Understanding the Connection

Construction projects often extend beyond the solid ground we walk on, venturing into maritime environments such as ports, docks, and coastal areas. When construction activities involve structures or improvements on navigable waters and the use of seagoing vessels, the jurisdictional boundaries blur, bringing maritime law into play.

Maritime law, traditionally associated with shipping and navigation, encompasses a broader scope than one might initially assume. This expansive reach is where construction law and maritime law converge. As you navigate these intertwined industries, understanding the nuances of maritime law, particularly maritime liens, becomes critical. Much like the construction liens familiar to many of you, maritime liens play a crucial role in safeguarding your financial interests, albeit with their own unique characteristics and considerations.

Just as construction liens secure your rights to payment for work done on real property, maritime liens secure debts related to services provided on or for vessels. Below we will explore the basics of maritime liens as well as some of the parallels and distinctions between construction liens and maritime liens, and shed light on how this knowledge can assist you in managing risk and resolving disputes on projects that have a maritime component.

Maritime Liens Explained

A maritime lien is a legal right related to maritime activities, allowing certain contractors or service providers to claim an interest in a vessel. While these liens are often associated with ship financing and repairs, they also have relevance in construction law, particularly when construction involves vessels on navigable waters.

Types of Maritime Liens

Maritime liens can arise from various maritime-related services, and construction-related activities are no exception. Some common maritime liens relevant to construction include liens for ship repairs, supplies, or improvements. If a contractor or supplier provides services or materials for the construction or repair of a vessel, or other activities such as towage, pilotage and transportation of crew members, the maritime lien can attach to that vessel as security for the debt owed. Once a party provides such services, they may have the right to assert a maritime lien.

Asserting a Maritime Lien

A maritime lien attaches at the moment the goods or services are furnished. Unlike most construction liens, there is no recording or filing requirement. Unless a United States Marshal sells the vessel, a lien will generally follow the vessel, even in the case of a good faith, unaware purchaser.

There are two ways to effectively pursue maritime liens. The easiest and most economical method is to record a Notice of Lien with the United States Coast Guard Office of Vessel Documentation if the vessel is documented. If the vessel is not documented with the Coast Guard, the lien may be recorded in the county where the shipowner’s principal office is located. The filing of a lien places third parties on notice and often results in satisfaction of the debt. Financing and charter agreements typically contain language prohibiting liens, and the shipowner may be forced to satisfy the lien or risk breaching the agreement. Further, a recorded lien may impede the sale or future financing of a vessel.

Beyond simply recording a Notice of Lien, the most effective but more costly way to enforce a maritime lien is to file a lawsuit against the vessel or property in federal court. The court issues a warrant for the arrest of the vessel, and the marshal goes to the vessel and detains it pending further instructions from the court or the seizing party. If the court determines the maritime lien is valid, and the debt remains unpaid, it may order the sale of the vessel. The proceeds from the sale are then used to satisfy the maritime liens in a specific order of priority, which is governed by applicable laws.

Priority and Enforceability

In the maritime world, priority is not solely determined by the order in which the liens are filed. Maritime liens can vary in priority based on the type of service provided, and some liens may take precedence over others. For instance, liens related to vessel repairs might have a different priority than those arising from the provision of repairs, supplies, and towage for the vessel. The complexity arises from the various categories of maritime liens and their respective rankings under the law. These rankings often override the common-law principle of “first in time, first in right” that governs many real property liens.

Losing Your Maritime Lien

Maritime liens will be lost if the property is completely destroyed. If only partially destroyed, the lien will attach to the remaining property. Liens may also be lost by waiver. For a lien to arise, the supplier must have relied upon the credit of the vessel as opposed to the personal credit of the owner. If the supplier relied solely on the credit of the owner, he is deemed to have waived his lien against the vessel. The law provides a presumption that a supplier has relied upon the credit of the vessel. The law also provides that a party may waive or subordinate his lien by contract. Waiver of liens is common in charter agreements. Therefore, it is critical to review your agreements with a careful eye to such provisions and attempt to remove them during negotiations. A party may also lose his lien through the operation of laches. Laches is the maritime equivalent of a statute of limitations. Laches is defined as an unreasonable delay in asserting a lien. Courts generally look to the statute of limitations of the state in which the lien arose to determine whether the delay was unreasonable.

Conclusion

Contractors engaging in maritime construction and related maritime activities will benefit from an understanding of the obligations, rights, and protections of maritime law. Specifically, knowledge of the rights afforded by maritime liens is vital for securing payment and optimizing lien priority. A maritime lien provides a crucial benefit to those who provide goods or services to vessels and their operations. This legal right serves as a form of security, ensuring that those contributing to the maritime enterprise are compensated for their services or materials.