The following is a very basic guide to take buyers through the various steps of purchasing a yacht. This is not an exhaustive list and on the basis that a yacht sale involves a mutual agreement between buyer and seller, minor changes to the process may occasionally occur.
First, a buyer needs to find a suitable yacht. At Grabau International, we focus specifically on the market for brokerage and new high quality blue water and performance orientated cruising yachts in the UK and internationally. Benefitting from over 18 years of experience in this particular sector of the market, we offer a market-leading wealth of experience and knowledge of the market.
In a vast majority of cases, the next step will be to arrange a viewing of the yacht. We can assist in making these arrangements and will seek to answer any questions a buyer may have, before, during and after the viewing.
There are occasions where it is not logistically possible for a buyer to personally inspect a yacht prior to making an offer. In these instances, it is common for the buyer’s chosen surveyor to act as their representative or an offer to be made subject to inspection once Agreements are in place.
After finding a suitable yacht, a buyer needs to put forward a formal offer to purchase. This should be made directly to us, preferably in writing via email, letter or fax.
In addition to its level, the offer should stipulate terms; such as, whether it is subject to a survey and/or sea-trial, or to securing marine finance. The offer should also stipulate if the timescale associated with completing the purchase is likely to be any longer than approximately 4 weeks.
The offer together with any accompanying terms will then be put forward by us to our client, the seller. Hopefully, the offer will be accepted; if not, negotiations may take place in an effort to reach a mutually agreeable level whereby the purchase can move forward to drawing up formal Agreements.
Yacht purchase differs from buying property in that ‘Agreements’ are usually exchanged at an early stage prior to any surveys and/or sea-trials or other formal inspections. This creates a process that is far less stressful because the buyer can proceed in the knowledge of being protected by the terms of an exchanged Agreement, while the seller is able to draw confidence from the buyer’s commitment to purchase their yacht.
Exchanging Agreements also place contractual obligations on the seller to proceed with the agreement and stipulate that they may not use the yacht once any survey and/or sea-trial has taken place.
The Agreement will reflect the agreed offer terms and either be a Conditional or Unconditional Sale & Purchase Agreement. Grabau International uses Sale & Purchase Agreements produced and approved by ABYA.
A Conditional Agreement creates a legally binding contract between both buyer and seller subject to the terms of the offer agreed. This may include a survey and/or sea-trial. Alternatively, an Unconditional Agreement simply creates a legally binding contract between both buyer and seller to complete the purchase within a given timeframe without any survey and/or sea-trial. We must always recommend that a Conditional Agreement is adopted, but there are occasions when the buyer may wish to make an ‘as is, where is’ offer, in which case an Unconditional Agreement will be used.
The Agreement is sent to the seller first, usually accompanied by the sales particulars, which will form the basis of the attached Contractual Inventory. Once approved by the seller, the Agreement and Inventory are sent to the buyer. Both parties will then be asked to sign their respective copies and return them to us.
Upon signing the Agreement and prior to exchanging, the buyer will be asked to pay a 10% deposit to be held subject to the terms of the Sale & Purchase Agreement in an appropriate Client Account by Grabau International which acts as Stakeholder in the sale. We operate Client Accounts in Sterling, Euros or US Dollars. An exchange of Agreement will not be issued until the deposit is shown to be fully cleared in the appropriate Client Account.
The principal purpose of holding a deposit is to demonstrate a clear commitment by the buyer to the seller, which is especially important as the seller may not use their yacht after any survey and/or sea trial has taken place. Holding a deposit also protects the seller should their yacht be damaged by the buyer’s surveyor or if any associated yard bills (such as lift-out or ashore storage charges) brought about by the buyer are not settled in the event of the Agreement being rescinded.
Once we confirm receipt of completed Sale & Purchase Agreements from the buyer and seller, and the 10% deposit payment as cleared funds in the appropriate Client Account, we will notify both parties that Agreements are exchanged. This notification confirms that a legally binding contract is now in place between buyer and seller subject to the terms of the signed Sale & Purchase Agreement.
For the benefit of this guide, the following steps will refer to the process involved with a Conditional Agreement. Those using an Unconditional Agreement can move straight on to the Completion section – step 10.
At this point it is important to consider that a brokerage purchase involves the sale of second hand goods between two private individuals and, as such, no statutory warranty will usually apply. The purpose of a survey and/or sea-trial is to allow the buyer to satisfy themselves of the condition of the yacht in a manner independent of either yacht broker or seller. We cannot make specific recommendations on the choice of surveyor. An extensive list of qualified surveyors can be found through the Yacht Designers & Surveyors Association (YDSA) website.
Once the yacht has been surveyed or sea-trialled, the seller may no longer use their yacht until such time as the Agreement is either completed or rescinded.
In very simple terms, any costs involved in satisfying a buyer as to the suitability of a yacht is a cost that will fall to their account. In addition to direct survey costs, costs associated with lifting or launching a yacht for the purposes of survey and/or sea-trial together with any re-commissioning required to test systems will usually be to the buyer’s account. Should the buyer reject the yacht after survey and/or sea-trial, the buyer will also usually be liable for the costs associated with putting the yacht back in position and state of commission in which it was originally found.
The primary purpose of a survey and/or sea-trial is not to find reason to renegotiate the agreed offer level, but to establish the condition and suitability of the yacht for the buyer.
While the Conditional Sale & Purchase Agreement does provide opportunity for further negotiations after survey and/or sea-trial, it is important to remember that a second hand yacht cannot be expected to survey or perform as new. Any good survey will inevitably produce a lengthy list of items which will require attention in the short, medium or longer term as part of the essential ongoing maintenance in owning the yacht.
Should any unforeseen or undisclosed material or structural defects of a significant nature arise as a result of a survey and/or sea-trial, the buyer can seek to renegotiate with the seller, either through a request that the seller agrees to a reduction in the price or undertake necessary repairs.
Should an agreement not be reached within 14 days, the Agreement is rescinded and the buyer’s deposit refunded. Alternatively, the buyer may decide to reject the yacht on the basis of the unforeseen defects and seek return of their deposit. In both instances, once the deposit has been returned and the Agreement rescinded, the seller is then free to instruct the re-marketing of the yacht.
Assuming the survey findings are acceptable or an agreement has been reached, the buyer will then be asked to indicate their acceptance of the yacht. This acceptance will create an unconditionally binding agreement upon both parties to complete the purchase within the timescales outlined in the Sale & Purchase Agreement (usually seven days from the date of acceptance).
Once the buyer has indicated their acceptance of the yacht, they should make arrangements to transfer the remaining balance of purchase funds to our appropriate Client Account.
We will then produce an appropriate Bill of Sale in favour of the buyer for the seller to sign along with collating any appropriate prior title, VAT and other supporting paperwork to be accepted by and subsequently handed over to the buyer. If the yacht is registered, a transcript of registry will also be obtained to establish legal title and arrangements to settle any outstanding mortgages or encumbrances.
As soon as the Bill of Sale has been executed, the purchase is complete and the buyer is free to use their new yacht. The buyer will also then be free to be registered in their favour at their cost. We will be happy to assist with this process. At the same time, any outstanding mortgages, yard bills or other encumbrances on the yacht due to the seller will be settled using the sale proceeds, and the final net sale proceeds transferred to the seller.