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Buying a boat - Lester Aldridge provides steps to take first

Thinking about buying a boat?

Some of the things to take into account to ensure plain sailing: read this great advice from Lester Aldridge.

Ed note: The gales will pass and calmer weather will encourage us all out on the water soon! Before we get carried away with enthusiasm for buying a boat it's well worth while reading this week's Life Matters with Lester Aldridge: this month written for us by Lucy Goff, Associate with Lester Aldridge Marine. If you'd like a chat with her see below. If you'd like to know more about LA Marine just click here!

Yachts at Sea

Buying a boat is not always plain sailing!

As a result of the pandemic and limits on international travel, the leisure marine industry has seen a massive increase in the sale of new and second-hand boats over the last two years. 

The attraction of sailing the seas in your own pleasure craft is obvious.

Beware the idiosyncrasies unique to boat transactions!

However, there are certain particular idiosyncrasies unique to boat transactions, which can catch the unwary buyer out. Similar in many ways to the conveyancing process involved in buying a house, there are various steps and hoops to go through from the initial expression of interest to handing over the keys and a myriad of issues to think about along the way.

This article aims to set out some of the things you should take into account when considering a potential purchase to ensure plain sailing.

Put it in writing

Agreeing to a properly worded written contract with the seller is vital to safeguarding one’s position both during and after the transaction. Among other things, this can ensure that there is recourse against the seller if they have misrepresented the title and VAT positions and to give the buyer an escape route if the boat turns out not to be unsatisfactory after the survey. 

Where a survey has highlighted repairs that need doing, written contracts can be updated to document the extent of any repairs that need to be completed by the seller before the transaction goes ahead.

It is standard practice for a deposit (usually 10% of the purchase price) to be paid to the broker before the seller will allow a survey to be undertaken. An appropriately worded sale agreement will protect the parties’ interests with regards to how the deposit is to be held and what should happen to it if the deal goes south. It is common for parties to agree that the deposit is held in escrow by a neutral third party broker or solicitor. 

Whilst there are several industry-standard sale agreements, it is always worth speaking to a specialist marine lawyer to ensure you are adequately protected and that any bespoke terms agreed between the parties are properly reflected in the contract wording.

Chain of ownership 

Couple looking over new boat

When purchasing a yacht (new or used) it is critical to ensure that the seller provides you with full title paperwork. Ideally, you would want to receive the original documents (typically a Builder’s Certificate issued by the Builder to the first owner and a bill of sale evidencing each change of ownership from the first owner to the current seller). The last thing you want after purchasing a yacht is for someone else to come out of the woodwork and claim ownership. Your only course of redress in such circumstances would then be against the seller, whose pockets may not be that deep or which may just be a shell company. 

Ship registries often require properly documented proof of ownership for you to fly their flag. Part 1 of the UK Ship Register, for example, requires 5 years’ clear chain of title. Lack of a good title may also affect your ability to obtain finance.

Scrutinise the survey

Much like buying a house, the general rule when buying a second-hand yacht is “caveat emptor” or “buyer beware”. This means the seller does not give any warranties as to the condition of the boat and it is therefore important that you carry out a full inspection to ensure you know the true condition of what you are buying. We would always recommend instructing a suitably qualified surveyor when buying a second-hand boat and a sea trial should be performed as well as a full out-of-water inspection.

Depending on the wording of the contract, if any defects are found you may be able to demand that repairs are made before completion, negotiate a lower price instead of repairs or even walk away from a bad deal altogether.

A survey is not as important when purchasing a new boat from a dealer since the manufacturer will usually provide a warranty, but do check the length of the warranty and the conditions that apply to it.

Taxing times

Following Brexit, the position concerning UK boats and VAT has become even more complex. VAT is chargeable on the majority of new pleasure yacht sales in the UK (unless the boat is being exported for example). The purchase of a second-hand boat on which VAT has previously been paid would not, however, be subject to VAT unless, for example, the yacht had been used for charter and the seller was VAT registered and had reclaimed the VAT on the basis that the yacht was a business asset.

Since 1st January 2021, a boat on which VAT (or its local equivalent) has been paid in an EU country other than the UK will not be regarded as “VAT paid” in the UK (and vice versa). Therefore, if a UK resident purchases a yacht in the EU and then sails it back to the UK, VAT will be payable upon arrival in the UK.

Customs officers are entitled to board yachts at any port to review their VAT status and have been known to force owners lacking the required documentation to account for VAT. It is therefore important you that obtain clear evidence of the VAT position from the seller or, if the position is unclear, get an indemnity written into your contract.

Linked to this, boat owners may want to give more careful consideration to where their yacht is registered if international or European cruising is planned. Which flag the yacht is flying might have an impact on how freely she can move around. 

The above is just a brief taster of the matters that should be considered when buying a boat. Investing time and effort on these issues at the outset of a transaction can save you a lot of hassle and, worse, financial loss further down the line and enable you to get on with enjoying your new boat!

For any further advice on yacht transactions, the team at LA Marine are on hand to help. 

LA Marine – experts in yachting law Lucy Goff, Associate at Lester Aldridge Solicitors

LA Marine are the South Coast’s leading marine lawyers. With offices in Bournemouth, Southampton and London and a history dating back over 20 years, we are excellently placed to assist and advise on all yacht-related transactions or disputes, big and small.

Please feel free to contact our friendly team on 02380 827415 or This email address is being protected from spambots. You need JavaScript enabled to view it. to discuss how we may assist you further.

Article by Lucy Goff, Associate, LA Marine

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023 8082 7475

 

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