A Quick Primer on Maritime Liens

Sailboat on blue water

Maritime liens, with the exception of a preferred ships mortgage, are liens that arise by operation of law automatically and give the lienholder a property right in maritime property (for example, vessels) and the right to foreclose the lien in admiralty. They are not created consensually and there are no requirements that a maritime lien be recorded or otherwise perfected by any filing.

A preferred ships mortgage, on the other hand, is a maritime lien which is created consensually, must comply with the requirements of Title 46 of the United States Code, and must be recorded at the National Vessel Documentation Center. If a vessel is eligible for federal documentation, the preferred ships mortgage offers the best achievable protection to a lender requiring collateral to secure a debtor’s obligations. That protection is not absolute, however, and certain classes of maritime liens, “preferred maritime liens”, rank ahead of a preferred ships mortgage.

Generally, competing maritime lien claims are first ranked according to class. The classes are, from highest priority to lowest, the following:

  1. Expenses of justice during custodia legis-expenses arising from the care and operation of the ship while it is in the custody of the Court through the U.S. Marshal (not regarded as a lien, but given priority).
  2. Seamen’s liens, including those of the Master, for wages, maintenance and cure; and wages of longshoremen directly employed by the vessel.
  3. Salvage and general average liens.
  4. Tort liens, including personal injuries.
    5. Preferred ship mortgage liens (U.S. flag vessels).
  5. Liens for necessaries under 46 U.S.C. §§ 31301(4), 31341 and 31342
  6. State-created liens of maritime nature.
  7. Maritime liens for penalties and forfeiture for violation of Federal Statutes.
  8. Perfected non-maritime liens, including tax liens.
  9. Attachment liens in causes of action within the admiralty and maritime jurisdiction (foreign attachment). This includes liens arising under the Uniform Commercial Code, vessel mortgages that do not fulfill the qualifications of a preferred ship mortgage under the Ship Mortgage Act, and federal tax liens as well.
  10. Maritime liens in bankruptcy. See United States. v. One (1) 254 Ft. Freighter, M/V Andoria, 570 F. Supp. 413 (E.D. La. 1983).

See 46 U.S.C. § 31301 (5) (defining preferred maritime liens as a maritime lien on a vessel that arose before recording of a ships mortgage or items 2 through 4 on the ranking list); See also USC § 31326 which provides:

“the preferred mortgage lien, including a preferred mortgage lien on a foreign vessel whose mortgage has been guaranteed under chapter 537 of this title, has priority over all claims against the vessel (except for expenses and fees allowed by the court, costs imposed by the court, and preferred maritime liens)….”

Michael Wales is a Maritime Law Attorney in San Diego, California. Mike also owns AGL Yacht Sales, Inc., a San Diego Yacht Brokerage, with his wife Leilani Wales. For assistance with any maritime legal matter you may contact Mike at mwales@waleslaw.com or at 619.493.1700. For information on brokerage boats please visit www.aglyachts.com.