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Boat Title Encumbrance


BoatWiki - Definitions


An encumbrance in boating terms can be defined as a claim or action against a boat which prevents its title from being transferred to another party. This differs from a lien as these do not always prohibit such actions and may follow through subsequent transfers. In order to become effective as an encumbrance, the claim must be perfected through an appropriate governmental recording or by compliance with statutory reguations.


Encumbrances are usually of a contractual nature where a boat is pledged as collateral  through a loan security agreement. They can, however, also result from tax liens, possessory liens, impoundments, repossessions, and court actions.


Encumbrances in the boating industry are typically evidenced by a preferred vessel mortgage or state level boat title recording. Uniform Commercial Code (UCC) filings, although certainly viewed as legitimate claims, do not meet the strict definition of an encumbrance as these may not in themsleves preclude the transfer of a boat title or registration.


Whether a lien or encumbrance, any outstanding claims against a particular boat will usually dissuade a buyer from finalizing a transaction unless cleared. The object is, of course, to make sure all of these are identified and dealt with prior to a closing or settlement.

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4/23/2022 - Page initiated by Team BoatWiki.

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