Is a Yacht Seller Required to Disclose Past Fire Damage to a Buyer?

Posted: January 16, 2013

I bought a 50-foot motoryacht six months ago and have had nothing but problems from Day 1. Most of the problems are related to the boat’s generator and electrical system. I was referred to a very good boat electrician, who finally figured out that the boat had suffered a serious fire at some point before it was sold to me, and that most of the problems I have experienced are related to the fire. I conducted a little research to see whether I might have a legal claim against the previous owner or my broker, and I ran across an article you wrote in 2011 concerning a new law that would require disclosure on a vessel’s title of any serious damage suffered in the vessel’s past. It seems to me that a fire would fall under that law, but there was no disclosure made to me on the title or anywhere else about the fire. What are my options in a case like this?
Our reader is referring to a body of law known as the “Uniform Certificate of Title Act for Vessels,” which we discussed in our July 21, 2011 installment of this column. For simplicity, I’ll just refer to this law as the “Title Act.” It looks like it’s time for an update on the status of that law.             

As explained in our 2011 article, the Title Act was designed to modify state law to make state vessel registration and titling laws uniform throughout the country. The law is designed to strengthen the tools available to lenders to protect their collateral and to discourage vessel theft by cleaning up inconsistencies in vessel title laws around the country.             

The Title Act also includes a concept known as “title branding,” which has nothing to do with the creation of a uniform title system. Branding will require the owner of a vessel to report “hull damage” to the Department of Motor Vehicles, after which a notation will be made on the vessel’s title, branding the vessel as “hull damaged.”              

Under current law, private party sellers have no requirement to disclose any problems that they are aware of when they sell a boat. If the hull is damaged in an accident, the owner may be liable for fraud if he or she conceals the damage, but if the damage is properly repaired in a workmanlike manner, there is no need for any disclosure. The new law would change this.             

The Title Act requires branding on boats that are “compromised with respect to the integrity of a vessel’s hull by a collision, allision, lightning strike, fire, explosion, running aground or similar occurrence, or the sinking of a vessel in a manner that creates a significant risk to the integrity of a vessel’s hull.”             

This sounds fair, but the “branding” provisions are controversial because they are ambiguous and the information that is being communicated is of questionable value. For example, the determination of a “compromised” hull or “significant risk to the integrity of a vessel’s hull” may be difficult to determine.             

Or, it may be possible for a boat to sink with no structural damage to the hull at all. Such an event would not fall within the reporting requirements, but the costs of repairing the engines and electrical systems could exceed the value of the vessel.             

And, the “brand” will remain on the title regardless of whether the damage is ever fixed, which may reduce the value of the boat unfairly.
             
Our reader’s case offers a good example of the deficiencies of the branding provisions of the Title Act. He has been dealing with generator and electrical problems but, since the integrity of the vessel’s hull was not compromised, there would have been no reporting requirement.             

Even if reporting of electrical problems were required, our reader has a 50-foot motoryacht, which is most likely a documented vessel. The Title Act applies only to state-registered vessels.             

At this point, the deficiencies of the Title Act are moot, because it has not actually been signed into law anywhere in the United States. The Title Act was drafted by the National Conference of Commissioners on Uniform State Laws. This organization is comprised of judges, law professors and attorneys from private practice, industry, and government from every state in the nation.
             
Uniform law commissioners are appointed by their states to draft and promote enactment of uniform state laws that are designed to solve problems common to all the states.  But these individuals are not lawmakers. Their job is to draft a body of uniform state law and then bring it back to their home state for adoption.             

As of the date of this writing, almost two years after the drafting of the Title Act was completed, only one state (Virginia) has actually introduced a bill in its state legislature to consider signing the Title Act into law.             

So, what does all of this mean for a person with a damaged boat? It means that there has been no change in the law.             

An ambiguous provision that would require disclosure of certain damage to state-registered boats has not been signed into law anywhere in the country. As such, there is no duty for the seller of a boat to disclose anything about the boat to a buyer, so long as he or she does not fraudulently conceal or misrepresent the condition of the boat.

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