Floating Homes Are Not Boats, Supreme Court Rules

Posted January 24, 2013 in Your Home & The Law by

Houseboats on a river

iStockphoto/Thinkstock

Floating homes that aren’t designed to actually travel across the water should not be classified as boats and don’t have to follow federal admiralty law, the U.S. Supreme Court ruled last week.

The decision means that people across the nation who live on the water don’t have to worry about running afoul of maritime laws, as long as it’s clear that their home isn’t used as a boat.

In Lozman v. Riviera Beach, the court said a “reasonable observer” test could be used to determine whether a given floating structure should be classified as a house or a boat. “Not every floating structure is a vessel,” Justice Stephen Breyer wrote in the majority opinion, noting that “a wooden washtub, a plastic dishpan, a swimming platform on pontoons, a large fishing net, a door taken off its hinges, or Pinocchio (when inside the whale) are not ‘vessels.’”

Instead, boats are defined as objects that transport people or goods over water. Notably, maritime law gives businesses the ability to sue a boat in federal court if they don’t receive immediate payment for goods and services, and law enforcement can then confiscate the vessel until payment is made. By comparison, imagine if a utility company had the ability to force people out of their houses if they were late paying a bill.

Justices Sonia Sotomayor and Anthony M. Kennedy dissented in the 7-2 ruling.

 

Ambiguities Remain

The specific case the court heard came about over a dispute between floating house owner Fane Lozman and a marina in which he had lived in Florida. The marina accused Lozman of not paying his bills and had the home seized by the city, which subsequently destroyed it after failing to sell it at an auction. Lozman fought the seizure up through the court system as several lower courts took the marina’s side; finally, the Supreme Court took a sympathetic view on his argument based in part on the fact that his home had no way to steer or propel itself.

However, not all observers are happy with the decision. “This does not provide clarity to the law and in fact, muddles it,” says Michelle Otero Valdes, who operates the Miami Shipping Law blog and is an admiralty and maritime trial attorney in Florida and partner at Chalos & Co. “In essence, the majority looked through their own eyes as reasonable observers rather than remanding the case for further fact-finding as urged by the dissent. If the matter had been remanded, the district court could have had the benefit of experts to determine whether the watercraft met the objective test that both the majority and dissent agreed should be used.”

Attorney Michelle Otero Valdes headshot

Michelle Otero Valdes

The decision could also lead to confusion from lenders who help finance boats and their ilk. Vessels obviously used for transport aren’t ambiguous, Valdes points out, but others may fall in a grey area. “Problems may arise, however, in the financing of recreational craft, casino boats, certain types of oil rigs and other waterborne craft that are not often moved,” she says. Operators who don’t want their facilities to be classified as boats might have to make physical aesthetic changes to meet the “reasonable observer” standard.

The ruling could also affect the willingness of banks to lend to consumers who want to purchase a houseboat. “Lenders are scrupulously looking at all requests for financing,” Valdes says, “and this decision may therefore cause lenders to consult with counsel regarding lien perfection and lending policies associated with such structures.”

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