We have written on this subject before, as we have shifted from the yachting magazine and hard copy pilot books and amassing knowledge at your local yacht club, to a whole new way of life where every detail of life can be obtained by asking Siri, or Mr Google or both. Of course, this applies to every facet of life today and yachting is certainly no exception.
The yacht club bore has now been replaced by yachting forums and unedited information in all forms, all of which are available to us at the touch of a button. There are no fact checkers, or checks and balances relating to information about yachting that adorns the worldwide web. Those with something to sell (of course we must be included in this), an axe to grind, or those who simply haven’t checked their facts; are seated cheek by jowl with well researched and knowledgeable articles and information that delivers good advice around the business of buying, selling, sailing, motoring, understanding and maintaining yachts.
As in days of yore, legends grow over time. Today they do it in real time and are embellished and added to at a furious rate. Before long, an incorrect fact becomes accepted as fact as Mr Google spews out threads and it is sometimes very difficult to differentiate fact from fiction.
This lack of clarity has also led to a dumbing down of the yacht brokers’ craft with small brokerages starting up across the globe, many of them head quartering on the kitchen table, guest bedroom, or dare we say it – in a shed in the garden. These Purple Bricks of yacht brokerage have a vastly reduced overhead, do everything online and offer a service of sorts. However, they do not provide the depth of service that clients of a conventional brokerage house enjoy with a good team of support staff, an office to visit and chat, and the level of knowledge, continuous training and financial security.
Many service companies have also leapt into the fray, offering yacht sales along with oil changes and guardiennage with only little experience of yacht brokerage. We know that this doesn’t work which is why our service operation in Palma de Mallorca is run separately to our yacht sales operation which works out of a dedicated office staffed by full time yacht brokers. At Berthon, it takes 5 years to make a yacht broker and a guardiennage captain, however knowledgeable, cannot morph into a yacht broker on day one, nor can they do it as an accompaniment to their day job.
The entry of so many new brokerage firms has added further confusion as although it is a vast generalisation, it is fair to say that many of them have only a basic grasp of the business of yacht brokerage and have little to say about the burning issues that we have to deal with today – VAT, RCD, title, local taxes, and the rest. Importantly they are unable to properly assess value and so we see many yachts on the market at incorrect prices with poor information and their poor owners are hijacked by the promise of a low commission rate on an unrealistic asking price with a marketing offering that will certainly not impress the savvy yacht buyer. For the yacht buyer it is also not cool, as often there is no formal mandate to sell the yacht so they are forced to wade through the poor information and maybe even travel far to discover that the yacht isn’t actually for sale or that another broker has prior claim and an undignified brawl between brokers ensues.
So together with the barrage of information from the worldwide web, and a myriad of wannabee yacht brokers, there are at the moment a number of legends circulating, some of which are rubbish and others which have enough of a grain of truth to be confusing.
Here are a few of our favourites…
We are interested to list your yacht for sale as we have someone who is interested in buying her. It amazes us how many times this one is trotted out. A broker who wants to list your yacht should be selling their service and knowledge of the market. It does of course sometimes happen that the broker has a client. If you have this conversation, delve into this magical client – ask about them and the broker’s connection and find out how real it is. Sometimes a broker will come to you as if they are acting as a buyer’s agent. This means in any sale they act for the buyer and not you. A reputable broker will tell you this and it will be reflected in any sale and purchase contract.
You can cover all your running costs and cost of your money by doing as little as 10 weeks charter a year. We had this repeated to us recently and this is a stinker. To charter a yacht she has to be MCA coded and, unless you are chartering her bareboat, a very good and qualified crew. Importantly she will also need a charter agent and she will need to comply with any local regulations – areas like Spain for example are very complex. It is likely that it will take a number of years to get traction and bookings. For a yacht of 55 to 90 feet, 4 to 5 weeks is more realistic until the yacht becomes known in the market and also starts to win repeat business. You may cover some costs but the costs of maintaining her at the standard required for charter will add cost. It is a good thing to do, to ensure that a little used yacht is in excellent condition for when you use her, but a money maker she will never be.
To avoid paying VAT as an EU national sailing in EU waters or as a UK national sailing in UK waters, all you need to do is to register her offshore. All pigs are fuelled and ready to fly! The Customs Authorities in all these regions will be looking at the beneficial ownership of the yacht and not at the flag. They take a very dim view of yachtsmen who seek to avoid the payment of this mandatory tax by trying to hide the ownership of the yacht. If the yacht is owned via a trust or other vehicle, expect them to look at the full ownership trail and to demand payment of VAT if appropriate.
The market in the USA is super-hot so it is a good idea to send your yacht to the USA to sell her if you are a European or a Brit. Well, it’s a bit true. The USA East Coast is for sure short of brokerage listings. However, Americans like well specified, recent yachts with good standards of equipment. They will not buy the old, whacky or dodgy condition just because she’s shown up on their shores. They are savvy buyers. If you are contemplating the USA as a selling area, bear in mind that you cannot offer your yacht for sale unless she is duty paid, which is an upfront cost to you of around 1.7% of her value. People who tell you that you can just write – not for sale in US waters – and everything is hunky dory, are talking tosh.
Any yacht selling in the Caribbean can do so free of VAT. This one is nearly true. All the islands in the Caribs are outside the VAT net including the UK, French and Dutch dependences. However, some have sales tax so check carefully if your yacht is transacting in this area to be sure that you understand the local tax system.
Now that the UK is not part of the EU, we don’t worry about RCD anymore. There is a grain of truth in this statement but bear in mind that if you are keeping your yacht in the EU and you want to sell her – she will likely attract a European buyer and for them it will be mandatory that she is RCD compliant– so don’t ignore it. If you are in the UK your yacht will need to be UKCA marked and if you import her from the EU she will need to comply even if she was built in the UK pre-RCD and was grandfathered, as she is now a new import.
An open and non-exclusive agreement to sell your yacht is the way to go as you are able to drive down the commission rate and the brokers instructed will all compete against one another to sell the yacht. You also have the option to sell her privately without paying commission to anyone. Brokers who do not have a credible offering and who aren’t investing in the service that they offer to their clients will suggest a lower commission rate because their costs are lower and will be happy with an open, non-exclusive listing. They will try to list as many yachts as they can. They have a scatter gun approach to yacht sales, selling whatever is at hand. They will not have a specific marketing campaign for the yachts they are selling, so the yacht owner is taking potluck. Established brokerage houses will not be so interested in your yacht although they might take her – but not at a low commission, if they have specific clients. If they do, they will not invest in the yacht’s marketing as other brokers will drop margin and cut them out so there is no point. What results is a race to the bottom; these brokers do not try to maximise price and the yacht will likely be offered at a variety of prices and with poor particulars.
There is no need for a survey because the owner had her surveyed and/or coded recently and you can have copies of these reports. If you are thinking of buying a yacht that has a recent survey or has been coded, you should certainly be given full disclosure to all the information available to the owner. However, unless you have instructed the survey, the surveyor who has written it has no duty of care to you and if he has missed something it is your hard luck. You also do not know the instruction that was given to the surveyor by the owner of the yacht. Coding surveys are good as they mean that the yacht is regularly inspected by a surveyor. However, a coding survey checks the criteria covered by the coding and it is not a pre-purchase survey. It does most definitely not provide enough information for a yacht buyer purchasing a yacht.
If your yacht is centrally listed with a broker you can list her with another whilst the agreement is in place – and double the chance to sell her – no worries! This is utter rubbish and if you do so you run the risk of paying double commission if the new appointee brings a buyer or if they engage with a buyer your central agent is already in touch with, and then encourage the buyer to engage with them by offering a lower price by cutting commission. Brokers who suggest this double listing either don’t understand the listing process or don’t care.
My yacht is not VAT paid in the UK and I am a Brit but I can bring her in for 9 months without paying VAT. NO, NO, NO! We don’t know where this particular myth came from but we have heard it a lot in the past 6 months. If your yacht is not UK VAT paid and does not qualify for Returned Goods Relief, VAT on her value is due as soon as you enter UK waters. No ifs, buts or maybes.
Of course, there are many more of these but we stop here at the risk of boring you. Every week we receive calls and emails from yachtsmen asking us about these subjects and many others. We imagine that other established brokerage houses operate a similar confessional. Please enjoy your yachting and valuable time out on the water but do take care of myths found under the auspices of Mr Google. As with most things in life, in yachting if it seems to be too good to be true, it almost certainly is.