Where Do I Begin to Prepare for the Purchase of My First Boat?
Posted: January 16, 2014 | By: David Weil
The first question is easy. The California Division of Boating and Waterways publishes a pamphlet with the catchy title, “How to Buy a Used Boat.” It is available online at dbw.parks.ca.gov/Pubs/UsedBoat/index.htm.
This pamphlet provides a nice overview of the process but, unfortunately, a small pamphlet can only scratch the surface of a yacht purchase transaction. We always recommend that buyers and sellers of any yacht use an experienced yacht broker to guide them through the transaction. And, for larger transactions or for buyers or sellers who are particularly cautious, a maritime attorney experienced in yachting transactions should be consulted.
When looking for a broker, a good place to start is with one who is certified through the Certified Professional Yacht Broker (CPYB) Program. The program is a joint project of seven different brokerage organizations throughout North America.
CPYB brokers are certified upon the successful completion of a rigorous exam, and they maintain their certification through a series of continuing education programs. You can learn more about the program and certified brokers in your area at cpyb.net/aws/YBAA/pt/sp/cpyb_home.
Whether an attorney or a broker is retained, a purchase agreement will be provided to the parties -- so, our reader will not need to look for a “boilerplate” document. Attorneys will, of course, draft a contract that is specific to each transaction, but most brokers use a standard form contract. Those agreements vary considerably from state to state, and even among brokers within a state.
In California, however, brokers who are members of the California Yacht Brokers Association have access to a set of form contracts that have been vetted by attorneys over a period of many years. Other organizations throughout the country have produced similar form contracts, and since many CPYB brokers are members of these organizations, the certification program is, again, a good place to start when selecting a broker.
A yacht purchase transaction involves a long list of concerns, and the form of the purchase agreement is only one item on that list. Brokers will also help with negotiation of the purchase price, processing of title documents, evaluating the title history, recommendations for lenders and marine surveyors, working with surveyors to evaluate the surveyor’s findings and negotiating repair allowances related to those findings. Also, in more complicated cases, a qualified broker will be able to provide referral to an attorney experienced in yacht purchase and sale transactions.
Our reader seems interested in pursuing this transaction without seeking the advice of a broker or an attorney. This is a bad idea, for the reasons previously stated -- even if he is considering the purchase of a relatively inexpensive boat.
Further, from a buyer’s prospective, there is very little advantage to a “private party” transaction, since the seller pays the brokerage commission without any cost to the buyer. Some people believe that the purchase price will be lower without a broker, but this is rarely true. A boat’s value is determined by reviewing recent comparable transactions (“comps”), not by calculating how much money the buyer needs to “net” from the transaction.
The purchase of a yacht, like the purchase of a home, is a complicated transaction that involves many obscure legal and practical considerations that may be unfamiliar to the parties. The process should begin with a consultation with an experienced broker or maritime attorney.
David Weil is licensed to practice law in the state of California and, as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, is a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. He is also one of a small group of attorneys to be certified as an Admiralty and Maritime Law Specialist by the State Bar of California. If you have a maritime law question for Weil, he can be contacted at (562) 438-8149 or at email@example.com.