Ask A Maritime Attorney: What steps do I need to take when purchasing a boat other than have a professional look at it?

Question:

I just submitted an offer to buy a used boat and I want to do everything possible to avoid any problems with the purchase.  I know I need to have the boat inspected by a professional, but are there other steps I can take to protect myself?

Answer

The purchase of a boat can be an exciting and emotional time, and it seems that people who are otherwise successful and sophisticated with important decisions in their life may enter into a boat purchase with no caution or common sense whatsoever.  So, let’s look at this.

Before starting the process, we recommend that all prospective buyers obtain a copy of a pamphlet prepared by the California Division of Boating and Waterways (http://www.dbw.parks.ca.gov) entitled “How to Buy a Used Boat.”  This document provides a brief but helpful overview of the boat buying process.  As for the legal issues that may arise, it would be impossible for me to list every legal risk associated with a boat purchase, but I can provide an introduction by looking at circumstances where our clients have found themselves in litigation after a boat purchase.

Most litigation that is initiated in connection with a boat purchase is related to the physical condition of the boat. Some type of fault or damage is discovered after the purchase, and the buyer believes that the problem was either fraudulently concealed or should have been disclosed prior to the purchase.  I should first note that, unlike a real estate transaction, the seller of a boat does not have any statutory duty to disclose the boat’s material faults prior to the sale. Most of these lawsuits therefore include allegations of fraud, and this form of litigation can get ugly and expensive real fast.

Since a seller has no real duty to disclose anything (so long as he or she does not lie or conceal), the buyer must find the best experts available to inspect the boat during the purchase contingency period.  The marine surveyor is at the center of this, but the buyer should also obtain a mechanical inspection and, for sailboats, a rig survey.  The selection of these experts is critical, and if possible, the buyer should not rely upon the recommendations of the broker or seller.

Prospective boat buyers are often surprised to learn that marine surveyors are not licensed by any government agency.  Many surveyors make reference to their Coast Guard Master’s License in their marketing materials, but this is just a marketing gimmick, and a Coast Guard license has no relevance at all to a marine survey.  Instead, most qualified surveyors are members of a professional (but non-governmental) trade organization – either the National Association of Marine Surveyors (“NAMS”- www.namsglobal.org) or the Society of Accredited Marine Surveyors (“SAMS” – www.marinesurvey.org).  Both organizations have member directories on their web sites.  The most qualified surveyors will have considerable experience with insurance claim investigation, which gives them considerable insight into what can go wrong with a boat.  Your marine surveyor should also be able to recommend experts for your mechanical inspection or rig survey.

In addition to claims surrounding the condition of the boat, we see a lot of litigation involving various other forms of misrepresentation.  This may relate to the boat’s features or warranty or title history or any other area where the buyer feels he or she has been cheated.  Litigation, however, is not a viable form of pre-purchase protection, so the buyer should take steps to avoid these problems before the purchase.  The most effective protection in this area is for the buyer to personally examine and confirm every feature that he or she finds important, rather than to rely on the representations of the broker or seller.

For example, many boat warranties are either very limited in scope or they are not transferable.  If a warranty is important, the buyer of a used boat should obtain a copy of the warranty paperwork and read it carefully.  Similarly, if the features of the electronic equipment are important, the buyer should confirm that those features are in fact included with the equipment, rather than simply relying upon the seller’s representations.  The buyer should also evaluate the performance of the boat during a comprehensive sea trial.  In a lawsuit, it may be alleged that these features were not important to the buyer if he or she failed to take reasonable steps to confirm their existence.

Title history is another area of frequent litigation.  Conflicting claims of ownership and undisclosed liens may both cause problems for a buyer.  Most purchase contracts require the seller to indemnify the buyer for these potential problems, but when the problem is discovered the seller’s whereabouts may be unknown, they may be insolvent, or they may simply refuse to cooperate.  The best form of protection against title problems prior to the purchase is to examine the vessel’s Abstract of Title (Coast Guard title history) carefully, and to review the title history with a documentation service or an attorney.  Unfortunately, a title history is only available for Coast Guard documented vessels, and title insurance is not available to protect against unknown or undisclosed problems in a boat’s title history.  As such a careful review with a qualified professional is important.

This list is just a sampling of the wide range of litigation that can develop after a boat purchase, and therefore only a brief introduction to the wide range of issues requiring careful inspection prior to signing the “final acceptance” on the purchase contract.  The common thread throughout this discussion is that careful buyers must rely as much as possible upon their own investigation and the opinion of their own hired experts, rather than the representations of the seller or broker.  In the end, it’s always better to avoid a lawsuit than to win one.  A maritime attorney with experience in yacht purchase and sale transactions can be a great help to buyers or sellers who want a hassle-free transaction.

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 in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at (562) 799-5508, through his website at www.weilmaritime.com,  or via email at dweil@weilmaritime.com.