Top tips on buying a second-hand boat
Buying a second hand boat can be a pretty big investment yet despite the expense the legal side of buying a boat can be as simple as buying a newspaper! With that in mind it makes sense to undertake a few basic checks before parting with your money and actually committing to buy.
If you’re thinking of buying a second hand boat then there is a normal running order of events that would be a useful guide to ensure your purchase goes as smoothly as possible.
The following advice is based on the RYA agreement for the sale and purchase of a second-hand boat.
View the boat and make an offer; subject to contract and survey
You’ve found your dream boat but it would be wise with an investment of this size to proceed with caution, ensuring you avoid any potentially expensive shortcuts and minimise your risks.
The sale and purchase agreement
A sale and purchase agreement, as the name suggest, will govern the terms under which the parties will complete the transaction, to include payment of the deposit, a buyer’s entitlement to survey the vessel; deemed acceptance of the boat or otherwise; termination of the agreement and how disputes between the parties are to be resolved.
A key provision of the agreement is that the seller is entitled to sell the vessel and that it is free of mortgages, debts, claims and charges.
It is not unreasonable, especially when large sums are involved, to ask to review key documents that will be delivered on completion, which most notably include a certificate of registry (if registered), build certificate, bills of sale and tax documentation.
Read the agreement carefully and only once you are satisfied with the terms of the agreement consider the next stage of the process, which consists of signing the agreement and payment of the deposit.
Consider how best to protect your purchase monies; if buying through a broker make enquiries of its use of a client account
Remember that, for the most part, the broker while willing to facilitate the sale will normally be acting on behalf of the seller rather than the buyer.
Ideally the broker will be a member of a relevant professional or trade body and will follow that body’s respective codes of conduct.
Prior to paying a deposit, make enquires to the broker as to how the deposit and/or completion funds are to be held. The broker should maintain a separate and designated client account - which should be completely separate from the company’s business accounts.
Have you agreed with the seller what the deposit is going to be? The standard deposit is 10% of the purchase price, but you could offer a lesser sum and amend the contract accordingly and possibly pay the purchase price on completion. Equally important is to agree on the method to be used to pay the funds.
Survey and Sea trial
Once satisfied with the documentation a sea trial is recommended. You will need to review the sale and purchase agreement carefully to ensure that you are entitled to withdraw from the sale if you are not happy with the boat following sea trial.
A survey is considered essential by most purchasers to check the condition of the boat and its engine/equipment. Although the boat may appear superficially to be in excellent condition, a survey is nevertheless a sensible precaution. You should discuss with the surveyor in advance whether there are any aspects of the boat of its equipment that will not be covered by the survey. Be aware that usually all expenses involved in a survey, including yard fees and preparing the boat for survey, must be met by the buyer.
Once the survey report has been received the buyer usually has a period of time to decide what to do next.
Post Survey - Negotiate work to rectify material defects, agree adjusted price if necessary
If there are no material defects identified by the surveyor, the buyer is normally obliged to go complete the sale. However, if significant defects are discovered, the buyer has the following options: withdrawing from the sale, renegotiating the price of the vessel or requesting the seller to rectify the problems at his expense, prior to completion of the contract.
Ask to see all equipment and gear which is not currently on the boat but which is included in the inventory prior to handing over the balance of the purchase price
Clearly you will want to see everything you are planning on buying and to ensure it is and does exactly what it should. This would include any warranty for key components of the vessel, manuals and certificates.
Ask whether there is marine finance on the boat and if so establish arrangements for and request proof of discharge prior to completion
If there is marine finance/ship mortgage you will want confirmation that the purchase monies are sufficient to redeem that mortgage. You may therefore wish to see, in writing, from the Finance House, a redemption statement. It would be prudent for you to liaise with the seller and the Finance House to ensure that the necessary arrangements are in place to redeem the mortgage. Depending on where the boat is registered, the mortgage may be registered with the Ship Registry.
Ask for confirmation of Recreational Craft Directive compliance or exemption and VAT status of the boat
When importing a boat from overseas most people are aware that you will have to pay VAT and import duty upon entry into the EU. But many are not aware of the requirement for the boat to comply with the Recreational Craft Directive (RCD). The RCD requires that craft placed on the market within the EEA comply with essential safety requirements and are CE marked.
Any boat that comes within the scope of the directive must have appropriate accompanying documentation including; Technical File and Owner’s Manual which must include a written Declaration of Conformity.
Lack of awareness of this requirement could prove to be extremely costly so beware!
Arrange insurance prior to handing over balance cheque
Although it is not compulsory for pleasure craft to have insurance in this country it would be foolish not to have comprehensive cover. Boat insurance is however pretty complex so it would be worth finding an insurance broker to help you with this.
If your second-hand boat is up to 20 years old then it will probably not need to be surveyed to get your insurance but for older boats a survey is usually required and any recommendations to be implemented before full cover is given.
On hand over of the balance ensure you receive an original Bill of Sale showing a transfer of ownership from the current owner to the buyer.
Ideally obtain copies of the build certificate, previous Bills of Sale, Certificate of Registration, ideally the Original receipted VAT invoice and if not available a good copy; RCD compliance and all other relevant documentation.
Although the law does not generally prescribe the documentation that should accompany a sale, documentation is required to comply with certain legal requirements such as the Recreational Craft Directive, compliance with national and EU-wide VAT rules and any national registration requirements. If the seller is unable to produce documentation the buyer may be entitled to withdraw from the sale.
The above guidance is by no means exhaustive, but provides a good starting point of factors to consider.
Article courtesy of the RYA