What is the issue?Buying a boat is one of the key ways to experience the pleasure of a countries coastline with family and friends. It is very much like buying a car and just as easy. However, as with a car purchase, key paperwork and legal matters need to be correctly attended to before a buyer may safely part with his money and take secure and unfettered ownership of a vessel. A new boat buyer has implicit Sale of Goods Act rights but not so a used boat buyer that are only covered by the laws pertaining to misrepresentation.
Why address this?Outside of your home the purchase of a boat may be the largest acquisition you will ever make. A lot of money is at stake and you have to make certain it is a safe, secure and well managed transaction plus one that will not set you up for unexpected future bills. Moreover, with UK planning and construction regulations, purchasing a home is unlikely these days to kill you; not so with a used boat.
How to address this?Here are some notes that assist in identifying the key transaction documents that help provide secure and unencumbered ownership of a serviceable vessel in the UK. Once the right used boat has been found at the right price a UK buyer should ask the seller to collect and present the following five documents.
1. Bill of Sale
2. Registration Document
3. Evidence of VAT payment, if the vessel was built after April 1st 1973.
4. Evidence that the vessel is not subject to a mortgage, if applicable.
5. Evidence of compliance with the EU's Recreational Craft Directive, if the vessel was built after 16 June 1998.
Only when all of these documents are confirmed to be available should the sale continue. The next step is to get a surveyor and assess the state of the vessel. Many boats are sold without paperwork or history but the price should be reduced accordingly to reflect the risk the buyer is taking on. The importance and measure of risk that stand behind these documents are as follows.
This is an official document that proves the seller has legal title and can transfer the ownership of the vessel. The ‘Bill of Sale’ is an official document that is registered by Maritime Coastguard Agency (MCA), part of the Department For Transport. A purchaser of a British registered vessel does not obtain complete title until the Bill of Sale has been recorded with the Registry, and the new Certificate issued. This is the critical document to get hold of, as this provides the legal title to the vessel. Make certain you obtain the Bill of Sale documents for the boat when completing the sale.
All pleasure craft can be registered on Part I or Part III of the UK Ship Register. Part III is a very simple and low cost form of registration available for pleasure craft of less than 24 metres. It proves a boat’s nationality if not the owners title. This registration can be done online directly, with the MCA.
Likewise any eligible pleasure craft owner can apply to register under Part I of the UK Ship Register. Part 1 is slightly more formal and a slightly more expensive registration but it is of a more weighty registration particular when travelling abroad. It has the advantage of, proving title to your boat, your boat’s nationality; use the boat as security to obtain a marine mortgage and the ability to obtain ‘Transcripts of Registry’, that show the boat’s previous owners and whether there are any outstanding mortgages.
VAT is only payable if a boat is sold by a trader. Private sales do not attract VAT however, depending upon the vessels age, the vessel will most likely need to show a history of VAT being paid.
The age of the vessel is key here and it may or may not be straightforward. Let’s go back in time and progress forward. If the vessel was built before April 1st 1973 it requires no proof of VAT payment as VAT did not exist before that date. Evidence that the boat was built before that date is all that is required. After this date there was a VAT amnesty that also means that there is no need for a proof of VAT payment on any boat that was built before the January 1st 1985. However that VAT amnesty requires evidence to prove the vessel was inside the EU at midnight of December 31st 1992 which complicates this somewhat. Any later build dates and the seller should produce evidence that VAT has been paid on the vessel.
In reality there are very few cases of people being caught with the wrong paperwork and it is not particularly actively pursued. However it is very much a peace of mind document, particularly for EU travel, as failure to show that VAT has been paid provides customs officials with the right to impound your vessel until they secure a payment of a tax bill. Stringency varies; some counties do not pursue it at all whilst on the other hand the Dutch reportedly demand original VAT papers most every time.
Despite this degree of complexity and large sums at stake, the current estimated value of the vessel marked up by the current rate of VAT, there is no official government document that can be called upon to prove VAT has been paid. What is used is the original receipt of purchase from a dealer describing the boat and showing payment of VAT. This is something that, on my first glance I worriedly noted, could easily be created in half an hour with the benefit of a word processor, personal computer and printer. However, should this ever be queried and found to be forged the chain of investigation would be very short making it an unlikely desperate measure.
Once the proof of VAT payment has been presented to a customs official the burden of proof is upon the customs official to disprove the document. That is the evidence of VAT paid stands unless the tax official can prove otherwise.
Specialised finance houses assist with finance as agents for a lender providing marine mortgages on a vessel. To get a mortgage on a vessel it has to have a Part I of the UK Ship Register that uniquely enables the vessel to be used as mortgage security. It also provides the ability to obtain ‘Transcripts of Registry’, that show the boat’s previous owners and whether there are any outstanding mortgages. It should be noted that mortgages on a vessel are recorded on the main Register but do not appear the Part 1 certificates. If you need details of any outstanding mortgages you will need to apply to ‘Registry Of Shipping and Seamen’ office for a transcript which involves a small fee.
If the vessel has had a mortgage you will need to request confirmation that there are no outstanding liens on the vessel. Otherwise a new buyer might have a subsequent visit from a finance company ceasing the boat in lieu of a loan-payment.
Since June 1998, it has been a requirement that all new boats offered for sale within the EU comply with the Recreational Craft Directive (RCD). This indicates that the craft fulfils certain essential criteria concerning safety and other associated matters. The boat must display a CE mark together with a plate detailing the maximum payload and operational limits. The exception to this rule is for new boats that are built by private individuals or fitted out as DIY projects. These are not required to comply with the RCD, unless they are placed on the market within 4 years of construction.
With these five documents available to be handed over a buyer is in a very good position to buy. If pursuing the purchase through a reputable broker you can usually rely on them to have already assembled and checked through all of this paperwork for you. A purchase through a broker provides you with some added measure of comfort; for should there be any subsequent problems you have them accountable for the validity of these documents and the boat that was offered. They are also adept at the formalities required to register a ship on your behalf.
Once this paperwork is in hand you can proceed to a survey. This in my experience is the single most important next step before buying a boat. I can honestly say I would unlikely to be alive had I not come across a very good surveyor. So finding a good one is also very important. Ask around other owners, boatyards etc for a reputable boat surveyor.
Brokers tend to provide a list of qualified surveyors that they recommend. I would suggest you ask for the list and then eliminate these particular surveyors from selection as there is an obvious moral hazard here. The brokers are acting on behalf of the vendor and their commission, 6-8% in the UK depending on the length of the vessel, and are both tightly aligned to sell you the vessel. The surveyor’s job is to be exacting and find every possible fault, protecting the buyer and in the process frustrating and even stopping a sale if need be. I am not saying anything untoward is happening here, but there is an obvious conflict of commercial interest here between a listed surveyor acting for the buyer and picking a steady stream of referral business by being on the broker’s recommended list. I would stay outside of that set-up as a matter of best practice.
Your surveyor should be a member of one of the recognised professional bodies such as the YDSA, I Mar E, RINA or SCMS, etc. Professional body membership ensures a high standard of proficiency and diligence, together with Professional Indemnity Insurance. This protects you in the event that the surveyor makes a mistake or fails to identify a defect in the craft. If they get it wrong there are serious consequences for them as they could be struck off.
Look beyond the boat to their council on other matters. Surveyors are well experienced and know the local scene in close detail enabling them to advise you with regard to many other aspects of the purchase, such as the above paperwork up to and including the pedigree of a broker. This can be critically important as there is a short time between a deposit being paid, even worse the balance being paid, and the title of the boat being secured by the buyer. A close sailing friend got caught in this bind when a broker was taken into administration in the middle of the sale. Here the buyer had parted with the deposit but not secured the boat and was not making any progress with a sheriff or a liquidator. Try to be there in the latter parts of the survey and strike up a conversation; he knows much more than the engineering.
Happy unfettered sailing.
With thanks to:Michael Harpur, s/y Whistler of Southampton
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