Sale & Purchase Process
The following is a very basic guide to take buyers & sellers 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.
1. Making an Offer
Following initial inspection and/or discussion, the first step is for the buyer 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 reviewed by 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.
2. Drawing up Agreements
Yacht purchase differs from buying a 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 both buyer and seller can proceed in the knowledge of being protected by the terms of an exchanged Agreement, with seller able to draw confidence from the buyer’s commitment to purchase their yacht, and the buyer reassured that the seller will proceed with the agreement before moving forwards to the cost and logistics of a survey.
The Agreement will reflect the agreed offer terms and either be a Conditional or Unconditional Sale & Purchase Agreement. Grabau International Conveyancing uses Sale & Purchase Agreements produced and approved by the Association of Brokers & Yacht Agents (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 and seller may agree terms on an ‘as is, where is’ offer, in which case an Unconditional Agreement will be used.
Depending on the party contracting our services, the Agreement is sent to our primary client first for approval. Any contractual inventory will also need to be established and approved by the seller. Both parties will then be asked to sign their respective copies and return them to us.
3. Payment of Deposit
Upon signing the Agreement and prior to exchange, 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.
4. Exchange of Agreements
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 9.
5. Surveys and Sea-trials
At this point, it is important to consider that a sale & purchase involving the sale of second-hand goods between two private individuals means that 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 a yacht broker or seller. We cannot make specific recommendations on the choice of the 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, it is usual that the seller will no longer use their yacht until such time as the Agreement is either completed or rescinded, although this is subject to what has been specifically agreed between buyer and seller at the outset.
In very simple terms, any costs involved in satisfying a buyer as to the suitability of a yacht is a cost that will generally 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, unless otherwise agreed at the outset. 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.
7. Post survey negotiations
The primary purpose of a survey and/or sea-trial is not to find a 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 an 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 long 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 1a given time period, 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 the return of their deposit. In both instances, once the deposit has been returned and the Agreement rescinded, the seller is then free to re-market 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. 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.
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