Boat Loan Perfection
BoatWiki - Definitions
Definition
Dec 22, 2023 - A loan perfection in boating terms can be defined as the process of recording a secured boat loan in such a manner as to attain priority over any competing or subsequent filings of the same nature. Such recordings will not, however, preclude any qualified maritime liens even if non-recorded. Secured loan recording methods will vary according to whether a boat is USCG documented, state titled or registered only. A perfected loan is sometimes referred to as a secured, preferred, prioritized or collateralized interest in the boat.
Security Agreement
The perfection process begins with a boat loan security agreement (WikiTags) wherein the owner pledges the subject boat as collateral. In addition to a warrant of clear and free ownership, the agreement sets forth the conditions under which the owner must insure, maintain, and operate the boat. It furthermore dictates the terms of foreclosure in the event of a default of the re-payment terms..
Preferred Vessel Mortgage
The ultimate method of perfecting a boat loan is through the procurement of a preferred vessel mortgage (WikiTags). This is a federal recording which accordingly takes precedent over anything filed on the state level. However, the vessel must first become USCG documented and the owner must be a U.S citizen. It should be noted that boats under approximately 25' in length will not qualify for documentation (WikiTags).
State Titling
Although not all states issue titles for boats, this would be the secondary method of perfecting a loan for boats which are not documentable. In this case it's simply a matter of naming the lender on a title application as the secured party or as the legal owner in some cases.
Uniform Commercial Code Filing (UCC)
If a non-documentable boat is registered in a non-titling state then a UCC filing is the only viable alternative. These are typically recorded with a secretary of state's office and should by a copy of the loan contract and security agreement Some lenders will chose file these in any event just to cover any included personal property that may not be part and parcel of the boat itself. This may include such items as removable furniture, bedding, appliances and small dinghies.
Conclusion
Choosing the right method of perfecting a boat loan can be confusing to the layperson. Those who are not familiar with such issues should consider the services of a qualified attorney and experienced boat titling professional.
Credits and References
Dec 22, 2023 - Page revised.
May 12, /2022 - Page initiated.
