ULC

Certificate of Title for Vessels Act Summary

The Uniform Certificate of Title for Vessels Act

 - A Summary -

State of the Law

Currently, all states and territories have a certificate of title law for motor vehicles.  These laws vary only slightly with respect to which motor vehicles are covered, and all or almost all of the laws are based on where the vehicle is principally garaged.  As a result, there is no significant overlap or duplication of coverage.

In contrast, only two-thirds of the states have a certificate of title law for boats and other vessels.  Moreover, in two discrete ways these statutes vary widely in scope.  First, they do not all cover the same types of vessels, each making its own distinctions based on size and propulsion.  Second, the statutes vary in whether they are based on where the vessel is principally used, where it is principally moored, or where the owner resides.  Consequently, significant gaps and some duplication in coverage exist.  The gaps allow for extensive fraud:  title to a stolen vessel can be washed by moving the vessel to a new jurisdiction that either has no titling law or has a statute that does not cover the type of vessel stolen.

Several other problems plague the existing titling laws for vessels.  First, none was written after the revision of Article 9 of the Uniform Commercial Code, which all states have since enacted, and few of the laws seem to have been written with much attention to the UCC at all.  Accordingly, it is often difficult to harmonize a state’s titling law with its laws governing sales of vessels and security interests in vessels.  As a result, difficult interpretive problems arise.

Second, none of the existing laws has been approved by the U.S. Coast Guard.  If such approval were given, security interests perfected under that law would be accorded the status of a preferred ship mortgage under federal law.  That in turn would likely facilitate vessel financing.

Third, very few state title laws for vessels provide for the branding of the title of a damaged or salvaged vessel.  This means that buyers may unwittingly purchase a vessel that has hidden structural damage and is therefore unseaworthy and unsafe.  This is a particular problem after a hurricane or other natural disaster in which many recreational boats are damaged.  Owners and insurers often sell the damaged boats for salvage to buyers who make cosmetic repairs and then re-sell the boats without disclosure of the casualty.

The Uniform Act

The Uniform Certificate of Title for Vessels Act addresses all of these problems.  In general, the act covers all vessels at least 16 feet in length and all vessels propelled by an engine of at least 10 horsepower.  Exceptions exist for seaplanes, amphibious vehicles for which a certificate of title is issued pursuant to a motor vehicle titling act, watercraft that operate only on a permanently fixed, manufactured course, certain houseboats, lifeboats used on another vessel, and watercraft owned by the United States, a state, or a foreign government.

The act applies if the vessel is used principally on the waters of the state.   An owner must, within 20 days of becoming an owner or within 20 days of when the vessel becomes used principally on the waters of the state, apply for a certificate of title.  However, no application is required for a federally documented vessel, a foreign documented vessel, a barge, a vessel under construction, or a vessel owned by a dealer.

A title application must include information about the owner or owners, the vessel, and any secured parties.  The application must be accompanied by documentary evidence showing the applicant to be an owner of the vessel.  Most of the information in the application will then be put on the certificate, although the owner’s social security number or taxpayer identification number will not appear.  The titling office will maintain its records so that searches about vessels can be conducted by the vessel’s hull identification number, by the vessel number, or by the owner’s name.

The act includes a novel branding requirement.  If the integrity of a vessel’s hull has been compromised by a casualty event, the owner or insurer must, prior to selling the vessel, either note this on the certificate or apply for a new certificate that indicates that the vessel is “hull damaged.”  Failure to comply with this rule renders the offender liable for a civil or administrative penalty.

Under the act, a certificate is prima facie – but not conclusive – evidence of the facts appearing on it.  Similarly, the act provides that a transferor who complies with the act’s rules on transferring title is not liable as owner of the vessel for an event occurring after the transfer, regardless of whether the transferee applies for a new certificate of title.  Collectively, these rules prevent courts from ignoring real transactions and treating the certificate itself as the only document relevant to actual ownership.

The act includes rules governing security interests in vessels.  These rules include provisions on choice of law, when and how to perfect through notation on the title certificate, when and how a security interest may be perfected in another manner, how to terminate perfection, and the effect of minor errors in the application or in the certificate.  The act also includes some rules on the priority of security interests in a vessel.  All of these rules are consistent with those in Article 9 of the Uniform Commercial Code, which governs security interests in motor vehicles and other personal property.

Conclusion

The Uniform Certificate of Title for Vessels Act represents a significant reform over the current patchwork of vessel titling statutes.  It was drafted with extensive input from boat manufacturers, dealers, state boating law administrators, and the U.S. Coast Guard.  Each state should adopt the uniform act as soon as possible.