Owning a yacht represents the pinnacle of luxury, but the path to purchase is fraught with legal pitfalls which can capsize your dreams if you are not careful. To navigate these treacherous waters safely, you must prioritise airtight contracts, perform due diligence and enlist expert help to avoid costly mistakes.

The Siren Song of the Private Sale

For many buyers, the allure of a private yacht sale promises a lower price tag by cutting out the broker and lawyer. However, the savings are often outweighed by the legal risks.

In a private transaction, the legal principle of caveat emptor, “let the buyer beware”, reigns supreme. If the seller isn’t the rightful owner, or if there are hidden debts, the buyer is the one left to deal with the fallout.

Insist on a written contract – use a detailed sale and purchase agreement which outlines all terms, from the purchase price to the inventory of equipment.
Engage a lawyer for the paperwork – this ensures the correct legal procedures are followed, offering a greater protection.

The Murky Issue of Title and Liens

One of the biggest risks in any yacht purchase is acquiring a vessel with a “clouded” title – history of ownership disputes or outstanding debts or mortgages. These claims, known as maritime liens, can be attached to the vessel itself, like limpets, staying with it even after it changes ownership.

If not properly discharged, these debts can become the new owner’s responsibility, costing thousands in unexpected payments and legal fees. Banks which provide a marine loan can register a mortgage or charge against the vessel on an official register and hidden, unregistered mortgages can also exist. This is a red flag which must be cleared before the sale can be completed.

Conduct a title search – a thorough search of the vessel’s registration is crucial to confirm the seller is the legal owner and that no maritime liens or charges are outstanding.
Establish a clear paper trail – before parting with a deposit, request all documentation, including the builder’s certificate and previous bills of sale, to evidence a historical chain of ownership. If the seller cannot produce these, proceed with extreme caution or walk away.
Use an escrow account – for a secure and transparent transaction, place your deposit in an escrow account managed by a reputable broker or solicitor. The funds are released to the seller only once all the contract conditions – including the removal or liens or charges – have been met.

The Hidden Cost of Compliance

A yacht’s glamorous exterior can hide expensive compliance issues that could sink your budget. The regulatory requirements vary dramatically depending on a vessel’s size, age, and intended use. International voyages require registration with a flag state and compliance with its specific regulations on safety, pollution and crewing.

Taxes, Taxes

Buying within the EU or the UK requires proof of a vessel’s VAT status. The original receipted VAT invoice is essential for demonstrating the tax has been paid, preventing a nasty surprise if customs authorities challenge your yacht’s tax-paid status, but this in itself is rarely sufficient. Many things can happen to cause a yacht to lose its tax-paid status. Additionally, Brexit has greatly complicated the VAT position in relation to Vessels moving between the UK and the EU and there is a high risk for the unwary to fall foul of VAT regulations and face a costly visit from the taxman.

Verify VAT status – get definitive proof VAT has been paid and that the VAT status has not been lost. For older boats without a complete paper trail, this may be difficult and require expert consultation. Those intending to charter will have additional considerations and expert advice is likely to be essential.
Understand the regulations – get expert help to ensure the yacht complies with all relevant regulations for its intended use and location, such as the Recreational Craft Directive (RCD).

The Deceptive “As Is, Where Is” Deal

Falling in love with a yacht can lead to emotional purchases, causing buyers to overlook critical due diligence. A common mistake is to agree to an “as is, where is” purchase without a proper pre-purchase survey. Whilst a visual inspection might reveal minor cosmetic issues, it won’t uncover hidden structural damage, corrosion or mechanical failures which could cost a fortune to repair.

Insist on a professional survey – always make your purchase offer contingent on a satisfactory survey and sea trial conducted by an independent and qualified marine surveyor. Look for surveyors who are accredited by professional associations like the Association of Brokers and Yacht Agents (ABYA) or the Maritime and Coastguard Agency (MCA).
Negotiate based on the survey – the surveyor’s report will provide an objective assessment of the vessel’s condition. If it reveals problems, you can use it as leverage to renegotiate the price or withdraw from the sale.
Get everything in writing – ensure all promises and warranties from the seller are detailed in the final purchase contract. An oral promise is not worth the paper it’s written on.

The Perils of Going it Alone

Yacht transactions are not for the inexperienced. A single misstep can negate any perceived savings and leave you with a substandard vessel and a massive legal headache. The use of specialist legal services whilst an additional cost, acts as a crucial layer of protection with intangible value.

Engage a reputable yacht broker – a professional broker, especially one who is a member of an industry body like the Mediterranean Yacht Brokers Association (MYBA) or Association of Brokers and Yacht Agents (ABYA) will guide you through every step.
Engage a maritime lawyer – regardless of value and for even the simplest of transactions, an experienced maritime lawyer is invaluable. They can review contracts, verify title, guide you on tax implications and ensure all regulatory requirements are met.
Think before you leap – try to resist putting down a large deposit without a carefully negotiated contract in place. It may be easy to pay but not so easy to recover if the deal goes sour.

By approaching your yacht purchase with a clear head and relying on professional expertise, you can secure your investment and ensure your maiden voyage is a cause for celebration, not litigation.

Get In Touch

If you’re considering purchasing a yacht, our experienced maritime lawyers can help you navigate the legal complexities. Contact us at lamarine@la-law.com today for tailored advice.