Navigating the risks of buying a yacht

Cruising around the South of France for weeks basking in the glorious Mediterranean sunshine, sailing past Cannes and Monte Carlo in a beautiful yacht nestled on the azure waters while the gentle waves rock you slowly into a deep sleep. Sounds like a dream but taking it beyond the realms of your imagination is easier than you think. Saracens offers straightforward advice on what to do when buying a yacht.

1. Advisors

The most important thing when buying a yacht is to make sure you have an experienced team of professional advisers to facilitate the transaction from the outset. Typically when buying a yacht the buyer’s team includes a good lawyer and an experienced surveyor. It’s not just good enough to have them on board (pun intended); you must actively consider their advice and opinion.

2. The Agreement

The central agreement in buying a yacht is the acquisition contract. This governs the terms of the purchase and quite often the Mediterranean Yacht Brokers Association (MYBA) Memorandum of Agreement (MOA) is the preferred option, being recognised globally.

The seller’s lawyer will generally produce a first draft of the MOA which forms the starting point for negotiations between the seller and buyer. As with most negotiations, the contract is often amended in accordance with the parties’ specific requirements. Normally, it is on the signing of the MOA that a deposit (typically 10%) is payable to the seller.

The MOA should deal with a number of key considerations including establishing the seller’s right to sell the yacht and transfer clean title (i.e. free from debt or other restrictions) to the buyer.

3. The Yacht

The Sea Trial and Survey

Importantly for the buyer, the MOA is subject to a sea trial and an optional condition survey. Much like when you buy any traditional asset, it is for the buyer to be satisfied as to the value and the credibility of the asset. The sea trial and survey of the yacht are therefore essential to confirm the condition of the vessel and to establish that there are no existing material defects in the yacht.

The seller is obliged to make the yacht available for a sea trial albeit at the buyer’s expense. Most sea trials last up to four hours. This is the buyer (and his team’s) chance to assess the yacht’s performance so it is vital he/they are present at the trial. If the buyer does not take this opportunity to inspect the yacht, then he is deemed to have accepted the yacht subject only to the condition survey.

If the surveyor discovers material defects in the yacht itself, a correctly drafted MOA should provide options for the buyer to terminate the contract and/or require the seller to rectify the defects or negotiate a reduction in the sale price.


Once the MOA has been signed, the seller will need to arrange a full inventory within 7 days. The inventory, once agreed will be signed and form part of the contract, so that all the items (onboard and ashore) are included in the sale.

Registration & Classification

The yacht must be registered in the port of a particular country. The buyer may register the yacht commercially (for charter) or privately. Popular ports of registry include the Cayman Islands, UK, Isle of Man and Malta.

When contemplating buying a yacht, it is important to consider its intended use following the purchase. If the yacht is privately registered in the name of the seller and the buyer intends to use it as a commercial charter, there is a cost to making the yacht commercially compliant and registerable. This should be ascertained at the outset.


The key factors when determining the tax liability are the chosen ports of registry, the location of delivery and residence/nationality of the buyer.

Complications can arise where a VAT paid yacht loses this status. For example, if the yacht is sold outside the EU, even if the buyer and seller are EU residents, the VAT liability will arise if the boat is brought back into the EU. Also, yachts that are kept outside the EU for more than three years may be required to pay VAT again.

However, if the permanent importation of the yacht coincides with the buyer transferring residence from outside the EU, it may qualify for VAT relief. Similarly, a VAT paid yacht exported from the EU (such as when long-term cruising) may also qualify for relief on its return if it is returned to the EU within three years of export, imported by the person who exported it from the EU, and has not undergone significant repairs that has enhanced its value.

If the buyer is not an EU resident, the vessel can be temporarily imported without paying VAT, for instance to cruise in the EU, for a period of usually up to 18 months.

Tax issues in connection with buying a yacht can be complex and independent advice should be sought in this regard. Tread carefully here though. It pays to get a tax specialist on board as the cost of getting it wrong can be in the millions.

4. Seller’s Warranties/Indemnities

The buyer’s protection under the MOA comes in the form of warranties provided by the seller. These warranties form contractual promises and should focus on:

  • Ensuring that the vessel, at the time of delivery, is free of any debt, claims or other restrictions. As there is no one central registry of yachts per se and because a yacht is a mobile asset, being able to spot any issues is not only critical but takes some skill. If there are any existing claims or restrictions, the seller should be obligated to deal with them as a pre-condition to completion of the sale or offer a discount on the sale price;
  • A confirmation as to who the real owner of the yacht is. Thorough due diligence must be undertaken and caution should be exercised when dealing with brokers and agents, some of whom may claim to be the owner/ seller of the yacht when in reality they are not. This is a common problem and one that buyers should be wary of when buying a yacht.
  • Appropriate protection for the buyer if following the purchase, an issue arises such as a hidden debt or claim or a restriction filed against the vessel. The buyer must have an appropriate warranty for this and possibly even further protection if the seller is a corporate vehicle.

It should be noted that unless otherwise agreed, the MYBA MOA standard form provides that the above warranties are the only warranties made by the seller about the yacht.

The buyer should be aware that they cannot rely on any other statements about the yacht’s description, quality, or fitness made prior to delivery. The yachting world is plagued by unscrupulous agents and brokers who will say whatever they need to in order to achieve a sale. This emphasizes the importance, of the buyer obtaining independent technical reports and conducting thorough due diligence with the help of experienced professionals.

Personal Guarantee

Where the seller is a special purpose / corporate vehicle (SPV), the buyer should seek to obtain a personal guarantee from the SPV’s ultimate beneficial owner in order to mitigate the risk of any breach by the seller of its contractual warranties.

5. Summary

Buying a yacht is an exciting and daunting prospect. For many people it will be the fulfilment of the dream of a lifetime and yet for others it is simply an additional asset to their wealth portfolio. But as with the purchase of any asset, a team of trusted representatives and advisors are crucial and will carry out any number of pre-contractual checks to ensure that you get exactly what it is that you are paying for.

Specialist advice and guidance is essential throughout the process of buying a yacht. Speak to Saracens and turn your nautical nightmares into smooth sailing.

Bon voyage!

Yachts and Private Jets

Commercial Law (High Net Worth Division)

Saracens Solicitors

Photo Credits
Trish Hartman

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