Getting the right Paperwork when buying a boat.
This is an account of some lessons I learned when buying a second hand boat recently. You may be well advised to get an expert's opinion before spending your cash, but this may help you understand where some of the pitfalls are. I sure wish some one had told me all this before I started. The three things I learnt about are “VAT”, “RCD compliance”, and “Legal Title”. There is a common misconception that proof of VAT is not necessary on boats over a certain age. It's not true.
Although VAT is a complicated tax, there is one simple statement that is always true;
If you can't prove that VAT has been paid on your boat you are liable to pay it.
A VAT receipt, either from customs or from a VAT registered company who legitimately sold the boat is usually enough.
Your concern when buying should be in understanding the VAT status of the vessel. VAT being due should not be a deal breaker because you can factor it into the price.
The RCD status on the other hand is a deal breaking issue. If not compliant it can render your boat legally unusable and it may cost more than she's worth to sort out.
RCD stands for the EU's “Recreational Craft Directive”. This basically states that boats built or imported into the EU after 16th June 1998 must be stamped with the EU “CE” mark. Initially this certified standards of seaworthiness, but in recent years extra requirements, such as engine emission levels, have been included.
RCD exemptions can be had, commonly by proving the vessel was in EU waters prior to June '98, but get expert advice before committing yourself.
Establishing legal title, i.e., proving conclusively that the Vendor owns the boat, can be complicated;
It is most simply done by producing the original Builders Certificate and originals of all Bills of Sale to second and subsequent owners. However if the vessel is on a full ships register then these documents will have been replaced by the Ships Registrar with a Certificate of Registry. Therefore ...
The second way to prove ownership is with a current Certificate of Registry. If the vessel is on a full ships' register then the Vendor should have an original of this document. Further, you can and should write to the registrar asking for a transcript of the register before buying. Among other things this will tell you who really owns the vessel and whether there are any mortgages on it.
Unfortunately there is more, for if the registration is not current, then there will be a “Deletion Certificate” from the register. The third way to establish title is with the Deletion Certificate plus any subsequent bills of sale, in effect the Deletion Cert acts much like the Builders Cert in the first method. As before, all documents must be originals, copies, even certified copies, won't do.
Thus far I've been talking about the full register or “Part 1”. There is a special “Part 2” register for fishing boats and in the UK there is a “part 3” or “Small Ships Register”, also called the SSR. Being on the SSR means that there is an official piece of paper that says certain details about a vessel have been registered against a person's name. It doesn't mean that those details are true, nor does it mean that that person owns the boat, nor that the boat is VAT paid, nor RCD compliant. So be careful! You will still need either an original Builders Cert or Deletion Cert and the full chain of Bills of Sale from then on.
If you think there is anything irregular or missing you should take professional advice.
Making the deal.
Once you are satisfied with the boat and paperwork, then comes the negotiation and contract. Closing my recent boat purchase was an education in itself, and of the lessons learned, some I got right in the negotiation, others I'll know better next time.
As many boats are bought through brokers, let's dwell on them for a moment. Brokers are useful, they matchmake us with our boats and convert our beloveds into cash. Sure we grumble about the chunk of change deducted from the capital sum, but a good broker earns it, and, if as a seller you don't think so and have time, you can sell direct.
However brokers are not all the same. I would expect a broker in my own area, on average, to be more concerned about me than one in a distant location, or another country. Still, it's common that we have to travel to get what we want.
Now despite what any broker tells me about how reputable he is; how long he has been in business; what other important clients he has; how he is working for me, whether I am buyer or seller; I always try to remember that very few of them are not also doing it to make their living, and this usually means they're in it for the money!
Surely in these circumstances even a saint would be tempted to push the sale through regardless of a couple of “i”s not being dotted?
Assuming our impeccably honest broker has not been subjected to such temptation, it is still possible that in the excitement of making a deal, he could forget to mention something to you or to the seller. Indeed, in the excitement of popping champagne bottles, you yourself might fail to notice something amiss in the contract you are signing!
So, and this applies whether dealing with a broker or not, make your offer in writing including all conditions.
At very least;
Subject to originals of any unseen paperwork
Subject to survey by your own marine surveyor
Subject to engineer's report on the engine
Subject to test sail
Subject to any other repairs or updates that you want the seller to attend to.
Subject to standard documents for contract and bill of sale being used (For example those of the RYA or YBDSA).
For a cross border transaction insist that your deposit is held in a Euro account. You can lose a couple of percent in the conversion, and if the deal goes south, you will lose it twice if you have to change back.
If dealing through a broker, then pending your other conditions being met, offer a deposit of not more than 5%.
This latter will upset the broker, who typically will want 10%, be prepared for a hissy-fit. However he is caught, turning you down without reference to the seller could put him in an awkward situation, so let him do the haggling! If he insists you can reasonably ask why. For a small boat a 10% deposit may be reasonable, but if paying six figures plus it's hard to justify. Be flexible and fair, and be willing to settle for somewhere in between.
By putting your offer in writing it can eliminate arguments later, it will also make it less likely that the broker inadvertently omits something to the seller, and it will reduce the risk that you forget to mention something. It will also enable you to refer to all your conditions with the single phrase “as per my written offer”, and provides a check-list to compare with the contract.
If your club or sailing association provides standard documents for contract and Bill of Sale, get them. If not, others can.
The RYA is internationally recognizable and their reputation is hard to challenge, alternatively many yacht brokers are members of Yacht Brokers, Designers and Surveyors Association (YBDSA). Both organizations have standard documents, which you can familiarize yourself with well in advance. Use of standard documents should not give either buyer or seller cause for concern.
Be careful of a broker's own contract. It may only have “minor” modifications from one of the standards, but be sure that you are satisfied with those differences.
Buying a boat is always going to be a risk, but I hope you derive some benefit from my hindsight. Good luck!
