Buying a Yacht Overseas

As an international brokerage house with offices both sides of the Atlantic, in both Northern Europe and the Mediterranean, international yacht sales is what we do and we have often written about this. However, there does seem to be rather a lot online of late about the pitfalls, problems and issues with buying a yacht overseas. Reading commentary from some of the scribes, it would be easy to imagine that buying a yacht overseas is some sort of dangerous and extreme sport, only to be undertaken by the very brave or foolhardy; and certainly only after extensive training. That it is something that is massively complicated, beset by local problems and which requires huge resource and is riven with uncertainty.

The reality is that it is none of these things.

Berthon and the other international brokers with whom we co-operate, work under international guidelines that are tried and tested, with common contracts and formats for yacht sales that run across the planet, and which are perfectly well understood from Sydney to Hong Kong and Palma to Fort Lauderdale.

There are strong, well-regulated and dynamic Brokers’ Associations who uphold standards and lobby for yacht owners as well as their members and who keep in touch with local changes to rules on taxation, importation and the rest.

Wherever in the world the yacht you are interested in buying is, they have client accounts, competent surveyors and good marine lawyers who have a handle on what’s going on.

Of course, as with everything in life, there is the odd Arthur Daley normally operating a very small brokerage house with standards and ideas on yacht sales which are very much off piste, and buying from this sort of brokerage house, does require nerves of steel and contains an element of risk. But these are not the norm.

It is important not to confuse a new yacht dealer with a yacht broker as they have a different business model and come at yacht sales from a different angle. A new yacht dealer has a definite mission from the manufacturer whose yachts they distribute, often taking stock boats and selling them in a retail transaction. They have comprehensive handover and predelivery inspection protocols. Title and documentation are spot on. Move them into the brokerage environment and they may well be selling you a yacht as if she were new, but without the benefit of the manufacturer protocols and checks, particularly if she was a trade-in and they are holding her on their books themselves. Add in a foreign location, tax and other local issues and when this happens it is wise to insist that the normal international brokerage rules are applied.

There has been a lot talked of the role of the co-brokerage in brokerage transactions, and a court case is reaching a conclusion in Miami, where Ya Mon Expeditions a Wyoming based LLC owned by a lawyer, discovered how commissions were shared between brokers when selling a yacht.

International brokerage sales often work on the basis that a buyer instructs his own broker to work with him on the sale of yacht. Thus, the buyer has his own person who represents his interests. The beef that has caused the court case in the USA is that this buyer’s broker then goes to the broker representing the seller and does a deal for commission – they will want half or a bit more – with the seller’s broker. Ya Mon feel that the industry, including the yacht search portals who work within this commission system are pushing the cost of commission up for the seller.

The principle that also looms large is that the buyer’s broker is being paid by the seller and is conflicted as he only gets paid if the sale concludes…

In Italy, all this is avoided because the buyer pays his broker and the seller ditto. There is no confusion or conflict of interest, other than the fact that the buyer’s broker doesn’t get paid unless his client buys a yacht – which is normal yacht brokerage and if a yacht is not right, if he has done a good job in representing his clients’ interests then the client will use him to continue the search.

At Berthon, to cut through these issues, we have a local broker initiative. When we have a yacht in Palma for example, she will be marketed in Europe but also via our USA office. On the portals in the USA, an American Berthon broker is the point of contact. USA buyers can deal with our American office in their own time zone, using our American Escrow accounts and an American sales contract (normally the YBAA contract) as well as the Yacht Closer system that is so common in the USA.

Because we work as a team at Berthon, the central agent in Palma, will do all the work on the ground, and work with the USA office to make sure that the sale is just a straight forward as if the yacht were sitting in Newport, Rhode Island. We are intimately familiar with local taxes, arrangements for lifting out, berthing, permits and all the other local wrinkles that might be a concern both in the locations where we have offices, and in many other parts of the world where we work with trusted partners.

In order to regulate international yacht sales there are a few key brokerage Associations and it is wise to look out for them. Using brokers who are members means they will be applying the normal international yacht brokerage rules. The Mediterranean Yacht Brokers Association is the standard for large yachts in the Mediterranean and further afield.

In the USA, YBAA are an important association and USA brokers must be licenced. Brokers should not be selling you a yacht in Florida without a Florida license, the same in California and so on. A note for yacht sellers on duty, which is 1.7% of your yacht’s value. We have all seen the ads saying – not for sale in the USA. This is not cool. If you are putting your yacht on the market and intend to have her marketed in the USA, you need to pay the Duty before you start. The rules are super clear, the Authorities are on it, and it will most certainly not be alright on the night if you do not.

Elsewhere there are more local associations that set a standard in their country – like ABYA in the UK and of course in Holland, all yacht brokers are qualified and part of HISWA. With the very strong history of yacht building and massive shipyards building yachts of all sizes, this is a dynamic association with high standards.

A local broker who is selling in their area to clients from that region, will be very knowledgeable about the local rules, taxes and so on. Many of them have local contracts and business practices that work in their location and this is how they function. However, this doesn’t mean that you need to join in with this if you are not comfortable. Any correct brokerage house will recognise and work with you on normal international terms although you may need an international yacht broker to help you with the sale to give you confidence and the local broker some pointers.

Some clients like to appoint a lawyer. In many cases this is a very good idea if the size of the transaction warrants it but… only use a marine lawyer; your everyday lawyer or a lawyer that sails but specialises in another part of the legal profession is of only limited value. There are many good firms, most of them with offices throughout the world who only deal with yacht and ship transactions of all types. All these lawyers work on the normal international brokerage process. Most of them will use the MYBA sales contract or something similar, or in the USA the YBAA contact. They are working in the market every day and are in touch with changing rules and trends. As of course will your broker.

So, What is the International Yacht Sales System?

Contract normally under UK law (which is the law of marine) subject to survey and sea trial.

Know Your Client and due diligence required up front before a 10% deposit is lodged. If the account is not separated from your brokers’ business account, ask your lawyer to hold the deposit or find an escrow agent for this purpose even if it does cost a bit more.

Sea trial and survey. The appointed surveyor is very important. This should be your choice and not a local chap who drinks with the yacht’s captain. They need PI insurance. You should ask to see sample surveys to be sure that you are happy with what you’re getting. Also speak to them and be sure that they are people that you can do business with.

If the ownership is in a company or LLP you should see all the paperwork as well as the yacht’s paperwork in good time after exchange. Any decent contract will specify the paperwork that will be provided, and you should be happy with this before you apply your moniker to the dotted line. It should cover LPA in the USA, RCD in Europe, VAT, local taxes, TA arrangements, provide no less than a title chain of 5 years, and it should provide some clarity on from whom you are buying. Your broker will have checked carefully that the owner is not sanctioned, a bankrupt and that they are who they say they are. They will expect you to provide information to show that the same applies to you.

If you decide to proceed with your purchase, you accept the yacht and then move to completion. It may be that the yacht needs to sell in international waters. In all cases there will need to be a Protocol of Delivery and Acceptance to record the moment at which the yacht becomes yours, and the sale proceeds in escrow are remitted to her old owner. When working with a lawyer these can be elaborate affairs with much lawyering and complexity, where not they are normally a bit more relaxed but nonetheless it is worth talking through the process and understanding exactly why things are being done as they are, and being satisfied that the process works for you.

Some brave souls identify a yacht and buy her direct from her owner and they deal direct. Whether this is local or international this is a bold thing to do, and I would suggest that a marine lawyer or experienced international broker is a useful addition to the process to be your sherpa. We get involved in this sort of transaction relatively often and normally both seller and buyer are pleased to be working within a tried and tested framework which provides security for both sides.

Always beware of those that tell you that as you are buying in the outer reaches of Mars that things are done differently. Whilst they may be in the local market you do not have to join in. Ask to work under international terms and normally you will find that in Mars the MYBA contact is often used, even in the outer reaches!

Also beware of contracts that provide limitations relative to what you can reject the yacht on after survey and sea trial. If the seller decides what is important this will not work and be doubly careful of contracts which state that the seller will fix any defects found by the surveyor. Whilst well intentioned, a seller’s oily rag is a buyer’s new oil cooler, and you must have the opportunity to negotiate or to walk.

A sea trial is a subjective thing so if this is conditional – insist on a trial before contract. Better still, ask to work on normal international terms and if you are unsure have your broker’s and lawyer’s phone numbers to hand as their fees will seem trivial in the quest for a smooth and straight forward sale.

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