A recent study conducted by First American Transportation Title Insurance Company, a subsidiary of First American Title Insurance Company, finds that more than 35 percent of recorded maritime vessel
ownership records contain potential title issues.
The October study evaluated
more than 100 randomly selected commercial and recreational vessels listed on
the U.S. Coast Guard’s National
Vessel Documentation Center (NVDC) registry.
Vessel abstracts of title, issued by the NVDC, are commonly relied upon
in pre-owned vessel transactions to provide an outline history of a vessel’s
title ownership from the time it’s built, or first placed under U.S.
documentation. The abstracts contain various title events, including
transfers, some claims-of-lien notices and mortgages. They also include
several indicators of title risk, such as periods where the vessel is out of
registry and unsatisfied claims.
First American found more than 27 percent of the vessels examined were
deleted from NVDC documentation, or had been in state or foreign registries
at one time. During these periods of non-NVDC documentation, important title
events, such as
vessel sales, liens or mortgages were not recorded in the
Coast Guard’s ownership records.
In addition, the study found that nearly 8 percent of vessels examined
had liens filed that were unsatisfied. “Where there’s smoke, there’s often
fire,” said Victor I. Koock,
general counsel for First American Transportation
Title Insurance Company. “We’ve been writing vessel title insurance policies
for more than five years, and we’ve found that vessels with unsatisfied liens
often have hidden liens that are not recorded; thus, these liens are not
listed in the NVDC abstract of title.”
“Maritime law does not require maritime liens to be filed with NVDC,”
said Paul B. Erickson of the law firm Alley, Maass, Rogers and Lindsay. “That
means a vessel buyer might not be aware of a valid and enforceable lien on the
vessel until after purchasing it. The new owner is then faced with paying out-
of-pocket expenses for issues incurred prior to their ownership or, in certain
cases, losing the vessel.”
While current regulations and registry loop-holes present some potential
risks to the consumer, the most frequent problems found in the survey related
to delayed filings of documents. More than 88 percent of vessel ownership
records studied contained one or more documents that were filed with the NVDC
at least 30 days after the date of execution. More than 80 percent of vessels
had delayed filings for important documents, namely bills of sale or preferred
mortgages.
“This is a very serious potential problem for
vessel purchasers and
lenders involved in these transactions,” said John N. Casbon, president and
chief executive officer of First American Transportation Title Insurance
Company. “When buyers review vessel ownership records prior to purchase, these
delayed filings mean they may not be aware of crucial documents relating to
vessel ownership and the seller’s ability to transfer the title. First
American’s vessel title insurance policies provide vessel buyers and lenders
with protection against hidden liens, as well as protect against other title
problems, including fraud, forgery and stolen vessels.”