Buying and registering your yacht
Well, you have finally decided to become a proud yacht owner.
Purchasing a new or used yacht was always an exciting and formidable task. The process can, however, also be a discouraging one, given the different aspects of such a complex procedure. In order to get a value for money, as with any investment in property, a numerous checks on various issues should be considered before setting the signature on the contract.
You are going to deal with various professionals consisting of advisor, broker, lawyer and surveyor, all in order to ensure a trouble-free transaction. Regardless of your trade, personal interests, skills and previous ownership your the most important player will be – the surveyor, especially if you are buying on a distance. This person will determine your future happiness and satisfaction or lack of it. So be careful in selecting one
A list of boat check up points you may find it here. 
Broker is the person you’ll encounter first. There is no chance for a second “first opinion”. If you do not feel comfortable with this person ask for another one. Keep on mind that they earn money on you so, insist on a proper attention. Your sale broker will track down the appropriate vessel for you and negotiate the commercial terms of the transaction.
Beside the Bill of Sale, the Memorandum of Agreement (MOA) is the most important document. You may use a standard wording or tailor made prepared by the lawyer. So drafted the terms of the sale and purchase contract should ensure commercial terms protecting buyer’s position. The MOA should take into account and provide for a number of key considerations including seller’s ability to sell the yacht and transfer clean title, free of encumbrances. It should entitle the buyer to carry out a thoroughly survey of the yacht by himself or by authorized surveyor. Also, a sea trial is highly recommended.
In a case when material defect has been discovered the MOA should provide options for the buyer to terminate the contract, require the seller to make good the defects or negotiate a reduction in the sale price. A standard wording MOA, such one as by MYBA – The Worldwide Yachting Association, provide for this. It’s important for the buyer to be aware of his options with regards to pre-purchase inspection prior to entering into the contract.
The Inventory list should be agreed upon and provided for in the MOA, ensuring all relevant items on board the yacht are either included in or specifically excluded from the sale by agreement.
The MOA should require the parties to exchange various vessel specific documents, as well as certain corporate documents (mentioned below and assuming the seller is a corporate entity) at completion.
Yacht Registration is a picky procedure. There are a dozen most sought after jurisdictions leading with Delaware, U.K., Panama, St. Vincent and Malta. The purpose of the yacht further determines the procedure. Commercial registration, allows the buyer to charter the yacht, has stricter rules while the pleasure registration, as it name says, allows only the owner to use the yacht, and has easier terms.
The seller’s obligation is to provide all of the necessary vessel documentation as well as the Deletion Certificate. Always leave a small portion of the price unpaid and release only when all essential documents are in your hands. You may use escrow service for this purpose. If you have paid off the whole amount and not being provided by let say “VAT paid proof” document you could be in deep trouble while ex owner is counting notes somewhere on remote, exotic spot.
The buyer should check whether the existing classification and registration of the yacht is suitable for his/her needs. If you would like to recoup some expenditure perhaps you are thinking to make the yacht commercially compliant and commercially registered in order to charter your new beauty. If she has been registered as a pleasure boat how present Registrar looks at commercial activity. Is it a friendly and cost effective or to bureaucratic, expensive one.
VAT – very important.
It’s also essential to determine whether the yacht has a “VAT paid” status or not. If the buyer intends to keep the yacht in the EU waters he/she may be held liable for VAT. These documents may be worth 17-27 per cent of yacht’s value. Some tax authorities are acting stubborn and such sale is advisable to take place somewhere in international waters.
The tax advisor is necessary when considering buyer’s residency/nationality, purpose of the yacht, intended area of use, period of stay, port of registry, place of delivery. These are very important factors here. It’s common for buyers to seek advice from tax advisers to plan the most tax-efficient ownership structure.
Crew, Mortgages and Liens
Documents ensuring appropriate indemnities should be provided by the seller to guard against crew claims against the vessel, including confirmation from the crew that their salaries have been paid in full and that there are no further debts owing to them. If any of the crew is to be retained, new employment contracts will also need to be put in place.
Mortgage – In case when the mortgages exists over the yacht as a security for the lender the seller should ensure that any such existing mortgage is fully discharged prior to completion.
The seller should warrant that the yacht is sold free of debts, charges, liens, claims, mortgages and encumbrances. Also, the arrangements will also need to be made to ensure prompt registration of any new mortgage in favour of the buyer’s financiers, if applicable.
Title
The buyer should be convinced that the seller has sole ownership of and good title to the yacht. Transcript of Register from the yacht’s flag state will proof this as well as will also show any current registered encumbrances.
Selling of the yacht where the owner is a legal body
This is the case with many yachts, and almost a rule with bigger ones.
Reason? Limited liability, ownership anonymity, flexibility to name just a few. The owner of the yacht is a legal body, a special-purpose vehicle set up with the sole purpose of owning and operating the yacht. A number of corporate documents should be exchanged at completion.
The procedure should ensure that the directors and shareholders of the selling entity have been authorized to sell the yacht and that this authority has been given in accordance with the company’s Memorandum & Articles of Association or Bylaws.
Commonly, when the seller is a legal body or title holder, it will typically own no assets other than the yacht.
In such case, it’s advisable for the buyer to obtain a personal guarantee from the beneficial owner of the selling company to mitigate the risk of any breach by the seller of its contractual warranties. Provision of a personal guarantee should be agreed before the MOA is signed.
The crown documents in the transaction is Bill of Sale signed by the seller and exchanged on completion as evidence of the effective delivery of the yacht as well as legal title transfer to the buyer.
Alternatively, smooth sale of the yacht could be performed by simple transfer of the shares of title holding company. A proper Minutes of Special Directors and Shareholders Meeting should be prepared signed and adjourned.
A Minute or ‘protocol of delivery and acceptance’, identifying the precise date, time and place of delivery, is also often signed by both parties’ representatives on board at the moment of delivery.
So, purchasing a valuable yacht is a complex task. The above issues represent just some of the due diligence considerations buyers and their representatives must be mindful of.
A number of other significant legal points should be covered, including confidentiality, law and jurisdiction, and commercial considerations such as crewing, maintaining, insurance and berthing. All of these require specialist advice and guidance to ensure a successful and trouble-free transition from potential buyer to owner.
In a suspicious cases or in “to good to be true” situations just turn around and leave the battlefield. It’s better to lose travel expenses than lifetime saving.
