Tips for Vessel Buyers and Sellers

Copyright © 2005 Weil & Associates and David Weil, Esq.

Remember the old saying: "The two happiest days in a boat owners life are the day he buys the boat and the day he sells it." So . . . it should be a happy transaction! But . . . it never hurts to be careful. If you decide that a lawyer is not necessary in connection with your purchase or sale, here are a few tips which should help to protect your interests in the transaction:

For the Both Parties (Buyer and Seller):

1. Use a yacht broker who is a member of the California Yacht Brokers Association (the "CYBA"). Yacht Brokers in California are licensed and regulated by the California Department of Boating and Waterways, but the Department has a sizeable case load and it can only look at the worst complaints against the worst offenders. The CYBA does a pretty good job of policing its members according to its Code of Ethics and they are, in general, an honest and hardworking group of businesses. If you are not in California, look for brokers who are members of the Northwest Yacht Brokers Association [http://www.nwyachtbrokers.com/], the Florida Yacht Brokers Association [http://www.fyba.org/] or the Yacht Brokers Association of America [http://www.ybaa.com].

2. If possible, use a broker that has been certified under the National Yacht Broker Certification Program. This program has a rigorous testing procedure that is much more comprehensive than the test associated with California's broker licensing process. The testing, together with the CPYB Code of Ethics (similar to the CYBA Code of Ethics), insures that your broker is among the best in the country.

3. Use a CYBA approved Purchase and Sale Agreement (it will have a CYBA copyright notice on the bottom of the form) or have an attorney draft an agreement for you or review the Broker's form agreement.

For the Buyer:

1. The Most Important Rule: Be Logical! Buying a boat can be an emotional experience, and the most conservative, level-headed people seem to ignore obvious warning signs.

2. Never buy a boat without first retaining a qualified marine surveyor to inspect the boat out of the water. The boat is a major purchase, and the cost of a pre-purchase survey is minimal. But - Selecting a surveyor is not a simple task.

Most yacht brokers are extremely reluctant to recommend any particular marine surveyor, and will instead provide you with a list of surveyors approved by your lender or insurance company. This practice is designed to distance your broker from any possible negligence by the surveyor in connection with the inspection of the boat. It is a good business practice for the broker, but it's not very helpful for the buyer. Also, the buyer should never use a marine surveyor for this inspection who was recommended by the seller. There is a real conflict of interest since the seller may not want the buyer to learn everything about the boat. Another complicating factor is the fact that there is no governmental regulation of surveyors. Terms like "accredited" or "certified" are designations provided by industry trade groups. No such designation or license is provided by any State or by the Federal Government.

Buyers are therefore left to their own resources when selecting a marine surveyor. The starting place for them is the list of surveyors recommended by the buyer's insurance company or lender. From that list, the buyer should select a surveyor who is a member of one of the two national trade organizations: the National Association of Marine Surveyors [http://www.nams-cms.org/] or the Society of Accredited Marine Surveyors [http://www.marinesurvey.org/]. It may also be helpful to ask for a referral from a knowledgeable boat owner. And, it is a good idea select a surveyor who is experienced in insurance claims work. A surveyor who is an experienced claims investigator will have a very broad exposure to the things that can go wrong with a boat, which will be very helpful when inspecting a boat prior to purchase. Finally, the buyer should be present at the survey so that he or she can ask the surveyor questions about the process. Do not rely on your broker to be your eyes and ears!

3. Never buy a boat without first taking the boat out on a sea trial. The boat will need to move from its slip to the boatyard for the survey, and taking the boat out for an hour or so before heading to the boatyard usually works with everyone's schedule. During the sea trial you'll get a feel for the boat that you simply can't get while you're tied to the dock. Review the boat's systems with the seller. Does everything work? Is he nervous about anything? Ask your surveyor to go out with you and check the boat out while you're underway. He may charge extra for this, but it's worth it!

4. Confirm that your offer to purchase the boat includes language which makes your offer contingent upon an acceptable sea trial and survey. If any problems came up during the sea trial or the survey, ask the seller if he'll fix the problems or adjust the sale price accordingly. If not, notify the broker in writing that the sea trial and/or survey were not acceptable, and advise them that your offer has been withdrawn. Note that most purchase agreements allow very little time after the survey for you to give notice of the unacceptable survey - so act fast!

5. Finally, does the boat appear to be owned by someone who pays their bills? Any unpaid charges for repairs, maintenance, or slip fees will qualify for "maritime lien" status even if the lien is not recorded, and the lien stays with the boat after the sale! If possible, ask a few questions. Check with the marina to confirm that the slip rent is up to date. If the boat was advertised to have recent repairs or maintenance, contact the repair people to confirm that they were paid. Note that most purchase agreements include a provision requiring the seller to get rid of all liens or reimburse the buyer if necessary, but the seller may be insolvent or difficult to locate.

 

For the Seller:

1. Read the listing agreement carefully - it's your contract with the broker. It must clearly identify your boat, it must state the gross listing price, and it must explain the commission arrangement. If you sign the document, be sure to get a copy!

2. Make very few representations regarding the condition of the boat - to the Buyer or to your Broker. Allow everyone to draw their own conclusions. A buyer who feels that he or she has been cheated will be looking for a reason to sue someone! The "As is - Where is" language of the purchase and sale agreement will not protect you against allegations of misrepresentation!

3. Many purchase and sale agreements will require you to indemnify the buyer if a lien surfaces that is based on something that occurred prior to the sale. Remember - maritime liens are valid even if they are never recorded! Therefore - save all your receipts and proofs of payment for all services rendered to the boat (maintenance, repair, slip fees, etc., etc.). This will protect the new owner from a vendor who makes a claim against the boat after you have sold it.