Recovering outstanding berthing fees – a guide for marinas and boatyards
A boat owner berths his boat at a marina and agrees to pay a fee. For several months or years the boat owner pays the fees promptly and his relationship with the marina remains good. However, due to financial pressures, or a loss of interest in the boat, he stops paying or pays less than is due. The marina keeps sending invoices and makes demands for outstanding payments which remain unanswered. The marina is left with a boat, for which it receives no or insufficient fees, that is taking up a berth that might be used by a paying customer.
Unfortunately the above is a familiar scenario to many marina and boat yard operators. Nonetheless, they have several options which should assist in the recovery of outstanding fees and/or the removal of the boat.
Arrest the boat
Arresting the boat is an option that often springs to mind. An arrested boat cannot be moved pending the outcome of legal proceedings for the outstanding fees and, if the marina is successful in court, they have an asset to sell to recover the fees. However, costs involved in arrest are high. A claim will need to be prepared and issued at the High Court (in the Admiralty Court) and then an application made for an arrest warrant. If the application for arrest is successful, the Admiralty Marshal will take control of the boat. If the marina is successful in its claim, but the owner does not pay the outstanding fees, the Admiralty Marshal will sell the vessel. From the proceeds, the Admiralty Marshal will be paid his fees and then the marina's legal costs and the outstanding fees will be paid (assuming the value of the boat is sufficient).
Because the legal fees and the Admiralty Marshal's fees can be high, arrest is usually only suitable where the boat concerned is of considerable value and/or where the amount of outstanding fees is high. Accordingly, in cases concerning small pleasure craft arrest is often unsuitable. However, there are other options.
Claim the debt from the boat owner
Depending on the exact wording of the marina's terms and conditions (and assuming the boat owner agreed to them at the time the berthing contract commenced), a marina can take legal action against the owner to recover the fees. This would be a claim against the owner personally (or against the Company if that is who is keeping the boat at the marina) and not against the boat itself.
Before issuing a claim, the marina would need to write a formal letter of claim. This in itself may be sufficient to prompt payment of the fees (and possibly collection of the boat, subject to terms and conditions). If not, the marina may then issue the claim. Claims worth £10,000 or less will usually be allocated to the Small Claims Court. This court is designed to be used by individuals or companies without legal representation (accordingly, legal fees are usually not recoverable from the other side). For larger value claims legal advice will probably be required from the start. Further, legal costs will increase significantly if the owner decides to defend the case.
Issuing a claim against a boat owner is usually only suitable if the marina is satisfied that the owner has sufficient funds to pay the outstanding fees (and legal costs). It may be possible to enforce a court judgment by selling the boat but a marina will have to incur further legal fees to do so, which it will not be able to recover unless there is sufficient money remaining from the sale proceeds after the judgment debt has been recovered. Furthermore reaching this stage can take months or even years, during which no income can be earned from the berth and the condition of the boat may worsen thereby reducing the amount for which it can be sold.
Refuse to release the boat
Marinas' terms and conditions often contain provisions which are designed to encourage an owner to pay the fees in full and on time. For example, if an owner does not pay fees for a certain period, they may become liable to pay interest at a prescribed rate. There may also be a clause which allows the marina to keep hold of the boat until outstanding fees are paid in full. The latter is known as a contractual lien and is often enforced where an owner turns up at a marina, to which he owes berthing fees, to remove a boat. To extract fees from a solvent owner, who wants continued access to his boat, it can be a useful option.
However, a contractual lien is clearly of no use in removing the vessel or obtaining payment where the owner does not have sufficient money; a lien does not confer the right to sell the boat and keep the proceeds.
Sell the boat
An owner may agree to allow the marina to sell the boat and to keep any outstanding fees. This approach may be suitable where an owner no longer wishes to keep the boat and agrees that he owes the marina money but does not want to deal with the problem himself (or have sufficient liquid assets to pay the outstanding fees). So long as the value of the boat is sufficient to meet the debt, this should be a straight forward resolution from a legal perspective.
However, where the owner does not agree, it may still be possible to sell the boat to satisfy the debt. The Torts (Interference with Goods) Act 1977 provides a mechanism whereby a marina may obtain the legal power to sell the boat and keep the proceeds of sale to the value of the outstanding fees (and the reasonable costs of sale) where there is no dispute between the marina and the owner. The power of sale arises where the marina becomes a 'bailee' of the boat. The marina becomes a bailee where it has notified the owner that the boat must be collected by a certain date, and the owner does not collect the boat, resulting in the boat remaining in the possession or under the control of the marina.
Within the notice in which the marina tells the boat owner to collect his boat, the marina must also inform the owner that the boat will be sold (under the Torts (Interference with Goods) Act 1977) if the boat is not collected. The notice must also set out details about the boat, its location, from where it should be collected (usually the marina), the amount of fees outstanding at the date of the notice and the date after which the marina intends to sell it.
Where fees are outstanding, the marina must wait for three months from the date of the notice before selling it.
The marina should state in its terms and conditions that it may rely on the Act to sell a boat, thereby giving notice to the owner (the terms may also provide a period of time after which the marina will be entitled to sell the boat). Further, the marina must ensure, when drafting terms and conditions, that in seeking to rely on the Act to sell the boat, the marina is not forced to give up its contractual lien. Otherwise, in the period between the marina notifying the owner that he must collect his boat (thereby effectively terminating the berthing agreement) and the sale of the boat, there is a risk that the owner may turn up to collect the boat and the marina will not be able to rely on the contractual lien to retain possession of it. The marina could then be left without the boat or the outstanding fees. This risk can be overcome, or reduced, by careful drafting of terms and conditions to ensure, for example, that the contractual lien will remain in existence after the contract is terminated until the fees are paid or until the marina enforces its right to sell in accordance with the Torts (Interference with Goods) Act 1977.
If a marina sells a boat and it subsequently comes to light that the 'owner' was not in fact the true owner of the vessel (i.e. they did not have 'good title' over the boat), then the real owner may have a claim against the marina. It is therefore essential that before selling a boat via this procedure, a marina is absolutely sure that it is owned by the person who owes it unpaid fees. The terms and conditions may, again, assist a marina in this regard by ensuring the owner warrants that he holds legal title to the boat.
If a marina would like to sell a boat but is concerned about any subsequent claims, they may apply to the court under the Torts (Interference with Goods) Act 1977 for authority to sell the boat. Although this will be more expensive than relying on the notice alone, it will bring peace of mind because, unless the court's decision is successfully appealed, a court-sanctioned sale guarantees that the boat is sold with good title. This may also be appropriate where it is not absolutely clear that the outstanding fees are owed. This may be the case where, for example, it is possible that the marina's terms and conditions may not have been incorporated into the relevant berthing agreement or where the interest clause is not sufficiently clear.
Considering the options
The above is not an exhaustive list of actions that might be taken. For example, a marina might also have a claim against an owner who fails to collect his boat if he effectively prevents a marina from earning income from the berth (even if the actual outstanding berthing fees are low). Hopefully it is clear that before taking any action a marina should think carefully about what it wants to achieve (obtain payment of outstanding fees, get rid of the boat, claim for other losses). The value of the debt and the financial situation of the owner are key to deciding on a course of action. Finally, marinas must draft their terms and conditions carefully so they are able to rely on the payment terms (and sanctions for non-payment) whilst also using a legal power of sale.