Arrests vs. Repos: Yachts in Handcuffs

27 March 2009 By Lisa Hoogerwerf Knapp

Just as the number of yacht repossessions and foreclosures has risen in the economic downturn, arrests of megayachts also are increasing.

A recent example is the 102-foot Broward Gabriella, subject of the “Seen and Heard” forum discussion called “MV Gabriella Hard Aground.” While the forum refers to this yacht as having been repossessed, according to Ken Cage, president of International Recovery Group, she actually was arrested.

Basically, a “repo” is undertaken by a bank when the boat owner is delinquent on his loan payments and the vessel is recovered as collateral. An “arrest,” on the other hand, is initiated by vendors or subcontractors who have not been paid for goods or services provided to the yacht.

“Arrests are complicated, but easier than repossessions,” says Cage. His company specializes in the investigation and recovery of marine vessels, aircraft and other special assets.

“The court issues an order and instructs the marshal to serve an arrest warrant for a payment on a lien for necessaries,” explains Michael Moore, maritime attorney. “Then the vessel is in custody of the court until the judicial system runs its course.”

“Necessaries” can mean services like yard work or products such as aftermarket electronics. Arresting a yacht is a way that shipyards, riggers, subcontractors and other vendors – unpaid crew – can attempt to force a yacht owner to pay his bills.

The “Catch-22” is that it’s expensive: It usually takes up to $5,000 to arrest a vessel. The bottom line is that it takes money to recover money you’re owed.

First, you typically have to post a minimum $2,500 bond for the marshal to arrest the vessel, as well as to pay court recording fees. Once arrested, the boat is towed to a location where “substitute custodians” care for it. Dockage fees can add up quickly if the judicial process is slow, or the yacht owner drags things out in court.

“The [subcontractors] are sometimes in a world of hurt for custodial fees,” Moore says. “They have to have some money to pursue these lawsuits, that’s fundamental.” He adds, “Some are reluctant to assert their claims. We had one under arrest…an 80-foot yacht. There were four parties associated with that boat that were not paid. Two parties were reluctant to get involved in the arrest action because of incurring the cost. The two people who asserted their claims are getting paid, the two that arrested the yacht. The ones that didn’t arrest the boat, due to a lack of funds, are not getting paid what they are owed.”

To set the forum record straight, Gabriella was not run “hard aground” in Florida’s St. Johns River by a captain during her arrest, according to IRG. “The yacht was never run aground,” Cage says. “That’s ridiculous.”

Broker Tucker Fallon of Bradford Marine Yacht Sales reports that Gabriella is safely afloat, but that there is a shallow spot between the basin where she is located and the river, hindering her relocation – about four more inches of water are needed to safely tow the vessel to another location where she can be sold. (The river was deeper when the yacht first came into the basin during hurricane season.)

“The yacht is inland, in a hurricane hole, and is not subject to surge,” Fallon says. “The water level dropped since we docked her months ago. We were concerned about the depth about three weeks ago when we wanted to move her to Ft. Lauderdale, and [we] left her there for the time being to avoid risk of damage. I want to defend the unknown captain who did nothing wrong.”

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