If a person sells a boat, and holds a short term Note on the boat,
for 80 % of
the sale price of the boat, what happens, if the new owner takes the
boat to a
boat yard and has a lot of work done on it, then,boat owner fails
to pay the
Note? He defaults.But when the Note holder goes to get the boat, it
has an
outstanding yard bill of, say $10,000. The Yard will not release the
boat, and
puts a lien on the boat. Now the owner can not sell the boat without
paying the
Lein.
QUESTION: How can the Seller/Note holder prevent this from
happening? I'm not
sure what to put in the Note/Sale Agreement to protect from this
happening?
Any ideas? Thanks
Lets back up a step. What difference does it make that you are
selling the boat? Suppose you don't sell the boat, but lend it to
your cousin instead. If the cousin takes it to the shop to get some
work done, and it ends up with a $10,000 possessory lien attached, are
you stuck with the lien and therefore the bill? I don't know about
boats. Are mechanics liens on boats the same as on cars? If you
don't know, that's your first area of research. It may be that
keeping title to the boat until it is paid for wouldn't do any good
regarding the lien. Sorry I can't answer, but you need to find out.
If you find out that boats are not like cars, and that it's possible
for the repair company to place a lien on the boat only if owner signs
something, then don't let your buyer be the owner. Lease the boat
with an option to buy, or use a conditional sales contract under which
title doesn't pass until final payment.
I can't tell you it's crazy to carry 80%, because maybe you can't find
a qualified buyer. But it would be crazy if you have a choice. What
happens if the buyer sells the boat to a chop shop (or whatever that's
called when referring to boats) and tells you it's stolen and doesn't
make any more payments. Who gets the insurance proceeds? It won't be
you unless you take steps now to make sure that it is you.
One less than likely option is to get the repair company to sign
something in advance that says they will look to the buyer for payment
and not you, and will not place a lien on the boat, and hereby waive
all lien rights. Then you give possession of the boat to the boat
company instead of to the buyer.
The best option is to keep the boat until you find a qualified buyer.
Meaning, one who qualifies for a bank loan, so that you get paid 100%
up front.
McGyver
