Marina and boatyard storage: Solving the problem of owners who don’t pay

Do you own or operate a marina, hardstand or boatyard, or have someone’s boat moored at the end of your pontoon outside your house? If so, the chances are you have had a problem with at least one owner who does not pay their fees.

It is a perennial problem, right across the country and internationally. And, with the COVID-19 pandemic, there are boats sitting around yards everywhere with owners who cannot get to them, can’t pay or just won’t pay. Particularly in situations like this, the “no cash no splash” rule is no help.

Not allowing a problem to develop in the first place is always better than trying to fix a problem once it has arisen.

So, what do you do to prevent this situation arising in the first place?

There is only one true solution

If you have:

• a signed agreement giving you the right to dispose of a boat that has been left at your premises when the mooring or storage fees are not paid;
• you have the correct procedures in place; and
• you followed those procedures when you agreed to store the boat

you should  be able to solve any problem regarding unpaid fees, remove the boat, sell it and get paid from the proceeds of sale (or even dispose of it ((read destroy)) if it is not worth anything and you can prove it), if that is how far you have to go, relatively easily.

However, we have seen many written agreements which are completely inadequate to give you any legal right to do that.  Further, even where the written agreements are satisfactory, it is quite common to see that appropriate procedures have not been adopted or if they have been adopted, they have not been followed at the time the operator of the facility agreed to store or moor the vessel. That then robs the operator of what would otherwise be an easy way of solving the problem.

With a properly drafted agreement (which takes into account the legal and legislative framework associated with storing vessels, and appropriate procedures in place which are actually followed when you agree to store a vessel) you can usually, relatively easily sell the boat and get paid or, if you can prove the boat is worth nothing, dispose of it with minimal risk.

Common problems with agreements and the procedures used by those who store vessels on behalf of others or moor them in their marina, include failing to take into account applicable consumer protection legislation which might apply, such as the Australian Consumer Law, or failing to consider the interests of third parties who may have a registered security interest over the boat in question.

Without a properly drafted agreement and the right procedures in place and actually following those procedures, you are inviting all sorts of problems and possibly litigation. Therefore it is imperative you seek guidance from a lawyer who understands these matters and is experienced in dealing with marinas, moorings and boatyards before you implement your mooring or storage agreements and the systems and procedures which you follow when agreeing to store or moor a customer’s or club member’s boat.

If you don’t have the right agreement, the right procedures and follow those procedures, you most likely will not have the rights you need in order to solve the problem of an abandoned boat, or one in relation to which the fees are not being paid.

What can you do if you do not have the appropriate signed agreements and procedures or have them but do not follow them?

If you do not have a properly drafted, written agreement and appropriate procedures that are followed which give you the legal right to sell or otherwise dispose of a problematic vessel, you are likely to have a real problem.

If you or your committee have a strong appetite for risk, decide to throw caution to the wind and simply sell the boat and pay yourself from the proceeds, you could run into all sorts of problems, particularly if the vessel is a registered Australian Ship, or worse still, a registered ship in another jurisdiction. Be warned!

First, you are likely to be exposing yourself to the risk of a court case – which would be bad enough here in Australia, but worse having to deal with one in another country.

Secondly, you may damage your reputation as a business or club. If you have unlawfully disposed of a boat which belonged to a disgruntled former customer or club member, just think what damage they might do to your reputation, particularly on the internet and on Facebook. Best avoided!

The worst-case scenario – you have no acceptable agreement or have not followed the proper procedures (or both)

In the worst-case scenario, you have to rely on a legislative solution.

Each State and Territory has different laws which govern these situations. If you follow the procedure set out in the relevant legislation and make sure all steps are correctly taken, you will eventually be able to sell the boat, pay yourself and, provided you remit any surplus first to anyone having a valid registered security interest in the vessel (which is not always that easy to determine) and then the owner of the vessel, you should not, at least in theory, experience any problems.

That said, there is one thing common with most legislative solutions like this and that is that they are time-consuming, complex and easy to get wrong. In a case Cornwalls was involved in last year, a Club in North Queensland gave notice to the owner of the boat (who was not paying the storage fees), advising of the intention to sell under the relevant Act. However, as often happens with clubs, time slipped by and the club ran out of time to conduct an appropriate advertising campaign for the auction to be held on the date specified in the notice under the Act. This meant, that to sell the boat legally, the club had to start all over again. It is still not sold. It is still on the mooring and none of the outstanding fees, which keep increasing, have been paid.

Action sales

If you have a properly drafted, valid contract containing the appropriate terms and conditions and procedures which have been followed, you can relatively easily sell a boat in relation to which the fees are unpaid, by private sale or by auction. Assuming the vessel has some value such as it is possible to sell it (which is not always the case), an auction is usually preferable because it demonstrates that you have “tested the market” and hence, you can avoid arguments about having sold the vessel at too low a price.

However, conducting auctions is not as simple as it sounds and there are many traps into which one can fall. Using an external auction house can be helpful, but you still must make sure that you comply with all legislative requirements and have the legal right to sell the boat in the first place,  something the auction house will not necessarily check for you.

If you have a problem with a boat with unpaid fees, you need to ensure you are reducing the risk, increasing the prospects of being able to get rid of that troublesome boat, and get your money without getting sued or any other problems. The Cornwalls Maritime team has extensive experience in dealing with all of these issues and can give you some helpful tips and step you through the process.

Queries

For further information regarding the above article, please contact the author, Ian Heathwood, or any member of our Maritime team.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.