On the title of the boat that I want to buy is typed, "Caution. This boat may have a lien on it." What does this mean?
Eric Freedman
Jon Shattuck responds:
The title (or USCG documentation) is the instrument used to prove, and transfer a vessel's ownership. Titles can be easily handed over from the seller to the buyer with the seller's signature and the new owner's name and address. Then the new owner applies for a new title with the old title attached to show proof of purchase and ownership.
If a lien is registered on the title, this lien has to be satisfied and the state where the title was issued needs to be properly notified so the title can be transferred "free and clear." Liens are usually noted on the title with the lien holder's name, etc., but you will want to perform some due diligence to be sure.
Call the appropriate state office where the title was issued, requesting to confirm whether the title is valid and the lien status. They always ask for different information, so be prepared to provide the title or registration numbers, the owner's name and address, boat, make, age, size and/or name. Simply ask the buyer to provide you with a copy of the title to ensure you have all the proper information in hand. The seller's lending institution will provide a "satisfaction of lien" letter which the state will require to remove the lien.
Even if the seller believes the lien is paid, it only counts if the lien satisfaction has been properly registered with the state. If there is a lien on the boat, a portion of the purchase price equal to the lien can be paid directly to the bank at closing and the balance paid to the seller. Sometimes the seller has to bring additional funds to the table if the lien amount exceeds the selling price (I hate it when that happens).
If you are financing this purchase, your bank will make sure the title is "free and clear," and all paperwork needed to transfer the title (and register its lien on your title) is in place before it will transfer funds.
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