One reason for this complex system is that, unlike real property, a boat can leave the jurisdiction where the lien arose. And, if the boat leaves the country, the problem gets even more complex because the rules of the foreign country must be considered.
The basic rule for pursuing a lien against a boat that has left the country is that the validity of a lien, the enforcement mechanism and the priorities among competing lien holders are all determined by applying the law of the country where the enforcement proceeding is initiated. This is important because the American system of ranking and enforcement differs from most of the rest of the world.
Maritime liens may arise from many different sources, including crew wages, salvage and a long list of other services that have little to do with a recreational boat. The liens that concern a typical recreational boat owner are limited to the mortgage and to claims for services rendered, such as mechanical repairs, shipyard work and slip rental. A lien for services rendered such as these is known as a lien for “necessaries,” and this is one area where U.S. law differs substantially from the rest of the world.
In this country, a lien for necessaries will be a senior claim against the boat if it arises prior to the recording of a mortgage. This is important because the mortgage may otherwise consume all of the owner’s equity in the boat.
Even where a lien for necessaries arises after the mortgage, it is a valid lien that may be enforced through a federal court procedure to arrest the boat. And the lien will stay with the boat after it is sold, even if the buyer has no notice of the existence of the lien.
Other countries are not so generous. For example, in Canada and the United Kingdom, a lien for necessaries is valid only while the lien holder has possession of the boat. It is always subordinate to a mortgage, regardless of when it arose, and it is automatically extinguished upon the sale of the boat. A service provider in the United States is therefore well advised to enforce his or her rights before the boat leaves the country.
Legal issues aside, there are a number of practical steps that a service provider can take to protect his or her interest in the boat, even after it leaves the country. Assuming the boat is U.S. documented, the most important task is to record a Notice of Claim of Lien with the Coast Guard. As noted previously in this column, the recording of this notice will not prevent the Coast Guard from processing a sale of the boat, but it will provide notice to the buyer of the existence of the claim.
For a boat that is traveling internationally, the recording of the claim is much more important. A foreign buyer will need to remove the boat from U.S. documentation in connection with the purchase, and the Coast Guard will not allow the removal to proceed if a lien notice has been recorded. A sale to a foreign buyer will therefore force the owner to deal promptly with the lien claimant.
One highly regarded treatise on maritime law pointed out that “a lien is a lien is a lien, but a maritime lien is not.” This expression should by itself encourage anyone who is either enforcing or defending a maritime lien to seek the advice of an experienced maritime attorney. The problem is made more complex where international enforcement is sought, and in those cases the parties should each seek the advice of a maritime attorney in the country were the boat is located.
Please note 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.