Whether you are buying a boat for the first time, or simply have not been boat shopping in ages, it is important to understand the technicalities of purchasing a boat. Over the next several weeks, we will discuss a few issues to consider, including insurance, registration and documentation, surveys and contract terms. Today, we will begin the series discussing options to obtaining title to a new boat or vessel.
How to Obtain Title to a New Boat
All vessels on Florida waters, unless expressly exempted, are required to have a Florida vessel title issued by the Florida Department of Highway Safety and Motor Vehicles. A purchaser of a new or used vessel has 30 days to title and register that vessel. During this 30 day period, the owner must have proof of the date of purchase aboard the vessel. Operating an unregistered vessel after 30 days is a second-degree misdemeanor. The requirement applies to stored vessels as well as those being operated.
Even if you plan to tie your vessel to a dock and never use it, the requirement still applies. However, there are exemptions. For example, vessels used exclusively on private lakes and ponds, non-motor powered vessels under 16 feet in length and federally documented vessels are exempt from the state title requirement.
Maritime Liens
The passage of vessel title works just like auto titles in Florida. When purchasing a vessel, there are many issues that a purchaser should be aware of regarding the title. Specifically, that a purchaser of a vessel takes that vessel with all maritime liens and encumbrances whether known or unknown. A lien is a cloud on title and may restrict the free transferability of a recreational vessel. An encumbrance, on the other hand, generally refers to mortgages or security interests created by written agreements.
Before purchasing a vessel, the prospective purchaser should obtain an Abstract of Title from the U.S. Coast Guard National Vessel Documentation Center. The Abstract of Title should identify any mortgages or claims of lien recorded with the Coast Guard. However, because some liens are secret, the Abstract of Title may not accurately represent all existing liens on the vessel. A purchaser should require, and almost all boat transactions include, a representation from the seller that the vessel is free and clear of all liens and encumbrances.
Unfortunately, sometimes there is no way to assure the purchaser that the vessel is being purchased lien free. Unlike real property, there are no title insurance companies nor are there mandatory requirements for recording maritime liens. Therefore, the only means by which a purchaser is assured of a lien free vessel is by the representation of the seller that the vessel is free and clear of all known liens and encumbrances. A purchaser should, to the extent possible, check with those who may have performed work or provided services to the vessel or with whom the vessel’s owner was dealing in the months preceding the sale. Additionally, the purchaser should demand written assurance that the seller will indemnify the buyer against all claims that may be brought against the purchaser for liens that attached prior to the sale.
Title Concerns When Purchasing a Boat with a Second Party
If you are married, or purchasing the vessel with friends or for a business, questions may arise about whose name should be on the title. Holding title to a vessel or personal watercraft in joint name with your spouse is not recommended. By doing this you open up all assets you hold in joint name to attack in the event of a lawsuit.
If you title the vessel in your name alone, you have exposed assets that only you own to a lawsuit. Because Florida has such strong asset protection laws for LLCs, ownership by a limited liability company (LLC) or a full corporation, is often advised over private ownership because ownership by an LLC protects, if not insulates, against liability.
Please feel free to contact me for additional information about purchasing a boat at amanda.ross@henlaw.com or by phone at 239.344.1249.