Can Small-Boat Mechanics Put a Lien on a DMV-Registered Boat?

I have a small boat repair company in Orange County. Several months ago, I completed a job on a 30-foot powerboat, but the boat owner has refused to pay the final invoice in the amount of $3,600. He has not contacted me to complain about the work, and he has not returned my telephone messages. The boat is “CF” registered with the California Department of Motor Vehicles. Can I put a lien the vessel, or do I need to sue the owner in small claims court?

We have devoted quite a few installments of this column, over the years, to the subject of maritime liens — but there always seems to be a new twist out there that we have not addressed. In this case, our reader is concerned with the procedures for enforcing a small lien against a California-registered boat, and this is not something we have previously discussed.

A person who provides services to a vessel automatically has a lien against the vessel to secure payment, and very little is required to perfect that lien.

For a documented boat, the lien is automatically perfected with no action required by the lienholder, as long as the service was actually provided to the vessel and it was performed with the consent of the owner. A lienholder may record a notice of claim of lien with the Coast Guard, but that recording procedure has no legal effect other than to provide notice to the world that a lien has been claimed against the boat.

Similarly, there is no actual procedure to put a lien on a CF-registered boat either, other than simply sending a demand letter to the boat owner, advising him or her that the vessel may be subject to sale pursuant to the California Boater’s Lien Law (see California Harbors and Navigation Code sec. 502).

California law does set forth certain requirements that a boat repair company must comply with, if it wishes to eventually pursue a lien claim against a CF-registered boat. But for the most part, these guidelines address the communication with the boat owner during the course of the repair.

For example, the boat owner must give written authorization for the job, and the repair facility must provide a written estimate (California Harbors and Navigation Code sec. 413). Failure to comply with these guidelines will prevent a lien from arising against the vessel, — but these procedures are good business practices, regardless of whether the repair invoice is paid, and they are not technically a part of the lien claim procedure.

So, for both a CF boat and a Coast Guard documented boat, the lien is basically automatic, without the need to record anything with any government agency. The more important question, therefore, is how to enforce the lien. In other words, how does the repair facility convert a lien against a vessel into money?

For a documented boat, a lien claimant can initiate a federal vessel arrest procedure, which often leads to the sale of the boat through a U.S. Marshals’ auction. We have discussed this procedure in previous installments of this column, and noted that the legal fees are prohibitively expensive for the enforcement of a small claim (see, for example, “Ask A Maritime Attorney — Foreclosing on Lien Not Necessarily Worth the Cost,” The Log, Dec. 14, 2006).

Enforcement of a lien claim against a CF-registered boat is a little easier. The lienholder works with the California DMV to sell the boat, and the money is paid to the lienholder from the proceeds of the sale. This sounds pretty simple, but there is one big problem with the procedure: It is only available when the lienholder has possession of the vessel.

If the lienholder does not have possession of the boat, he or she is not authorized to go out and repossess the boat — and this presents a real roadblock for the enforcement of the lien. As a consequence, the DMV procedure is usually only practical for shipyards (assuming they have not launched the boat) and for marinas that are enforcing a lien for slip rent (assuming the boat is still in the marina).

So, repair liens can be a pain in the neck to enforce. But it is important to understand the purpose of a lien. A lien is a financial security device that provides collateral to secure payment of an obligation. The question of whether a lien is valid, or of the enforcement mechanism for a lien, has no bearing whatsoever on whether the money is actually owed.

In our reader’s case, he does not have a lien because he does not have possession of the boat — but this simply means that he cannot take advantage of the DMV procedure to conduct a lien sale. His claim against the boat owner is still valid.

In view of the amount of money involved with our reader’s claim, he should consider filing a lawsuit against the boat owner in small claims court. Assuming he is awarded a judgment, he can take steps to enforce the judgment against any of the boat owner’s property, including bank accounts and other assets, as well as the boat itself.

An attorney experienced in debt collection may provide additional insight into methods for enforcing a state court judgment and, of course, a maritime attorney experienced in lien enforcement should be consulted for more specific information on maritime lien creation and enforcement.