Buying A Charter Yacht: Ten Basic Steps To A Smooth Process
The buying process often seems like a daunting task to first time buyers with so many parties involved, documents to generate and decisions to make. We have compiled an easy to follow checklist to help you make this a smooth transaction. Once you have decided on the yacht and charter yacht management company, choose an experienced yacht broker to help you navigate the process and keep this checklist handy for your own peace of mind.
Sequence Of Events When Buying A New Charter Yacht
- Decide on the yacht that will adequately suit you and your family’s needs.
- Use resources like catamaranguru.com and sailonline.com that have lots of information on the subject.
- Decide on the partner/charter company you will use to operate your yacht. Negotiate the specifications and price.
- Check with your accountant to ensure that the management program you choose is right for you.
Apply for financing through a marine lender or other financial institution and get a funding approval – do NOT enter into the Purchase Agreement until you have a commitment letter from the lender.
- Place the order with the manufacturer. Note: A non-refundable 20% deposit will be required at this point.
- Check the Purchase and Sale Agreement and make sure that you understand it and agree with it.
Factory Delivery Date
Decide when the vessel should be at the cruising grounds to optimize the income. The yacht should arrive and be ready for service at the start of the high season.
Yacht Corporation Documentation
- Set up a corporation to operate the boat, usually LLC or S Corp.
- You can initially enter into the Purchase Agreement as well as the Management Agreement in your personal capacity but specify "or Assigns" so that when the Corporation is set up you can assign the agreements to the entity.
Charter Yacht Management Company Agreement
- Once your vessel has been ordered, follow up and sign the Management Agreement as well as all the Addendums with the charter management company so that the yacht can be offered for charter pending the arrival.
- This is important because the lead-time will ensure that when the yacht arrives it will already have a good number of bookings, which represent immediate income and cash flow.
Tax Advantage With Business Yacht Ownership
- If you are in a Performance Ownership Program you need to get all the administration in order while the yacht is being built.
- Sign the Sales Associate Agreement
- Set up the website and decide on marketing strategies.
- Decide which boat shows to attend
- Put the word out to your sphere of influence about chartering your boat.
Yacht Closing and Payment
When the yacht is completed, the factory will want to be paid before it is released in the charter company's care, so closing needs to take place at this stage. The lender will require copies of the following:
- Builder's Certificate – Factory provides this to the Documentation Agent (DA)
- Manufacturer's Statement of Origin – Factory provides to DA
- Picture of HIN – Factory provides to the DA
- Confirmation of Insurance – Normally, the charter company provides the insurance policy with the owner and lender as loss payees.
- Confirmation of your down payment provided by the Charter Company
- Bill of Sale provided by the Charter Company
Yacht Documentation Agent
- The lenders will either assign a Documentation Agent (DA) or the buyer will appoint their own – this depends on the lender.
- The DA's responsibility is to make sure that all documents and title are correct and provide them to the lender upon request.
- The DA will register and flag the vessel with the USCG and get a certificate of registry generated – note this can take up to a month, so most yachts leave the factory on a "Running Letter" which is supplied by the DA.
The yacht will leave for the charter destination with professional delivery crew. You will be assigned a delivery tracking number.
For more information about charter management, contact Us: