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Charter Yachts: Good Or Bad Deal?

charter boats

Stephen recently replied to a post on Cruisers Forum with the permission of the moderator about a discussion of charter boat ownership. It is a discussion worth having and I hope our readers will find the information useful.

 "...First, thank you to this forum’s moderators for letting us post this, since we had been named in this thread. We feel that this post is an opportunity to explain a lot of little-known but essential components relative to the purchase of a charter boat, whether pre-owned or brand new.

Buying A Pre-Owned Charter Yacht Out Of A Charter Fleet

Charter companies are central to this discussion. Without them the cost of catamarans would probably be beyond the reach of most people. It is true that charter vessels take knocks during their charter life but it is important to know that yachts (unlike vehicles) are infinitely refurbishable. Even if you buy a used charter yacht it is possible to restore it to “as new”, provided that the boat is structurally sound to start with.

Charter Yacht Buyer Beware

In our experience, when buying a charter boat out of a fleet, in 99% of the cases, the maintenance records are not made available. This means that the onus is on the buyer to ensure that he is buying a sound vessel and equipment. It is a “buyer beware” situation. When phasing their yacht out of any of the major fleets, most owners get a pre-phase out survey done by an independent surveyor, and present this to the company as a basis for the work that should be done. It is important to note that in that case, the phase-out work, often very extensive, is paid for by the charter company.

That is a huge benefit to the boat buyer. Normally, the same surveyor will conduct a follow-up survey in order to establish that all the repairs and work have been done to industry standard and to the satisfaction of the owner. What this means is that the prospective buyer now has a base line to start from, and a level of confidence in the structural integrity of the boat and condition of the equipment and machinery.

Recently we did the sale of a phased out boat from one of the major charter companies and we were very impressed that they actually went over and above the items on the survey (these were missed by the surveyor) and did the required repairs. The phase-out process can be a very good thing for the buyer if the broker knows the people involved on the other side and is able to work with them for a good outcome.

Generally charter companies will do the right and moral thing, provided the process is well managed. Alternatively, we have had instances where the boat had structural damage that was not disclosed by the charter company, despite being specifically asked if the vessel had any damage or incident costing over $3k to repair or resulting in an insurance claim. Needless to say, when damage was discovered in the pre-purchase survey, we advised the client to reject the boat and we found another one for him. Experience does count when doing these transactions.

It should be noted, however, that not all charter companies have a phase-out program. In that case, the concept here is that the boat is maintained to a high standard at all times during its charter life and phase-out work is not required. In this situation, a full survey by the prospective buyer will establish the condition of the boat. Depending on that condition and the survey findings, there will often be an adjustment to the boat price.

Find An Expert To Represent You In Negotiations

Whether the boat is coming out of a large fleet or a smaller one, it is critical for the broker assisting the buyer to fully understand the charter industry and the inner workings of the charter companies to make sure that the boat is sound and in fair condition with no latent or hidden issues. A large percentage of yacht brokers actually know surprisingly little about charter boats, which is in fact a very specialized area.

In closing, a buyer cannot rely on any forthcoming disclosure from any charter company as the basis for believing that the vessel and its machinery and equipment are sound. That is the responsibility of the buyer and of the professionals he chooses to represent him in the transaction. If maintenance records are provided they should be used as a guideline and not be looked at as empirical data. In the end, a boat buyer assisted by a yacht broker with intimate knowledge of the charter industry can usually make excellent purchases within charter fleets.

Choose a Good Marine Surveyor

One aspect that cannot be understated is the choice of surveyor. I always give the buyer a choice and make him choose the surveyor. The buyer contracts directly with the surveyor so that there is an additional safety net in case there are issues with the vessel. By having the surveyor report directly to the buyer and not be answerable to the brokers in any way, the buyer has an additional and independent advisor. Remember both brokers want the deal to close so they can make money, whereas the surveyor is being paid whether the deal is consummated or not and has no interest in making it happen one-way or the other.

Buying A New Boat To Be Placed In A Charter Fleet

This is where the consulting with an expert becomes crucial. As the array of management programs and offerings has significantly increased over the recent years, this process has grown more complex and more confusing for the buyers. Since a buyer’s commitment to a charter company is usually for several years, making a mistake can be not only very costly, but an experience that should be a very happy one, can morph into a nightmare. And thus buyer’s assistance is definitely not a luxury any more but a necessary protection, which can prevent major trouble and save considerable money down the road.

This is an area where we have 30 years of considerable expertise and can advise the clients with regard to:

  • The choice of the most adapted charter company,
  • The best selection of boat and its equipment,
  • The choice of an appropriate management program according to the buyer’s sailing program.
  • Once the above is determined, the structure and negotiation of contracts and documents is another level of complexity, with the potential pitfalls, what to be careful of, what to insist is included in the transaction, etc.. The list is very long. Once a boat buyer signs on the dotted line, he/she is typically in for five years, so better be sure that one knows what one is getting into.

There are also little-known but legitimate and substantial tax advantages available through government incentives and small business stimulus programs that can benefit a buyer and offset the cost of ownership by up to 50%. This is another area of expertise where we consult and, should the program fit the buyer’s ownership profile, may results in very significant savings.

We understand this part of the industry from the inside out. We know all the players worldwide, and can provide invaluable information to make this experience what it should be: "A Happy One!" 

Contact Us For A Consultation

 

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