Buying a Superyacht. Ten Tips for a

Buying

Superyacht a

TEN TIPS FOR A SMOOTH TRANSACTION

The decision to purchase a yacht often develops after someone has experienced several charters and the idea of becoming a superyacht owner becomes attractive and desirable. When it comes to a first purchase you have the choice between buying an existing superyacht or a “yet to be built one”, the latter being a much longer process and often the choice of an experienced superyacht owner.

For the purpose of this article, we will discuss the purchase of an existing superyacht. When buying a superyacht you normally enter into a memorandum of agreement with the seller. An approved standard agreement is available to every broker member of the MYBA Association. However, prior to signing such an agreement, you should ensure that it has been reviewed by your superyacht lawyer. Indeed, a standard agreement is often not sufficient and requires to be tailored to your specific purchase.

Here are some key points in the purchasing process:

1PRELIMINARY STEPS

Prior to committing to any purchase and signing any agreement, you should ensure that you have had seen all the superyacht’s specifications and details which include, but are not restricted to, knowing where the yacht is registered, whether there is a berth available with it, who currently owns the yacht, how many crew is onboard, what the yearly running costs total, whether the yacht does charters and, if does offer charters, what is its VAT status?

Once you have all the details, it is recommended you speak to your superyacht lawyer to discuss any prepurchase arrangements which would be necessary to enable you to safely purchase the superyacht.

2PRIOR TO SIGNING AN AGREEMENT

You should ensure that the purchase agreement is drafted and reviewed by a superyacht lawyer in view of all the superyacht specifications and details of the purchase. Each sale and purchase is specific to the yacht, its status, flag and owner. It is therefore important to ensure that these are taken into account when drafting the agreement so that you are appropriately protected.

3WHAT ARE YOU BUYING?

It is important to be clear on what it is exactly you are buying and the memorandum of agreement should reflect this with exactness and clarity. Are you buying the superyacht free of any content? Or does the yacht price include tenders, toys, art, and any accessories which form part of the interior? It is crucial for this purpose that the parties agree on an inventory so that there is no ambiguity. Such an inventory can be prepared by the yacht’s captain who would then submit the list to each party.

When purchasing the yacht, you also need to decide whether or not to retain the crew and the captain. If yes, then their crew agreements should be checked and you should ensure that there is no outstanding wages and/or expenses due. Additionally, your lawyer should enquire with the seller’s lawyer as to whether there is any ongoing or pending grievance you should be aware of with either crew or passenger. A similar exercise should be carried out for the superyacht service suppliers’ agreement.

4SUPERYACHT SURVEY

It is essential that you carry out a survey of the yacht prior to its purchase. The memorandum of agreement should provide for this and should give you the opportunity to cancel the purchase and/or deduct any necessary repairs from the purchase price should the survey results be not satisfactory. 5 SUPERYACHT SEA TRIALS

Similarly, the memorandum of agreement should provide for sea trials so that your representative and/or captain can assess whether the yacht is in good functioning order. Again, the agreement should provide for you the ability to cancel/ terminate the purchase. 6 PURCHASE PRICE

It is important to ascertain whether any taxes are due upon purchase and to ensure that the purchase price agreed between the parties is inclusive of all and any taxes, VAT, duties which may be applicable to the superyacht. Your memorandum of agreement should also provide for the yacht to be sold free of any encumbrance. 7 DOCUMENTATION

When acquiring an existing superyacht, it is vital to ensure that as part of the completion you receive all the necessary and mandatory yacht documentation linked to its registration which should also show international convention compliance.

These documents should be carefully checked by your superyacht lawyer so as to ensure that (a) the yacht complies with the international maritime conventions currently in force and (b) you have the necessary documents to register the yacht to the chosen flag (whether it is same or a different one) upon acquisition. 9 INSURANCE

You should arrange for your superyacht and crew to be insured in advance of the purchase so that all your covers are in place upon completion of the purchase.

It is essential that you seek advice from your lawyer, but also an insurance broker, regarding essential cover: Hull & Machinery insurance which will cover the value of the yacht in the event of total loss, Protection and Indemnity insurance for third party liabilities and Medical and Personal Accident cover for your crew. You may also wish to consider cover for Kidnapping & Ransom, and a full health cover for your crew. 10 COMPLETION & DELIVERY OF THE SUPERYACHT

The completion of a purchase and the delivery of the superyacht often take place simultaneously. There are obviously several conditions to fulfil to be able to complete, such as receipt of all the corporate and regulatory documents, transfer of the purchase price into an escrow account ready to be paid to the seller, having ready all original documents ready to be handed to the purchaser, and also having the execution of the protocol of delivery and acceptance confirming safe receipt of the yacht ready to be handed out. All these actions take place at the same time so that you take delivery of the yacht at the same time as the seller receives the purchase funds.

This last step should be prepared and executed properly. At the same time registration of your newly acquired yacht and insurance should come into place.

8FLAG REGISTRATION

Your superyacht lawyer should arrange for the yacht to be registered with the appropriate flag at the time of completion and delivery. Your lawyer will be able to advise you on the correct procedure and the most appropriate flag vis-à-vis your situation and ownership structure.

Anouch Sedef- Partner Meyer Avocats-sedef@meyer-avocats.ch