Besides the importance of having a boat surveyed before you commit yourself to buying it, the other essential is to make absolutely sure that it really does belong to the person who is selling it.
Besides the importance of having a boat surveyed before you commit yourself to buying it, the other essential is to make absolutely sure that it really does belong to the person who is selling it.
What you need to find is evidence of ‘clear title’, which means ownership by right, with no other person or institution having a claim on the vessel.
Every year a number of vessels are sold by people who, sometimes unknowingly, don’t legally own them. And occasionally these vessels turn out to be the security for an undeclared mortgage; when they are reclaimed by the finance company, the buyers can lose most or all of the money they paid for them.
But don’t let this put you off buying a secondhand boat. There are some quite simple precautionary steps you can take which together can go a long way towards eliminating the chances of being caught out.
The extent of investigation necessary will depend partly on which of the three main routes you take to buying your boat: through a yacht broker, from a dealer or direct from the owner.
Buying through brokers
There is a lot to be said for for dealing with a yacht broker when you buy a secondhand boat.
Even though it is the seller who will be paying their commission fee, and whom they are representing, good brokers will deal with a number of both the seller’s and buyer’s problems – services for which, in the purchase of a house, both would have to pay solicitors.
This includes the all-important checking on their customer’s ownership of the boat, and its freedom from any encumbrance such as an outstanding mortgage. Brokers should also establish whether or not VAT has been paid on the boat, ensure there is continuous insurance cover through the purchase process, and see through the necessary paperwork.
Virtually all reputable brokers in the UK are members of the Association Of Brokers & Yacht Agents, and directly or indirectly (through ABYA) of the British Marine Industries Federation. They have a detailed code of practice under which they should operate. They should have professional indemnity insurance, and should be ready to show you evidence of it if you are in any doubt. Preferably they should also carry insurance to cover legal expenses and attendance of sea trials.
Your deposit should be safe with such a broker, who will put it into a client account, from which it cannot be drawn for any business other than the transaction in hand. Again, you are quite entitled to ask for evidence of such an arrangement, which might come in the form of a letter from the manager of the bank where the account is held. And it is a good idea to ask; there was a case recently in which a (non-ABYA) broker on the River Thames took deposits on several boats and then disappeared.
While brokers depend on their clients for much of the information on the boats they are selling, they are, in the words of their code of practice, “responsible for providing accurate information to the best of (their) ability”, and if they are aware of “defects or deficiencies” in a boat they are obliged to inform a prospective purchaser.
It is worth asking brokers if they have personally inspected the boat or boats you are interested in. Good ones will look over any that are within reasonable reach, and arrange for a local professional view of any that are not. Some will accept only boats that are within a certain, easy-to-drive distance.
Do not assume that brokers always put a fair price on a boat they are selling. Many owners insist on them advertising their craft at much more than they are worth and, just like houses, few boats sell for their asking price; it is always worth spending some time studying advertisements and talking to a selection of brokers to establish what is the going rate, before putting in an offer.
Most brokers use the ABYA/BMIF form of contract, the ‘Agreement For The Sale & Purchase Of A Secondhand Vessel’. In its standard form, this allows for an agreement to buy, subject to a survey and/or a sea trial, within a certain time (usually at least 14 days and commonly up to 28 days, especially if finance has to be arranged), with a 10% deposit payable on signing.
If the settlement period is extended, for example if the buyer requires three months or more to raise the money, the seller might fairly ask for a larger deposit, or a second stage payment.
A precise inventory of the equipment to be included in the sale should be attached to the contract, forming a part of it.
Buying from dealers
Most new-boat distributors and dealers (many of whom are also brokers) have secondhand boats which they are selling themselves, commonly vessels that they have taken in part-exchange for a new one.
They will usually take some care to bring a boat up to a good standard of cleanliness, undertake any necessary repairs and service engines. They may even offer a guarantee, and anyway such sales are subject to the terms of the Sale Of Goods Act (click here for more information).
The procedure and terms for buying such boats are normally similar to those for buying through a broker. Purchases should be based on a properly drawn-up contract, such as an adapted form of the ABYA/BMIF agreement used for brokerage sales.
A handful of companies specialise in buying and selling secondhand boats, usually towards the lower end of the market.
Sometimes dealers may have absolute proof of clear title, when they sold the boat in question to its previous owner. If they haven’t, it is worth making your own enquiries.
Part-exchanges involving only secondhand boats are relatively rare. Dealers, or brokers selling boats they own, may sometimes agree to take your existing vessel off your hands, but often only if its value is at least 50% less than the one you are buying.
Buying privately
Without the broker’s commission or the dealer’s profit margin to take into account, those who buy their boats privately should be able to do so at a slightly more favourable price.
But many sellers, unguided by a broker, have a very inflated idea of their boats’ worth, so it is doubly important to check out the real market value of the boat before you agree to purchase it.
And, even more so than when buying through a broker or from a dealer, be absolutely sure about what you are taking on, because you have less legal protection and any problems arising from a sale may be more difficult to resolve. It is up to you, and you alone, to do everything possible to establish the seller’s clear title to the boat.
Make these checks before handing over any money, and establish that the seller is who he says he is, and that he lives at the address he gives.
Just as if you were buying from a broker or dealer, you should have a written contract with the seller. We would recommend the Royal Yachting Association’s ‘Agreement For The Sale Of A Secondhand Yacht’, copies of which are available free of charge, as the basis for a private transaction contract. A clause in this allows for the purchase to be subject to inspection and survey, and for payment of a 10% deposit.
Who owns the boat?
There are two main reasons why every year some people buy boats that turn out to be stolen or mortgaged.
Number one is the lack of a compulsory registration scheme, or an effective voluntary one. Number two is that many people suspend their common sense when buying boats, handing over large sums of money without the forethought and investigation with which they would normally enter such a high-value transaction.
Some simple detective work is called for, or at least check that the brokers have done it for you. In most cases a seller’s clear title can be established quite quickly, but other cases require rather more digging to satisfy yourself that after buying the boat in question someone isn’t going to pop up with a claim on it.
There are three main registers of boats in the UK, although none of them is guaranteed to provide the information you seek.
If the boat is ‘Part 1’ registered, as a British ship, ask to see the registration certificate and the (original) bill of sale to the current owner, to check that they match. For a fee of £12 you can obtain a ‘transcript of entries’ from the Registry of Shipping & Seamen, which should show up any outstanding mortage on the boat. Now that registration needs renewing every five years, you also need to check that it is still in date.
If the boat is on the Boatmark security register, with the requisite hull identification number (HIN), a call to operators Equifax should establish the authenticity of the seller’s title. The HIN will be the same as that required for boats that are CE-marked under the European Union’s Recreational Craft Directive for new boats, which came into force on 16 June 1998. The inexpensive Boatmark scheme has been going for only four years, but should become an ever more useful tool in combating fraud if widely adopted by owners in the future. New and secondhand craft can be registered.
On the other hand, the equally inexpensive Small Ships Register is worse than useless in helping anyone establish title. Anyone can declare ownership of any boat to get it onto the SSR, without having to produce any evidence.
If you cannot satisfy yourself that the seller has unencumbered title to the boat you want to buy, you need to find out all you can about him and his craft.
Trace the boat’s history as far back as possible, ideally through all bills of sale covering previous changes of ownership, back to the builder’s certificate; if the seller does not have these documents, it could be because they are in the hands of a mortgagor. Ask to see the boat’s service history as well.
Don’t be shy of asking questions about owner and boat, for example of the local harbourmaster, marina, boatyard and chandler. Are any of them owed money?
Find out which company the boat is insured with, and make similar enquiries of them.
Ring round the three marine finance companies from whom over 90% of boat mortgages are taken out (click here for contact details), and ask them if they know of any outstanding payments on the boat. They might give evasive answers – perhaps because of their duty of confidentiality, perhaps because there is some doubt about the exact identity of the boat or the owner – but if they think they have an interest, they will let it be known.
Happily, the number of boats whose new owners have discovered there were outstanding mortgages on them has declined in recent years, but the number of stolen boats in circulation shows no such trend. The title checks we have already suggested should go most of the way to satisfying you that a boat is not stolen, but there may be clues on the boat itself that indicate it has been.
Look for the shadow of an old name or a fishing number; if there is one, check out the story behind it. The same applies if it is a GRP boat that has been repainted, or if the builders’ standard decals have been removed. If there is evidence of identification numbers having been removed or camouflaged, you should be very suspicious indeed.
Is it in good nick?
We would always urge anyone buying a secondhand motor cruiser to do so subject to survey, even if it is only a year or two old and a highly regarded model. It may have been well built, but has it been well looked after?
Commissioning a survey could seem an extravagance, but it is invariably worthwhile, and can often save you money. If it shows up significant undeclared faults, you can either withdraw from the transaction or push very hard for the asking price to be reduced. At the very least, the surveyor’s report is sure to highlight the one or two jobs that most need doing once you have taken the boat over.
But you do need to be fairly serious before you get to the stage of commissioning a professional survey.
A starting point should be your own inspection of the boat. This might not be able to uncover the kind of faults a survey will, but it is worth looking for some of the more obvious problems that might be found (click here for a checklist) and getting an idea of how well the boat has been looked after. Musty-smelling, damp cabins and a filthy engineroom are signs of neglect.
It is well worthwhile pressganging a friend or fellow club-member, preferably someone who is familiar with the type of boat in question, to join you in your ‘pre-survey’. He or she might have a more detached view of the boat’s state when, if you have taken a fancy to it, your own judgement might be clouded.
If you can, arrange for a trial run in the boat, preferably before signing any agreement to buy, but otherwise as a condition of that agreement. You are unlikely to get the opportunity truly to test a boat’s seaworthiness, but try to assess how easy it is to handle, for helmsman and crew, and listen for any unusual vibration from the engine(s) or sterngear.
When you are interested enough to commission a surveyor, choose one who is member of the Yacht Designers & Surveyors Association, or one of the other professional bodies such as the Royal Institute of Naval Architects or the International Institute of Marine Surveyors. He should have professional indemnity insurance, and if in doubt you should ask to see the policy.
Brokers will give you a list of local surveyors but will avoid recommending any particular one. If possible, ring a number of surveyors to find one who is familiar with the type of craft in question.
Whoever you choose, be sure to tell him what you are going to use the boat for, so he can comment on its suitability for that purpose.
Ideally, order a full condition survey, which will cover engine installation and major systems. A cheaper alternative is one that covers hull and deck structure only. For either, the boat should be examined while out of the water.
The YDSA used to recommend a formula for working out the cost of surveys, until the Office of Fair Trading thought that smelt of price-fixing. However, many South Coast surveyors calculate their fee for a full condition survey using the formula of multiplying the vessel’s overall length in feet by its beam in feet, and multiplying the result by 1.1 to get a sum in pounds. Prices might well be less than that in other parts of the country.
Note that marine surveyors do not normally carry out tests on engines themselves. Unless you are certain there is no problem with them (if, for example, the boat is only a year or two old with proper service records), it is worth commissioning a separate mechanical survey, from an engineer who is suitably qualified and, again, familiar with the make in question.
For older engines the inspection should include a compression test.
A done deal?
If you have agreed to buy a boat subject to survey, rejecting it on the basis of the survey report is acceptable if the survey throws up ‘material defects’. Just what constitutes a ‘material defect’ is a grey area, but it would have to be something fairly serious, a dangerous structural fault for example.
If the problems are not terminal but will require several hundred, or even a few thousand pounds to put right, the price can be renegotiated accordingly. By just how much will depend on what kind of offer was originally made (close to the asking price or some way below it) and on whether or not the work being done is purely curative or actually improving the look and value of the boat. If osmosis treatment were to cost £3000, for example, the vendor might pay just £2000 of that figure because the purchaser is getting a boat that will be in better shape, with a new gelcoat, than if no treatment had been necessary.
Unless he is a recognised dealer for the boat in question, it is probably wise to resist any offer by the seller to do the necessary work himself, because you might get only a cosmetic repair.
If there is an outstanding mortgage on the boat you are buying, and the owner is intending to pay it off with the sale money, as should be the case, it is worth making sure that the debt is cleared immediately on completion. When buying direct from the owner, a good way to do this is to find out how much is due to the finance house and arrange to split your payment accordingly, part to the vendor and part to the finance house. When buying through a broker, you should have a clear, written agreement that the money received from you will be divided in the same way.
Ensure when you take delivery of your boat that you also receive all the appropriate documentation: its registration certificate, bills of sale, builder’s certificate and a VAT invoice or proof of exemption (click here for more information). If you want to Part 1 register the boat yourself, you will need original bills of sale going back five years or to the boat’s launch date, whichever is the shorter period.
Finally, check also that all the equipment that you understood was to be included in the sale is still on board.
