FEDERAL REGULATION ENCOURAGES STATES TO ADOPT UNIFORM CERTIFICATE OF TITLE FOR VESSELS ACT (UCOTVA)

U.S. COAST GUARD UPDATES FEDERAL REGULATIONS ON VESSEL TITLING FOR UNDOCUMENTED VESSELS: FEDERAL REGULATION ENCOURAGES STATES TO ADOPT UNIFORM CERTIFICATE OF TITLE FOR VESSELS ACT (UCOTVA).

States that have adopted UCOTVA will benefit from updated US Coast Guard regulations on vessel titling for undocumented vessels

On June 6, 2022 the U.S. Coast Guard announced that it will change its regulations for certifying state titling systems for undocumented vessels. States that have adopted the Uniform Certificate of Title for vessels Act, also called “UCOTVA,” will benefit from the new regulations.

What do the new regulations say?

The new federal regulations, available here, encourage states to adopt UCOTVA and to participate in the vessel Identification System (“VIS”). States that have adopted UCOTVA can apply to the U.S. Coast Guardto certify their titling statute. Once the U.S. Coast Guard certifies the statute, and the state is participating in the VIS, a security interest in a vessel perfected pursuant to the statute is granted the status of a preferred ship mortgage under federal law. This effectively allows preferred ship mortgages on vessels that are not documented with the U.S. Coast Guard, which was a central goal of UCOTVA.

Why do the new regulations matter?

Financing for vessels covered by a certificate of title in a state that has adopted UCOTVA will likely be significantly easier, and potentially less expensive, than for vessels in a state with a non-uniform vessel titling law—or no vessel titling law—because of the ability to obtain a preferred ship mortgage. This type of lien has priority over almost all other liens on a vessel. The only exceptions will be previously perfected preferred ship mortgages, and maritime liens for damage arising out of a maritime tort, wages of a stevedore employed by the vessel owner or the owner’s representative, wages of the vessel’s crew, general average, or salvage. See 46 U.S.C. §§ 31326(b)(1), 31301(5).

The new regulations also require states to participate in the VIS if they want to offer access to preferred ship mortgages for undocumented vessels. VIS is a centralized database of registration and ownership information provided by VIS states and the U.S. Coast Guard National Vessel Documentation Center. VISdata is accessible to state and federal agency law enforcement personnel and numbering, titling, and registration agencies. Uniform participation in the VIS means better information for states and law enforcement about vessel ownership history, state registration changes, and more. Obtaining this information is key to deterring vessel theft and fraud.

UCOTVA also has other benefits. First, it is designed to work seamlessly with the Uniform commercial code, in particular Article 9, to further facilitate secured lending against vessels. Article 9 of the UCCgoverns all secured transactions and is the law in every state. UCOTVA works with this existing law.

Second, UCOTVA contains a “title branding” provision. This consumer protection measure requires a vessel owner or insurer of a damaged vessel to label the vessel as “hull damaged” on its certificate of title. Even if the vessel is repaired, the brand remains with the vessel forever. This branding promotes transparency and helps ensure that buyers of and lenders against vessels are informed about prior hull damage that might not be obvious on inspection and may affect the vessel’s value. Branding is especially important, given the prevalence of storms along our coastlines. In the wake of these storms, unscrupulous parties often purchase severely damaged vessels from insurance companies. The vessels undergo repairs before resale, but the work performed may not meet the standards necessary to pass a professional survey of the vessel. The branding provision helps ensure that a purchaser of a pre-owned vessel enters the transaction with all the information needed to make an informed purchase, something currently only available through a third-party service such as BoatHistoryReport.com.

UCOTVA also clarifies what information a state titling agency must make available about a vessel, providing greater transparency about a vessel’s ownership and financing status. Under UCOTVA, an individual can request information about any certificate of title, security interest, termination statement, or title brand that relates to a vessel if the individual (1) identifies the hull number in the request; (2) identifies the vessel number in the request; or (3) is the owner of the vessel.

Which states have adopted UCOTVA?

UCOTVA has been adopted in Alabama, Connecticut, Florida, Hawaii, Virginia, and the District of Columbia. Florida’s law will become effective on July 1, 2023, and Alabama’s law will become effective on January 1, 2024. At this time, several other states have expressed an interest in pursuing UCOTVAadoption as well.

Who wrote UCOTVA?

UCOTVA was drafted by the Uniform Law Commission,, or “ULC,” a non-profit law reform organization composed of volunteer attorneys appointed by their states. In 2011, the ULC finalized UCOTVA after more than three years of study and drafting in conjunction with the U.S. Coast Guard, American BarAssociation, Maritime Law Association, National Boating Federation, National Marine LendersAssociation, National Marine Manufacturers Association, International Association of MarineInvestigators, and National Association of State Boating Law Administrators, among others.

As a member of NMLA, how will this impact me?

Some of the most significant ways NMLA and Marine Lenders stand to benefit through the adoption of Colva include:

• States adopting UCOTVA are afforded improved lien perfection protection through a first preferred ship mortgage, typically only available for eligible larger boats

• UCOTVA will assist recreational marine lenders in providing and maintaining competitive loans for boat purchasers

• UCOTVA simplifies and improves the identity of stolen boats to the benefit of lenders, law enforcement, and boat-owning consumers

• States adopting UCOTVA enjoy the benefit of an additional tool in the prevention of fraud, particularly versus those states without titling laws

• Owners and sellers must report and record specific structural damage and/or salvage status prior to any sales under UVOTVAs title branding provision

• Standard consumer titling and lien language through UCOTVA simplifies and improves the identification process for lenders

The new federal regulations are now effective as of July 6, 2022.

For more resources and to learn about certification, please visit the U.S. Coast Guard’s Boating Safety Division website.

Primary Author: Kaitlin Wolff, Legislative Program Director, Uniform Law Commission

Contributors:

  • Esson Miller, Chair, UCOTVA Drafting Committee and Virginia Uniform Law Commissioner
  • Stephen Sepinuck, Reporter, UCOTVA Drafting Committee
  • Jim Coburn, Owner, the Coburn Consulting Company and Member of UCOTVA Drafting Committee
  • Caroline Mantel, Director, Boat History Report