Tips for Vessel Buyers and Sellers
Copyright © 2005 Weil & Associates and David
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
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!
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
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
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!
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!
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.