abstract of Title will stop when they confirm that the liens and mortgages all appear to be satisfied. But the Abstract offers more information if we look just a little deeper. For example, a large Claim of Lien may appear to have been satisfied, but what if the claim was made by a salvage company? This would tell us that the boat had suffered a catastrophic loss at some time that may not have been disclosed.
After reviewing the Abstract, discuss the recent history of the boat with the seller. Confirm that invoices for recent work on the boat have been paid and that the seller is current with monthly slip rental payments.
Careful attention to these procedures will provide peace of mind to buyers in 99% of yacht purchase transactions, but the bottom line is that the title history for a boat can never be as clear and secure as the title history in a real estate transaction. Contact an experienced maritime attorney for more information about your specific purchase.
David Weil is licensed to practice law in the state of California and, as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, is a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. He is also one of a small group of attorneys to be certified as an Admiralty and Maritime Law Specialist by the State Bar of California. If you have a maritime law question for Weil, he can be contacted at (562) 438-8149 or at email@example.com.
David Weil, Esq.