Can a Boatyard Get a DMV Lien Sale for a Coast Guard-Documented Boat?

I have been working with a local boatyard to purchase a 42-foot sailing yacht that was abandoned in the yard a couple of years ago. Apparently the owner ran up a fairly large repair bill and simply walked away from the boat. It is a Coast Guard-documented boat, but since the documentation expired a long time ago, the yard manager said that title can transfer through a lien sale conducted by the California Department of Motor Vehicles (DMV). The boat is available at a really attractive price, but I am concerned about whether a DMV sale can be used to transfer title to me. Can you clear things up?

The yard manager in our reader’s scenario is referring to a lien sale procedure administered by the DMV through the California Boater’s Lien Law, set forth in sections 500 through 509 of the Harbors and Navigation Code. Under the Boater’s Lien Law, a lien arises for services rendered to, or for the storage of, any vessel subject to registration with the DMV.

Under Boater’s Lien Law, the DMV will work with a lienholder by evaluating the claim and communicating with the boat owner. If the department agrees that the lien is valid, it will authorize the sale and process the transfer of title to the new owner.

The DMV sale procedure is fairly efficient, but it has two significant limitations. First, it may only be conducted if the lienholder actually has possession of the boat. This may not be a problem for a boatyard or marina, but a service provider who works on a boat while it is tied to its regular dock will have a problem.

The second limitation with the DMV lien sale procedure is that it may only be conducted for DMV-registered boats. The Boater’s Lien Law does not apply to Coast Guard-documented vessels, and the DMV will not participate in the sale of a documented vessel — even if the documentation has expired.

Under most circumstances, enforcement of a maritime lien against a documented vessel requires the vessel to be taken into custody by U.S. Marshals after a lawsuit is filed by the lienholder in federal court. This is a very powerful enforcement tool, particularly if the lienholder is concerned that the boat may leave town before the owner pays the bill. The procedure allows for a “sneak attack,” with no notice whatsoever to the boat owner before the Marshals arrive to take the boat into custody.

Assuming that the federal judge finds the claim to be a valid maritime lien, the boat may be sold at auction and title transferred to the buyer through a court order. The problem with this procedure is that it is extremely expensive. As we discussed in several prior installments of this column (for example, “Ask A Maritime Attorney — Foreclosing on Lien Not Necessarily Worth the Cost,” The Log, Dec. 14, 2006), the cost of a vessel arrest may easily exceed $20,000, even when the claim is not disputed by the boat owner.

Our reader, in this case, indicated that the abandoned boat has been offered for sale by a boatyard at an attractive price. Unfortunately, the price of the boat is not particularly relevant, since this is not a DMV-registered boat — and, as such, there is no easy mechanism for the yard to transfer title to the buyer without a court order. Under these circumstances, the boatyard should consult with a maritime attorney experienced in lien enforcement. If the owner of the abandoned boat cannot be located, it is likely that the yard will need to file a lien foreclosure action in federal court.