Having made the decision to acquire a yacht, there are a number of important steps that should be taken to ensure its successful ownership and operation in future years.
Yachts will either be purchased as new builds or pre-owned. For a new build, the main commercial terms and the documentation will be covered by a detailed contract that includes the detailed technical specification of the yacht. For a pre-owned yacht, the main commercial terms will, typically, be agreed through the yacht broker.
New build yacht
When purchasing a new build, either directly from the builder or through a dealer, a written contract is indispensable. There are broadly three categories of new-build – production yacht, semi-custom yacht and custom yacht.
Production yachts are generally the least expensive and quickest option. There is very little scope for variation or negotiation, and the sale and construction contract will typically be presented to the buyer in a standard form.
Semi-custom yachts offer the relatively short lead times of production building with some of the flexibility associated with full custom projects.
Custom yachts are built in most cases completely to the owner’s requirements and therefore involve a close collaboration and regular visits to the yard during the design and construction. The assistance of a marine lawyer is essential to review the design and build agreement. It is also recommended to use a marine surveyor or project manager to monitor and co-ordinate the work of the designer, architect, builder and any external suppliers.
In reviewing the provisions of the building contract, special consideration should be given to:
- Specification and plans
- Contract price and variations
- Sub contractors and suppliers
- Performance criteria
- Trials and tests
- Documentation and delivery
- Warranty period
- Dispute resolution
- Choice of law
A buyer should always appoint a surveyor to carry out a pre-purchase survey and sea trial to establish the current condition of the vessel and the potential level of future costs. A survey provides a basis for price negotiation or the rectification of defects prior to delivery.
The parties to a sale will generally sign a Memorandum of Agreement (MOA) that reflects the agreed terms. This should specify both the time and procedure to be followed on delivery and the documentation that will be provided by the seller in exchange for the balance of the purchase price. It should also cover:
- Price and mode of payment
- Any special conditions
- Sea trial and condition survey
- Place of delivery
- VAT status
- The law applicable to the contract
This is a legally binding agreement so it is recommended that both parties should seek legal advice before entering into an MOA.
Documents to be delivered on completion should include:
- Bill of Sale
- Builder certificate and previous Bills of Sale
- Yacht certificates
- Log books, plans, blueprints, handbooks, manuals, technical documentation and instructions, which should be transferred on board the yacht
- A general assignment of all current warranties for the yacht, its equipment and components
- Corporate documentation showing that the company is in good standing
- VAT paid certificate / confirmation under EU Temporary Admission scheme / import document for commercial yachts
- Transcript of the Register
- Class confirmation
- Registry confirmation of no outstanding fees or other charges
- Crew release letters
- Commercial invoice
- Protocol of delivery and acceptance