Question:
I am in the process of buying a boat and I’d like to know more about the Coast Guard Abstract of Title. What information is listed on the Abstract, and is it available for all boats? My lender was unable to approve my loan until reviewing the Abstract, but I don’t recall this being an issue on my previous boat.
Answer
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, as discussed in this column many times, 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. The instrument is therefore referred to as a Notice of Claim of Lien (rather than an actual “lien”), and the recording of the instrument has no legal effect other than to notify the world that someone claims to have a lien. We should note that this treatment is different for a mortgage, which in fact must be recorded to be valid.
In view of the foregoing, an Abstract is not a definitive “title history” for a vessel. Nonetheless, a wide range of information is listed on an Abstract, and that information is used by different people for different purposes.
The document 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 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. Any discrepancy may be evidence of a simple typo, or it could be evidence of a fraud or a crime. It should in any case lead to further inquiry.
It is not uncommon for some of the identifying information to be missing, particularly when the boat was initially registered with a state or a foreign country. However, missing information may sometimes be an indicator of a problem. For example, it may be perfectly legal to register a 70-foot motor yacht with the California DMV, but this would nonetheless be unusual since most large yachts – and all large commercial boats in this country are Coast Guard documented. Since the Abstract of Title would have no information for the period that the boat was DMV registered, a prospective buyer may want to ask a few questions to fill in that missing information.
After the identifying information, the Abstract lists a series of documents in chronological order. Most users of an Abstract are concerned with three principal 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, and it lists various lesser-used documents such as the recording of a court order or a Coast Guard administrative task.
When lenders review an Abstract of Title, they will start from the top and confirm that the transfers of ownership accurately track the history from seller to buyer, they will 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 provides more information if we look just a little deeper. We already discussed the importance of time gaps in the chronological history and missing or incorrect vessel identification information, but information that is otherwise correct may be helpful as well. 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 suffered a catastrophic loss at some time that may not have otherwise been disclosed.
The identity of the owner may also be important. If the first transaction recorded on the Abstract is a transfer to a new boat dealer, but the first sale to a consumer was a few years later, the boat may have been used by that dealer as a demo and the new boat warranties may have been extended by the demo period. Or the identity of a previous owner may provide some insight as to a prior use of the boat. If we know that a boat was owned by commercial maritime service company. our marine surveyor may know to look for some hidden scars that would not otherwise be apparent.
The thing to take away from this discussion is that a Coast Guard Abstract of Title may be a treasure trove of information. Buyers should ask their broker or lender for a copy and then review it carefully for anomalies, even if they are assured that there are no outstanding liens.
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 [email protected].
