Before answering this question I should ask our reader to re-examine his business plan. His fundamental premise – that he will be able to purchase and sell used boats at a profit – may be seriously flawed. But we will leave that discussion for another day.
His observations about the used car industry are accurate. Most states, including California, place restrictions on the purchase and sale of cars for a profit. In California, a dealer’s license is required for anyone that buys, sells or exchanges cars for a profit (Calif. Vehicle Code sec. 285). Yachts, ships and boats, however, are not subject to the same restrictions, but we should provide an overview of the industry’s regulatory landscape before answering our reader’s question.
Yacht Sales in California are regulated by the California Division of Boating and Waterways (DBW). The agency was formerly a stand-alone department in California but it was absorbed into the Department of Parks & Recreation several years ago. It oversees a number of programs, including a loan and grant program for the financing of launching ramps and marinas, a licensing program for captains of passenger boats that operate solely on state waters (such as Lake Arrowhead), and the licensing of yacht and ship brokers and salespeople.
Notably, California and Florida are the only states in the country that require licensing of yacht brokers. For most of the remainder of the country, a yacht broker may hang out his or her shingle and start selling boats with nothing more than a local business license.
Brokers in California are regulated under the California Yacht and Ship Brokers Act (Calif. Harbors and Navigation Code sec. 700), and regulations that are promulgated under the Act (mostly under Title 14 of the California Code of Regulations). The Division of Boating and Waterways regulates brokers through the enforcement of these statutes and regulations, issuing licenses, administering licensing examinations, auditing brokers, and where necessary, disciplining brokers for violations of the statutes and regulations.
With this framework in mind, let’s get to our reader’s question by looking at a couple definitions. The California Yacht and Ship Brokers Act defines “Yacht” as a vessel that is over 16 feet in length and that measures less than 300 gross tons (section 701(c) of the Act. “Broker” is defined in section 701(a) of the Act as a person who “Sells or offers to sell, buys or offers to buy, solicits or obtains listings of, or negotiates the purchase, sale, or exchange of yachts, and who DOES NOT OWN THOSE YACHTS. The key to this definition is in the five words that I emphasized at the end. A broker’s license is NOT required for someone who sells a boat that they own, regardless of how many boats they are selling and regardless of whether they make a profit – or are trying to make a profit.
Our reader may therefore proceed with his plan without first obtaining a yacht brokers license. He should nonetheless consult with an attorney who is familiar with the general business regulations that he will be subject to, including statewide issues such as sales and use tax and the regulations of his local community.
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. If you have a maritime law question for Weil, he can be contacted at 562-438-8149 or at firstname.lastname@example.org.
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