1031 Exchanges and Boats

The 1031 Exchange – Rules of Thumb for Boats

Editor’s Note: The tax code has been changed and 1031 exchanges for boats are no longer allowed.  

IRS 1031 Exchange can be used to shield the proceeds of sale of a boat from income tax, when the plan is to use those proceeds to buy subsequent property.  This is a quick primer, not legal advice.  This is not an area that I recommend for DIYers.  

  1. What is it a 1031 Exchange?

The 1031 Exchange is a vehicle by which investment or business property (including that owned by an entity or individually) can exchange one kind of investment property for another while deferring some or all of the taxable gains on that property.     The simplest form of an exchange is a simple swap – my boat for your boat — which assuming no cash changes hands does not trigger tax. Things get increasingly complicated if there is a swap for property and cash, or especially if the property is sold for cash and that money is intended for later reinvestment.  This latter transaction is what is known as a “deferred exchange,” and is the kind of transaction that gets most people in trouble most of the time. All exchanges of investment property must be reported to the IRS on Form 8824, which is available on the IRS website: https://www.irs.gov/pub/irs-pdf/f8824.pdf.

  1. What Kind of Property Qualifies?

The property concerned cannot be primarily for personal use, so in boats, it is most likely to be either commercial stock or boats in charter.  Additionally, the property must be considered “like-kind” and so the property on both sides of the exchange must be of a similar nature. Real property cannot be exchanged for personal property, including boats.  A car cannot be exchanged for a truck. In all probability, a yacht could not be exchanged for a commercial fishing boat or cargo vessel, although this might be dependent on the specific circumstances.

  1. What are the advantages?

For a boat owner with a boat in charter, the boat has been depreciated for tax purposes the boat has been depreciated over the time of ownership.  For this reason, a ten year old boat, from the depreciation perspective, may be considered by the IRS to have a value of zero dollars. If it is sold for a million dollars in 2018, normally the million dollars would be taxable income to the seller, taxed at the applicable capital gains rate, in the year of the sale.  If that money is going to be put back into another boat, then that tax can be deferred to some point in the indefinite future. Avoiding the capital gains on the funds will save the investor 15%-20% in tax, depending on their tax bracket. An investor can downsize in this manner by trading for a less expensive property and paying only the capital gains on any cash received above the trade.  

  1. Deferred Like-Kind Exchanges

As noted, simultaneous exchanges are pretty easy to manage and pretty easy to report.  A deferred exchange introduces a number of difficulties and restrictions, because the cash will be in the hands of the investor for a period of time.  The first issue is that a replacement property (or properties) must be identified within 45 days of the sale of the original property. Notice of this identification must go either to the seller of the property or to a “qualified intermediary.”  Qualified intermediaries have to be qualified to the IRS in advance and they can’t be an agent of the party such as an attorney, broker real estate agent, etc. Assuming that this notice is properly given, the transaction must then close within 180 days of the time that the original property was sold.  If either of these deadlines are not met, then the deferment is lost and the funds are taxable in the year obtained.

In sum — boats that have been depreciated for tax purposes – typically commercial or charter boats – can be the subject of a 1031 Exchange, so long as the exchange is carefully crafted, documented and reported to the IRS.  A private yacht (including one on which a second home deduction is being applied) is generally not property that can be exchanged. For a boat that has been significantly depreciated but retains a high present value, an exchange can represent a significant savings for the owner.  If it is anticipated that the current boat will sell, and then a substitute boat will be identified later, the new boat must be identified within 45 days and the proper notice must be provided either to the seller or to a qualified intermediary. The transaction must be completed in 180 days.  

Baylaw Boat Closing and Settlement Services

Boat closing and settlement servicesBoat Closing and Settlement Services

You can save thousands of dollars over what a broker will charge with complete confidence that your purchase and sale documents and funds will be handled professionally and honestly.  Baylaw will close the deal for 2.5% of the purchase price ($10,000 minimum).  Funds will be held in our trust account; purchase documents will be reviewed by a lawyer; and no money will be released until all parties are fully satisfied that the deal is ready to close.

Baylaw, LLC will finalize your boat purchase or sale.  We:

1. Collect purchase funds in a trust account in preparation for closing.

2. Obtain and review ownership documents for completeness and accuracy.

3. Verify ownership status and publicly filed liens on the boat, yacht or ship.

4. Obtain lien pay-off information.

5. Prepare a settlement statement showing who is to be paid what funds from closing.

6. Pay off all known liens and mortgages.

7. Deliver closing funds to seller and lienholders.

8. Delivering good title to purchasers
In addition, we can also provide the following.

Documentation and registration services for all boats, yachts and ships.

Set up and transfer LLC and corporations and/or conduct asset sales for vessels held in LLCs or corporations.

Provide tax advice related to sales and use tax in any state in the United States.

Provide advice on related legal issues such as recommendations for where and how to title the boat; corporate ownership; chartering; maintaining anonymity, etc.

Documentation and Registration Services

Baylaw, LLC generally does not provide documentation and registration services, but we are happy to review specific transactions handled by reliable documentation agents where the purchase has more complicated tax or international ramifications.

Vessel Purchase – Closing and Settlement

Vessel Purchase Closing and SettlementOnce the contract is signed, the most exciting and harrowing part of the purchase of a yacht or ship is the final magic moment when money and ownership change hands — that is the moment we call closing or settlement. It is truly one of the magic moments in the law: in an instant money is transformed into a living ship and a living ship is transformed into money. There is a great deal of work that must be done, however, before that moment can safely occur.

For a lawyer, representing the buyer is the most complicated transaction because everything must be verified — the identity of the ship, the identify of the owner, the authority of the owner to possess and sell the ship, the title documents offered in the sale. In addition, attention must be paid to the buyer/client — if they are buying through a company, is that company established and in good standing; are the funds going to be available to close; can the use the ship for the purpose that they expect; can it be registered in the location of their choice; is insurance in place? The worries are endless, and inevitably they all come to a last minute peak 24 hours before the scheduled close.
When closing finally occurs, it is the lawyer’s job to be sure that the title documents are legally sufficient to transfer title, that funds are properly allocated, and that possession is given to the new owner.

Every closing is different, but here are some of the questions that we try to answer before any closing becomes final.

1. Can the owner deliver title to the boat free and clear of any liens or mortgages? Answering this requires checking with the registry of the flag nation and in some circumstances doing investigation to be sure that there are no hidden liens. Verifying the identify of the owner is also recommended.

2. Is the boat eligible for sale in the United States? A ship or yacht that has not been properly imported (and paid import duty) cannot be sold in the United States to a US Citizen without paying import duty. The consequences of violating customs law can be significant.

3. What documents will be required by the vessel registry in which the vessel will be placed? All registries will require that the boat be deleted from any prior registry and that properly executed Bill of Sale be executed. Different jurisdictions have many different and specific requirements as well, including the United States, which requires that vessels be primarily owned by US citizens. .

4. Are there factors that require that the closing be conducted in international waters or a different state of the United States than where the boat presently lies? Usually the reasons to conduct an international settlement involve state sales and use tax or the application of duty.

Closing and settlement can feel overwhelming — that’s pretty normal. There are a lot of moving parts and there are always surprises. With good representation, however, the important issues will be resolved: you will either get your boat or your money and be ready to move on to your next projects.

Dirk Schwenk is a maritime attorney in Annapolis, Maryland. He is a member of the Yacht Broker’s Association of America, the Maryland Marine Trades Association and the bar of Maryland. He has been practicing in admiralty and maritime since 1997.

Vessel Documentation, Registration and Flagging

Vessel documentation (also known as Flagging) is a national form of registration, which essentially registers the ownership of your vessel with the shipping agency of the country of choice. In the United States, this is a Coast Guard responsibility, and it is that agency that accepts applications for documentation and also files liens against federally documented vessels. The “Certificate of Documentation” essentially replaces a title and registration that you would receive from state authorities. All maritime countries have similar agencies, with large yachts often flying the flag of the Cayman Islands, British Virgin Islands, Jamaica, as well the flags of the home countries of the owners.

Baylaw, LLC can provide documentation and flagging services for your vessel at a very competitive fixed rate, assuring that you have a lawyer that is looking out for your interests in the closing process.

Documentation or flagging provides conclusive evidence of nationality for international purposes, provides for unhindered commerce between the states, and admits vessels to certain restricted trades, such as coastwise trade and the fisheries.  Vessel documentation also allows for greater flexibility in obtaining financing. Certain types of mortgages, specifically a “Preferred Ships Mortgage”, are only available to documented vessels and are only available from FDIC approved banks or other lending institutions that have received federal approval.

Baylaw, LLC provides documentation and flagging services including, as needed, setting up corporations in the United States or abroad, submitting applications for documentation or registration, perfecting liens and generally problem solving to assure the best experience possible for the vessel owner. We differ from most documentation companies in two ways. First, in addition to getting the proper papers filed, our attorneys are available to consult on complex issues such as avoidance of unnecessary tax, dealing with customs bonds and import duties, as well as review of purchase contracts, crew contracts and charter arrangements. Second, we bill for what needs to be done, instead of setting a price in advance. For simple transactions this will almost always result in savings for the vessel owner. For transactions that become complex, any additional money will go to assuring that you have the best possible maritime advice to solve the problem.

We look forward to working with you.

Legal Considerations for Buying Charter Boats

This article is aimed at people who are considering buying a yacht to be used for charters, or converting their existing yacht for charters.  There are, of course, lots of other things to consider – like how to properly employ a captain and crew; where the boat is going to be located, etc., etc.  But if you are considering charters in the US, this is a good place to start.   Originally published in the Yacht Brokers Association of America Spring, 2015 Newsletter.


Eventually, many people that love the water and love their boats will entertain the idea of chartering their boat.  Perhaps if they can make a little money with chartering, they can write off their expenses and enjoy more time on the water.  This is a great idea, but one that should be approached with solid planning and much caution.  Here are some of the most important issues to consider:

  1. Income Tax Issues.  In my practice, I leave income tax questions to qualified professionals (and if you are going to consider writing off boat-related expenses, so should you).  Here is a rule of thumb, however — you’d better have income related to the boat if you are going to write off losses related to the boat.  Beyond that, lawyers like me are happy to consult with your qualified tax professional.
  2. Insurance Issues.  Almost all personal yacht insurance policies either ban chartering altogether or limit it to a very small number per year.  Carefully read the yacht policy to determine what limitations are currently in place.  About the worst possible result is that you decide to charter the boat, there is a serious injury or death, and then you find out that you have violated the conditions of your insurance policy.  That mistake could be catastrophic.  If the boat is to be chartered, the policy should reflect the scale and duration of the charters.
  3. Banking Limitations.  Many boat loans forbid the use of the boat for any purpose other than as a private yacht, and provide the bank the option to call the note if that prohibition is breached.  I personally have never seen this become a serious issue in a case, and I struggle to imagine a situation in which it would become a serious issue — but no one wants to be the guinea pig tasked with finding the worst case scenario.
  4. Limitations on Crewed Charters.  Only US flagged boats with a coastwise endorsement can be used to carry passengers in US waters (except for American Somoa, the Northern Marianas, and the Virgin Islands)
    1. To be coastwise, a boat must be built (or completely rebuilt) in the United States, or else it must obtain a waiver.  (The waiver application is here: http://www.marad.dot.gov/ships_shipping_landing_page/domestic_shipping/small_vessel_waiver/small_vessel_waiver_request/small_vessel_waiver_request.htm).  Generally waivers are available if a boat is more than 3 years old, cannot carry more than 12 passengers, and will only be used for passengers, not cargo or commercial fishing (sportfishing is allowed, assuming no commercial sale of the catch).
    2.  Tip for Brokers and Buyers: if the owner hopes to provide crewed charters (especially meaning that the owner selects and employs the Captain), then it is imperative that the boat be qualified for coastwise endorsement.  The safest option for this is a US built vessel or a boat with a previously granted waiver.  Less safe, but possible, is a boat that is more than three years old and to be certified for no more than 12 passengers.
  5. Issues with Bareboat Charters.  Most yachts are not built in the US, and therefore are not eligible for a coastwise endorsement (see above, Limitations on Crewed Charters).  The only chartering option for such yachts is to make them available for bareboat chartering.  Some considerations for bareboat chartering:
    1. A bareboat charter is considered to be equivalent of a lease of property — for all intents and purposes the ownership and control of the boat transfers from the title owner to the charter for the period of time of the charter.  The documents and the actions of the parties should reflect this.
    2. A boat under bareboat charter cannot have paying passengers (ie the Captain can’t charter the boat and then have the passengers pay him) as this is a violation of the coastwise protections.
    3. The title owner of the boat is responsible for providing a seaworthy vessel, and may be liable if issues arise.
    4. Although the charterer is responsible for operations, the title owner may be left holding the bag if the charterer engages in illegal activity (like smuggling) and gets caught.
    5. It is strongly recommended that any boat that is made available for charter comply with the inspection requirements for a similar passenger vessel with USCG certification — anything less may be considered unseaworthy or negligent preparation.
    6. While the boat must be fully in the control of the charterer, the owner can place some restrictions such as requiring certain certifications for the Captain and crew; placing navigational limits on region or running at night.
  6. Placing the Boat in a Charter Fleet.  Many boats in the US (and other destinations) place boat in a charter fleet so it is managed by a charter company.  The benefits of taking this path are that typically the charter company handles the contracting, scheduling, maintenance, etc.  On the downside, there may be significant limitations on the owner’s use and customization of the boat.  For an owner looking for a newer stock boat, and who is willing to accept some limitations in exchange for cost savings, this can be a great option.  Brokers may be advised to consider what boats the charter companies are looking for in order to best advise their buyers.
  7. Corporate Ownership.  A boat that is going to be placed in charter for a significant percentage of its use should consider ownership through a corporate entity like a limited liability corporation.  Such an entity provides some protection against liability (although insurance should be the first consideration), some anonymity for the true owner, and also provides an organizing vehicle for income tax considerations.

A buyer (or a buyer’s broker) that is considering purchase of a boat to be used in charter should do some homework before buying.  Considerations such as the location of future charters, the origins of the boat, the size and capabilities of the boat and its marketability should all be evaluated before purchase.  An existing boat can be converted into a charter opportunity, but it is much easier if attention is paid to purchasing the right boat for the job.

J. Dirk Schwenk is a Maryland real estate and maritime law lawyer.  He graduated cum laude from the University of Maryland School of Law in 1997 and has been in private practice ever since.  He has worked on hundreds of matters involving boat purchase, tax, ownership and sale.


Contract Law 101 – Maryland Contracts

Back to Basics – Contracts 101.

(Originally published in the Mid Atlantic Mariners Club Newsletter, 2010).

The first rule of contract: capture the intent of the parties.

In every profession, not just the law, we are faced with making, interpreting and abiding by contacts.  Sometimes these contracts are long and impossible to understand (mortgage refinancings, consumer warranties) sometimes they are so fleeting that one hardly notices (“I’ll pick up lunch”).  In law school, we learn that a contract consists of an enforceable promise.  It’s a promise that one can take to court, and the court can make the other comply or award damages for their failure to do so.  All contracts, though, include a major element of hope and trust and if that trust is broken, bad things happen, and the threat of a court’s intervention may not be enough to save the deal.

When a client comes to me about a contract, it is usually one of three things — reviewing a contract that someone else has prepared; papering an understanding where the framework is already in place; or protecting a client from the risks of a particular kind of deal.  The most frequent contracts for me are boat and ship purchase contracts — these often involve a significant outlay of funds before the product is near completion, and therefore require both trust and legal protections.  With all projects, I generally start with the same three questions.  What are you trying to accomplish?  What has already been agreed to?  How much do you know and trust the other party?

 When it comes to reviewing a contract that someone else has prepared for my clients’ signature, I focus on two things.  First, does it capture the items that my client thinks are being agreed to?  Many times I am given a form contract such as a boat brokerage agreement, and the parts of the deal that are most important to my client (the time of delivery and the promises that the boat will be fully commissioned to spec) are nowhere to be found.  Usually this can be handled with an addendum that sets out the specifics (Boat to be delivered to Maryland on date certain at the seller’s risk and expense), but sometimes the brokerage contracts simply will not do the trick.  Lawyers often joke about the boat brokerage and real estate contracts — they do a great job protecting the brokers or agents, but beyond that, its usually a lot of words that don’t say too much.

 My favorite project is when a client comes to me and says … “I agreed to _____ with ______ – can you write a contract for that?”  I like this kind of project (not just for the irony of the fact that there may already be an oral contract) because it usually allows me to work from the ground up, as opposed to slogging through pages of 8 point font prepared by someone else.  I get to start with “what exactly has been agreed to?”  Typically a clients’ answer to that question feels like the tip of the iceberg … “we agreed that I would sell his product for a 10% commission.”  This leaves open all sorts of lawyer-fun — how much do you have to sell; can you sell competitor’s products, too; can they hire other brokers or salespeople; where will suit take place; what happens upon termination?  And what happens if there is no agreement on all of the side issues?  I love that question.

 The Second Rule of Contract: be reasonable.

Assuming that there is enough of a contract to be a contract (generally that it is known what is being agreed to, including when it is to be done and how much it is going to cost) everything else may be an open term.  In some areas of the law, like partnerships, employment and state insurance contracts, there is a whole body of statutes that fills in the blanks.  In those areas people may “agree” to many things that they never even thought of.  If there are not default terms, then the agreement reverts to the rules of reasonableness.  These rules are essentially human instincts — most people will agree most of the time about certain things even if they have never considered them before.  If the contract is to buy a certain thing (say a house), then it is only for that particular thing, not something else.  If it is for something that is largely interchangeable (like a Blackberry), then it may not mean a specific thing, just a thing like it.  You can usually do well in contracts by staying polite and acting reasonably, but sometimes that is mighty hard.

 The rest of contracts is just simple interpretation — if the words on the paper say to do X, and X isn’t illegal or completely unreasonable, then that is what you do.  Words are notoriously tricky things, though, so one must write with care and make sure that everyone abides by at least the most important terms over time.  There are a few contracts (marine insurance, for example) where certain words and phrases have such a history behind them that their meaning is known with some certainty.  But for most contracts, even ones that have been used many times, no court has ever interpreted the key language, and everyone is operating on   hope that the words mean what they think they mean.  This is the real difficulty with “form” contracts — people trust it because its The Form, but who knows whether it captures the agreement that was really intended.

 What can you take away from all of this?  First and foremost, be sure that the contracts you enter into actually capture what is being agreed to — this can be trickier than you think.  Second, sometimes the simplest contracts are the best ones — agree to the key items, and otherwise act reasonably.  Third, there are times when a very thorough papering is necessary — like when a major asset like a house or a business is on the line.  In those cases, have clear goals and good representation that is looking out for your specific interests.

J. Dirk Schwenk is a Maryland real estate and civil litigation lawyer.  He graduated cum laude from the University of Maryland School of Law in 1997 and has been in private practice ever since.

Maryland Boat Lien Sales and Marina Collections

Maryland marinas and marine businesses have a number of options to collect on unpaid bills.  Baylaw, LLC offers competitive rates to conduct lien sales. We have the legal expertise to assure that you select the right method to ensure the greatest return with the least likelihood of ending up worse a write off.

Maryland Boat Lien Sales:

Three reasons to use Baylaw, LLC to conduct lien sales:

Baylaw LLC Lien Sales
Baylaw Marina Collections

1. We know when the best option is to hold an auction, use the abandoned boat process, arrest a vessel under federal maritime law or simply sue for the amount due. We also know when to tell you that your best option is to walk away and not pursue the debt.

2. The Marina or Marine Business can always negotiate with its customers.  We never stand in the way of a negotiation. We never tell owners that they have to pay our fees to get their boat.  Your customer is your customer.

3. We will not put you at risk for claims of unfair debt collection or consumer protection act violations, and if litigation ever does arise, we will know what to do.

Four Options:

There are four basic options if the boat owner will not pay: 1) conduct a lien sale; 2) seek title as an abandoned boat; 3) arrest the boat under federal maritime law; or 4) file suit against the owner in state or federal court.   Each of these options has its pros and cons.  Baylaw, LLC can help you decide which is appropriate for your situation.

1) Maryland boat lien sales: The most important facts for a lien sale are that you have possession of the boat and the owner’s bill is unpaid at least 30 days.  If those facts are present, and the boat is not a federally documented boat, then a lien sale is a good option.  Notice of the sale must be sent to the owner and secured lienholders and the sale must be conducted in a public place.  Baylaw, LLC does that work at a competitive flat rate.

2) Abandoned boats: This is a good option if the owner is unknown or will not respond or if the boat has no value.  Owner can be forced to claim the boat or lose title.  For higher value .

3) Maritime arrest: this is a good option for a higher value claim or where the marina or maritime business does not have possession of the boat.  If a bill is unpaid, an arrest can be done in any jurisdiction where the boat can be found.

4) Sue for damages: This is another option if the boat is no longer in the hands of the marine business and is especially effective if the owner of the vessel is known and has assets.

If you need assistance with collecting a debt concerning a boat, please contact Dirk Schwenk at 410 775 6805 or dschwenk@baylawllc.com.


Lien Sales – The Times Just Changed.

In October, 2014, the Maryland Court of Special Appeals issued a decision concerning Maryland’s lien and recovery business.  Lien and recovery companies are hired by mechanics and marinas to collect overdue charges for repairs and storage on vehicles and boats. At least as long as I have been practicing, lien companies have added a “processing fee” to the amount owed, and required that the boat or vehicle owner pay the processing fee in addition to the overdue charges in order to get their boat or vehicle back.  If the owner didn’t pay up, then the vehicles were put up for auction.  In Allstate Lien and Recovery Corp. v. Stansbury, however, the vehicle owner fought back.  Mr. Stansbury asserted that including a $1000 processing fee in the amount required to redeem the vehicle was an unfair and deceptive practice, and violated Maryland’s laws against unfair debt collection.  The trial court, and now the Court of Special Appeals, agreed that the inclusion of the processing fee was a violation of the Consumer Protection Act and the Consumer Debt Collection Act.

Violations of the Consumer Protection Act and Consumer Debt Collection Act both have significant consequences.  Consumer Protection Act violations are grounds for shifting attorneys’ fees from the consumer to the business — which means that Allstate Lien and Recovery in this case is likely to be responsible for tens of thousands of dollars (even hundreds of thousands) of fees for Mr. Stansbury’s lawyers.  A violation of Consumer Debt Collection allows for “damages of emotional distress and mental anguish suffered with or without accompanying injury.”  This means that a jury is free to award money for distress and upset, even without any kind of physical symptoms, if the debt collector has acted badly.  Since the lien and recovery company is the agent of the mechanic or marina — those businesses may also be on the hook if the lien and recovery company acts badly.

You are warned.  The unlawful $1000 processing fee may be costing Allstate Lien and Recovery (or hopefully their insurer) hundreds of thousands of dollars beyond what they paid their own attorneys to defend the case.

With those warnings, when does a garageman’s lien attach?  Here is the statute:


(a)(1) Any person who, with the consent of the owner, has custody of an aircraft and who, at the request of the owner, provides a service to or materials for the aircraft, has a lien on the aircraft for any charge incurred for any:

(i) Inspection, maintenance, repair, servicing, or rebuilding;

(ii) Storage, parking, handling, or tiedown; or

(iii) Parts, accessories, materials, or supplies.

(2) The operator of any airport on which an aircraft lands or which is otherwise used by an aircraft has a lien on the aircraft for any landing fee, flight fee, or other charge so incurred.

(3) A lien is created under this subsection when any charges giving rise to the lien are incurred.

(b)(1) Any person who, with the consent of the owner, has custody of a boat and who, at the request of the owner, provides a service to or materials for the boat, has a lien on the boat for any charge incurred for any:

(i) Repair, rebuilding, maintenance, servicing, or wet or dry wharfage;

(ii) Storage; or

(iii) Parts or accessories.

(2) A lien is created under this subsection when any charges giving rise to the lien are incurred.

(c)(1) Any person who, with the consent of the owner, has custody of a motor vehicle and who, at the request of the owner, provides a service to or materials for the motor vehicle, has a lien on the motor vehicle for any charge incurred for any:

(i) Repair or rebuilding;

(ii) Storage; or

(iii) Tires or other parts or accessories.

(2) A lien is created under this subsection when any charges set out under paragraph (1) of this subsection giving rise to the lien are incurred.

(d)(1) A park owner has a lien against a resident’s mobile home, if the park owner obtains a judgment against the resident under Title 8A, Subtitle 17 of the Real Property Article, and the resident fails to yield and render possession of the premises as ordered by the court.

(2) A lien under this subtitle shall be:

(i) Stayed if the resident files an appeal in accordance with Title 8A, Subtitle 17 of the Real Property Article; and

(ii) Extinguished if the resident redeems the premises in accordance with Title 8A, Subtitle 17 of the Real Property Article.

(3) A lien is created under this subsection when the resident fails to yield and render possession of the premises as ordered by the court.

Md. Code Ann., Com. Law § 16-202 (2014).

If you are owed money for repairs, storage or maintenance, here are the steps you should follow:

  1. retain possession unless and until paid in full;
  2. act promptly to hire a competent lawyer or lien sale company to prepare the statutory notices of lien.
  3. Accept payment in full — don’t add in charges that cannot be substantiated.

Baylaw, LLC can prepare statutory notices for a reasonable flat fee and walk you through the process of getting paid or obtaining title.  Please email Dirk Schwenk dschwenk@baylawllc.com, or Jeff Toppe jtoppe@baylawllc.com for details.


The End is Near — Settlement and Dispute Resolution

As a lawyer it sometimes feels as though you work and work but nothing is ever fully resolved.  This month has been different for me – I have actually put the final signatures on settlements of four different kinds of cases — all central to the kind of work that I do.  The cases included:

1. a dispute on the location of a boundary as it pertained to riparian rights and a pier location;

2. a dispute on insurance coverage on damages to a boat;

3. a dispute between a purchaser and broker on a boat purchase; and

4. a dispute over erosion control efforts on community property.

Resolution of a case is always a team effort that includes dedicated clients that are willing to do the hard work of obtaining facts and facing the risk that a case does not go their way.  Patience and appropriate strategy a must.  If the opportunity presents itself to obtain results through negotiation and settlement, the entire team must have a clear idea of the achievable goals and be ready to compromise as needed.

Dispute on Boundaries, Riparian Rights and Pier Location

In Calvert County, Maryland, our client owned a property with a house at the end of a street in an incorporated town.  When the town was designed, his lots did not reach the water and the town owned a strip of land which included the entire waterfront.  Over time, however, erosion ate through the land between his property in the water, so that some lots in the subdivision were entirely submerged, and my client had a small cove that provided access to the bay.  The town took ownership of the submerged lots and a small remaining parcel that was still above water, leading my clients to worry that the town intended to put a walkway around his property which would isolate his property from the bay and decrease his privacy.

We filed a declaratory judgment action stating that he had obtained riparian rights when the water reached his property and asserting adverse possession over the land next to his lot.  After discussions with the Town stemming from the suit, it came to light that the town was willing to forego putting in a walkway if it could get an easement along the water to install a flood control berm.  Although the negotiations were difficult, we eventually reached an agreement that allowed for my client to have a location that allowed him to install a pier for access to the Chesapeake Bay; maintained my client’s privacy; and met the town’s needs for installation of flood control.

Dispute on Insurance Coverage on Boat Insurance

In Anne Arundel County, Maryland, we had a client whose boat had water enter into the core of his boat hull and eventually cause rot and damage.  When the boat was on jackstands at the marina, the hull partially crushed and required significant fiberglass and core repairs.  The client filed a claim under his hull insurance policy but surveys were inconclusive as to how the water entered the hull.  We filed suit asserting coverage under the all-risks policy of marine insurance, arguing that if the source of the water was not known, then none of the exclusions to the policy supported the denial of coverage.  We were unable to resolve the dispute through discussions with the adjuster, so we filed suit seeking a declaration of coverage.  Resolution was difficult and lengthy, but the client obtained money for repairs that he would not have had if he accepted the denial of coverage.

Dispute on failed erosion control project

Controlling erosion is a major issue for waterfront owners and waterfront communities, and the quality of contractors and erosion control projects is highly variable.  With new requirements preventing bulkheads and restricting hard shorelines, poor work can increase erosion or worse, leave large loose stones that can injure or even kill unsuspecting community members.  We recently obtained an insurance settlement to allow for reconstruction of a failed erosion control project on community land — the project was so bad that it required installation of “keep off” signs on the community’s main beach area as well as environmental citations against the contractor and a community board member.  Resolution required changing the way that the community’s erosion control funds were managed and contracts awarded, as well identifying appropriate experts to testify on the deficits with the project.  The Court’s intervention was required to determine significant related issues about the nature of the community’s land and covenants as well.  Perseverance was required — luckily it was a community that had leaders and community members that were willing to carry through with a difficult job to the end.

Dispute with Buyer and Broker in Boat Purchase Contract

One of the most interesting aspects of boat purchase/boat broker and boat tax cases is that they often involve many different states.  This case was no different.  The contract called for arbitration in New Jersey, where my client was located.  The boat was located and seat rialed in Tennessee.  The listing broker broker was in Alabama and the buyer was located (and the boat was delivered to) Illinois.  The buyer alleged that there were undisclosed problems with the boat and filed suit in Illinois (where he signed the contract).  Right away, the case involved the tension between arbitration and litigation; maritime and State common law; and the substantive law of multiple states — and all of that before getting to the question of whether the purchase contract’s terms protected my broker-client.  My client’s first questions to me concerned whether I was comfortable working across so many jurisdictional lines and areas of law.  Luckily those issues come up in most significant boat purchase disputes, and I had an idea of how to mitigate the issues of the Plaintiff having filed in Illinois.

This was a rare case in which there was an intense week of work preparing motions to dismiss or stay the action in Illinois.  We argued that the contract called for Arbitration in New Jersey, and that therefore the suit in Illinois could not go forward there.  Since there was some question about whether the arbitration clause would be enforced, we also argued that since boat was delivered to the purchaser in Tennessee, that was the appropriate State if the case was not going to be in New Jersey.  Ultimately we were able to reach a rapid resolution prior to the Court ruling on the motions.