Ask a Maritime Attorney: How can I determine if this is a valid lien?

Question:

I am in a contract to buy a Coast Guard documented boat. The sea trial and survey have been scheduled and my broker conducted a lien search to confirm clear title. The lien search was conducted through the Coast Guard and also through a private lien search company. The Coast Guard search came back with no recorded liens, but the private search found a lien that was recorded in 2005. Is the private search more comprehensive or reliable than the Coast Guard search? How can I determine if this is a valid lien?

Answer

Several private companies have sprung up over the past few years that purport to act on behalf of the Coast Guard, theoretically saving you the hassle of dealing directly with the Coast Guard on vessel documentation issues. Be careful when dealing with these companies. BoatUS warns boaters:

“These internet businesses, while legitimate and legal, are not endorsed by the Coast Guard and often have misleading websites that may fool visitors into thinking they are official government entities, complete with official-looking logos and photos of what seem to be Coast Guard boats.”

The Coast Guard warns that it “does not endorse any of these companies, and the companies do not operate on behalf of the Coast Guard in anyway.”

For the most part, these private companies focus on renewing a vessel’s documentation at a price significantly higher than the fee charged by the Coast Guard, but they are apparently expanding into the lien-search business. Before using one of these services, boaters need to know that there is only one legitimate source of information for Coast Guard documentation information, and that is the Coast Guard’s National Vessel Documentation Center (NVDC) located in Falling Waters, West Virginia, and on the web at http://www.uscg.mil/nvdc/.

The Coast Guard warns that “the only legitimate Coast Guard website offering documentation uses a ‘.mil’ domain name. Web domains using ‘.us,’ ‘.com,’ ‘.org’ are not authorized.”

To complicate the landscape further, we should note that these warnings are directed at private companies that appear to perform work on behalf of the Coast Guard. These companies should not be confused with legitimate vessel documentation services that assist boaters with filing and retrieving Coast Guard paperwork. The best of these companies are all members of the American Vessel Documentation Association (AVDA), and they can be found on the web at www.americanvessel.com.

With those warnings in mind, let’s look at our reader’s case. First, as noted above, the fact that the Coast Guard has no record of the claim automatically calls it into question, but there are other reasons to challenge the credibility of the claim. This will require a quick review of the nature of maritime liens and the lien recording system, so bear with me as we get into the weeds a bit.

The Coast Guard will allow practically anything to be recorded against the title of a vessel, so long as it includes a notarized signature and a declaration to the effect that the lien holder believes the lien is valid. In fact, the NVDC warns that “neither the filing of a notice of claim of lien nor the acceptance by the Coast Guard of such a notice is a guarantee that the claim is valid or enforceable.” As such, even if the claim was reported by the NVDC there is no guaranty that it is valid. Unfortunately, whether the claim was legitimate or not, it stays on the vessel’s recorded title history until the lien holder files a subsequent document to release the claim or a court issues an order to instruct the Coast Guard to release the claim.

So, in view of the convoluted lien recording process, why bother to record a Notice of Claim of Lien (NCL) at all? First, in the event of a foreclosure by another creditor (a mortgage holder for example), notice of the action must be given to all other lienholders who are known to exist. Recording the NCL will therefore keep a lienholder informed as to other lien enforcement activity involving the boat. Second, the enforcement of a lien, whether it is recorded or not, generally requires the involvement of a Federal Judge and a “civil arrest” of the boat by a U.S. Marshal. This is an extremely expensive process, and it may not be an option for a relatively small claim against the boat. The recording of a NCL, however, is an effective method for a lienholder to get the attention of a boat owner, without undergoing the expense of a foreclosure.

Our reader has another reason to question the validity of the claim. The information from the private company indicates that the claim arose in 2005. As noted above, the claim (if it had been properly recorded with the Coast Guard) would stay on the recorded title history forever unless it is released. But the claim cannot be enforced unless a court finds that it is valid.  Maritime liens are fundamentally based upon a breach of contract for the underlying services to the vessel. And, while the lien claim may remain on the title history forever, a breach of contract is subject to a statute of limitations that will bar a lawsuit from proceeding after a period of time. In California, a lawsuit for breach of contract must be brought within two years for a verbal agreement, and four years for a written agreement. The claim against our reader’s boat is 17 years old and as such it is clearly time-barred.

With all of this in mind, our reader should not be concerned about the lien claim that was reported by the private company’s search, even if it was once a valid claim, and even if it was also reported by the NVDC.

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 (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com,  or via email at dweil@weilmaritime.com.

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