Penalties for exceeding 30-day registration...

[travlineasy]

Maryland, like many states, requires that you register your boat within 30 days of purchase. Upon registration, you are required to come up with a big chunk of money based upon the purchase price, or the blue-book value, whichever is highest.

A friend recently purchased a Documented boat that had an outstanding lien. Because the lien had not been satisfied prior to the purchase, the bank claimed they could not release the title until all the paperwork had cleared. After weeks of calling the bank and asking for the title, the bank said "We don't have a title for the boat--it's documented and you will have to obtain documentation from the Coast Guard, a process which took months.

Because of the delays, when the owner(s) went to Maryland's DNR office to register the boat, they not only had to pay the 5-percent tax, but additionally, $219 in penalties and interest. DNR said we don't care about the delays in documentation, the only thing that counts in this matter is the bill of sale, which was dated 5 months earlier.

From my perspective, I don't believe they legally owned the boat until either the title, or U.S. Coast Guard documentation papers, were received. They've sent a letter appealing the fines, but in Maryland, the process of getting through the bureaucracy will probably take the rest of their lives before it's resolved.

Gary

[RhythmDoctor]

It's all hindsight now, but I wonder whether the buyer could have gotten the seller to tear up the bill of sale and make a new one with a more current date.

[GeorgeDog]

We had the same problem last summer dealing with federal documentation that was held up while simultaneously trying to fulfill Maryland sales tax and whatever they call the paperwork to get the sticker for the boat.

Regardless of what else happens you are responsible for meeting their deadlines which includes paying sales tax on time. You own the boat when the bill of sale is signed and get to enjoy all of the benefits and liabilities that go along with it. After all your friend was/could use the boat during this period, correct? Documentation has nothing to do with it "legally." If they refund the penalty it isn't because the state is in the wrong, it would simply be a goodwill gesture.

Bottom line: If you buy or bring a boat into Maryland be prepared for a mountain of paperwork including federal documentation (optional), paying taxes, getting the little (use?) sticker, dinghy registration, dinghy and/or boat trailer registration, insurance, and probably some I've forgotten about. Getting all of it right is your, and only your, responsibility.

Just as a side note: I filed the federal documentation myself and found both the paperwork very easy to fulfill and the officials very professional and helpful. Each step of the Maryland process was harder than the entire documentation process (i.e. Do it yourself).

[Minnewaska]

The initial point of failure was probably writing a check and taking ownership with an outstanding lien. That is ill advised, so the registration rules weren't written to accommodate it.

That said, I have found myself in a pinch with documentation. I just mailed in the registration forms with a copy of the application for documentation and it worked. At the least, if I had sent my check and they didn't return the sticker, I suspect I would have avoided any penalties later.

[sailingdog]

I think Minne has hit it on the head... they should not have taken ownership with an outstanding lien. The P&S agreement generally requires that the boat be sold with a title/documentation FREE OF ALL LIENS.

[hellosailor]

This is why you don't buy something WITHOUT CLEAR TITLE.

As an alternative, if the seller is willing you can enter into a "contract for deed" or "contract for sale" which stipulates that you are buying $$ up front and will pay the final dollar and actually make the sale at a subsequent date and time, i.e. when the lien is satisfied and the clear title delivered.

i.e., you're paying $19,999 today for the right to make use of the boat immediately, and to purchase the boat not later than six months from now, for the additional consideration of one dollar, upon delivery of the clear title to you. If the title isn't delivered within that time, you get your money back and they get their boat back.

This is why having a competent broker or attorney involved in the transfer of titled property isn't always a complete waste of time. In this case, call it a $219 lesson.

Whether the tax men will show any sympathy...let us know. In some states, some of them actually would.

[travlineasy]

They signed the check in the bank and the the lien was paid off while they were standing there. That part of the transaction went smoothly. The next part, though, was the bank's fault--they said they didn't have the title at the bank and would mail it within a few days. In fact, they never had the title at all and did not admit this until several weeks later and lots of telephone calls to the bank and the previous owner.

It was organized mass confusion at its very best!

Gary

[sailingdog]

That's cause the bank was probably not very experienced in the marine market, and the fact that the boat was USCG documented and needed the lien cleared on the USCG Documentation rather than the title wasn't something they knew how to do properly.

Originally Posted by travlineasy

They signed the check in the bank and the the lien was paid off while they were standing there. That part of the transaction went smoothly. The next part, though, was the bank's fault--they said they didn't have the title at the bank and would mail it within a few days. In fact, they never had the title at all and did not admit this until several weeks later and lots of telephone calls to the bank and the previous owner.

It was organized mass confusion at its very best!

Gary

[RhythmDoctor]

Originally Posted by travlineasy

They signed the check in the bank and the the lien was paid off while they were standing there. That part of the transaction went smoothly. The next part, though, was the bank's fault--they said they didn't have the title at the bank and would mail it within a few days. In fact, they never had the title at all and did not admit this until several weeks later and lots of telephone calls to the bank and the previous owner.

It was organized mass confusion at its very best!

Gary

Sounds familiar, since banks also can't find the paperwork for a few million houses that they're trying to foreclose on.

I suspect that an attorney with experience in this area, a doc prep/escrow agent, or an ethical broker would have recognized this potential snafu and would have protected your friend by suggesting escrow until the entire transaction was completed properly. OTOH, it's possible that some brokers might have just been in a hurry to get a commission and pushed the sale through despite knowing that banks often don't follow through in a timely manner.

Your friend should look at the bright side. If this was the only mistake, and it only cost $219, he still got hit for less than most attorneys would have charged.