Whether you are buying a brand new motor cruiser or a second hand dinghy, potential pitfalls apply. So how do you stop your heart ruling your head when purchasing a boat to avoid making an expensive mistake?
You have decided on a model, spotted a boat for sale you like and are ready to declare your interest in buying it. But amidst all the excitement of what might be about to lie ahead, do not let your common sense alarm bells get drowned out by the intoxicating prospect of sitting at the helm of your new boat and cruising off into the sunset.
Buying a boat is up there with a house or car in terms of emotive pull. But it can prove a costly transaction, financially and emotionally, if you do not protect yourself.
“It does not matter if you are buying a new boat, built bespoke or from stock, or a second hand boat privately or through a broker, there are certain rights and expectations every potential buyer has,” explains Mandy Peters, RYA Legal Advisor.
“Making sure those rights and expectations are satisfied fully before any unredeemable financial outlay is made is crucial if you do not want to end up with something that, at best, you cannot sell on, or at worst, is actually dangerous or you cannot use yourself.”
Whereas someone buying new is covered by the Consumer Rights Act 2015, buying privately does not afford the same legal protection.
For private sales the common law rule of Caveat Emptor – let the buyer beware – applies. This means you buy what you see and redress against the seller is limited if you later discover things are not as they seemed.
Importantly the onus is on the buyer to investigate, not on the seller to voluntarily disclose. However if you ask a question, sellers are obliged to provide accurate answers or face potential consequences down the line.
“Insist on seeing the boat and, if possible, meet the seller or at least the broker if one is involved,” Mandy continues.
“Beforehand put together a list of pertinent questions you want answered. These could include the condition of the boat, the type of use it has had, any collision history, repair work that has been undertaken, engine service information, anything that is going to help provide you with peace of mind.”
Commission a surveyor, one affiliated to a professional body thus carrying professional indemnity insurance, to do a report on the boat. Surveyors do not generally include engines so a separate engineer’s report is a good idea too.
Until recently a buyer could, under the terms of a standard sales agreement, pull out of or renegotiate a sale if a surveyor found what was defined as a ‘material defect’. However the RYA has removed this term from the standard sales agreement they offer to their members, and buyers using this contract can reject or renegotiate on a survey’s findings.
What is in a deposit?
“When it comes to boat sales we get a great number of enquiries about deposits,” reveals Mandy. “It all comes down to what provision around deposits is included in the written sales agreement. If you do not get this sorted from the outset, any comeback on getting monies returned can be tough.”
The seller will normally want a deposit paid as security for the sale and against any possible damage arising from survey and/or sea-trial. In return the buyer will want that deposit to mean the boat is taken off the market until the deal is finalised or agreement ended.
However, issues can arise if, for example, a buyer changes their mind after seeing and/or testing the boat, the survey report includes something unsatisfactory to the buyer or even if the buyer’s financial circumstances change.
For the sake of both parties it is important to agree in what, if any, circumstances a deposit or part of is refundable.
The RYA, BMF and ABYA all offer standard Sale and Purchase Agreements templates, with variations for direct sales and those involving brokers. If this is not offered to you remember there is nothing stopping you from presenting an agreement to the seller/broker and saying you would like to do business on these terms.
As well as deposit terms, the agreement should include exactly what is being sold and included in the inventory (which should be attached to the agreement), and establish a means of payment and payment schedule acceptable to all parties. Ideally the negotiated purchase price will be subject to contract and survey.
If any amendments are made to a standard agreement these should be clearly marked “As amended by…” and dated on the document.
Once a contract is agreed it should be signed and dated by both parties. Only then should the buyer part with the deposit.
As well as reassurance on the physical state of the boat, one of the earliest things buyers need to establish is that the person selling the boat actually owns it. Unlike with cars there is not a compulsory legal registration system tracking ownership. Registration is not compulsory in the UK and many boats are not registered.
Buyers also need to ascertain there are no outstanding loans or mortgages secured on the boat or this could leave you liable for someone else’s debt later. As part of the initial sales agreement, obtain a written undertaking from the seller that the boat is not subject to any encumbrances, debts, liens, charges etc.
Where can I get help
RYA members get free legal advice and this includes access to a Sale and Purchase pack providing a step-by-step guide to the many different and complex aspects of buying and selling a second hand boat.
This pack includes the RYA Agreement for the Sale and Purchase of a Second Hand Boat template, as well as advice on VAT, Recreational Craft Directive and syndicate ownership.
There is plenty of information and guidance for buying through brokers or new too.
“The vast majority of boat purchases go through smoothly, but if and when disputes do arise you have to make sure you do not get stung,” Mandy concludes. “Buying a boat should be the start of an exciting journey, so letting your head rule your heart and using your common sense can remove a lot of unnecessary stress.”
Find out how the RYA can help you when buying a boat, including with insurance, at www.rya.org.uk