Buying or Selling a Boat: What You Need to Know

by James L. Rudolph

When you buy or sell a boat, there are plenty of legal issues and potential complications, not unlike when you buy or sell a home. In fact, some boat transactions are more complicated than home purchases, as they can involve local, state and federal regulations.

Furthermore, if you want to finance or insure your boat, you will discover that lenders and insurers have additional requirements beyond those of regulators. That is why it makes sense to enlist the support of qualified professionals who can assist you with significant boat transactions. You should be prepared to deal with all of the following issues.

1. Costs of Acquisition and Ownership

When you purchase a boat, you must remember to budget for more than the purchase price, considering the costs of registration, applicable taxes, fuel, maintenance, insurance, inspections, mooring and winter storage fees. All of these costs can vary depending on whether you want to use the boat for fishing, water-skiing, party cruising, or transportation.

It pays to figure out the annual cost of ownership per use, so that you can decide whether it makes more sense to rent or charter a boat as needed, instead of owning one.

If you do decide to purchase, it is wise to check the reputable published guides to wholesale and retail values, such as BUCValue Guide, the NADA Marine Guide, and the ABOS Blue Book. Consider too that boat prices tend to be higher at the start of boating season and lower in the off- season.

Before you begin negotiations, you should know your rock bottom or upper limit for price, as either a seller or buyer, and you should not be in a rush if you want the best outcome.

2. Options to Consider When Buying or Selling
You can sell or buy a boat yourself, enlist the support of a broker, or turn to a boat dealer. If you are a buyer, you can even deal directly with a boat builder if you want something built to custom specs. If you work with a broker, that person should be a member of a recognized professional association, such as the Yacht Brokers Association of America. Also, if you are selling, consider that you will get less money from a dealer than an ordinary purchaser, but you will also spend more time on advertising, dealing with tire-kickers, and possibly handling multiple negotiations until you close with one buyer.

3. Important Preparation and Research

If you are a seller, it is important to create a great impression of your boat by cleaning and sanitizing the bilge, scrubbing the decks and the galley, and charging the batteries for easy start­ up demos.

It is also important to be wary of remote buyers or potential scams. Fake cashier’s checks are increasingly common, as are scams in which a buyer sends more than the purchase price, with a request that the seller forward part of the money (from his own funds) to a third party for shipping or other charges. Watch out for people who don’t negotiate price, or show other signs of being “too good to be true.”

As a buyer of anything other than a new boat, you have to look beyond the surface to ascertain conditions. You-need to check out the engine, the electrical system, the scuppers and all water draining mechanisms, including the bilge pump. You also have to look for soft spots on the deck, indications of saturated foam, damage to stringers under the deck or to joints between the deck and the hull, wear on belts or hoses, signs of milky or gritty oil or bad transmission fluid, mismatched paint, damage to the keel or propellers, issues with the safety equipment, and other potential problems.

You should also compare photos and descriptions of similar boats for sale to see what features or equipment might be added to or missing from the typical included accessories. Be careful not to buy more than you want or need, as every item on a boat becomes a maintenance and repair issue.

Obviously, with so much to inspect, it can be very helpful to hire a professional boat surveyor, who will examine the boat carefully and prepare a written report of findings. The report should provide a statement of overall condition and likely range for fair market and replacement values. It should also note any issues in compliance with applicable Coast Guard Regulations or National Marine Manufacturer Association requirements. You might also want to ask for notation of any non-compliance with National Fire Protection Agency standards, American Boat and Yacht Council standards, or Offshore Special Regulations (the latter applicable to racing sailboats).

Any surveyor you hire should have professional indemnity insurance and be a member of a reputable professional association, preferably the Society of Accredited Marine Surveyors or the National Association of Marine Surveyors. The surveyor should perform an in-slip inspection, and require a short haul and bottom cleaning prior to a dry hull inspection on a clear day. The inspection process should conclude with a re-launch and final sea trial. It is best for the buyer to attend the inspection so the surveyor can point out any issues and answer any questions at that time.

Generally, the surveyor’s fee is based on the length of the boat or the hourly time invested in the survey. An engine survey might cost an additional $500.

4. Legal Issues and Paperwork

A boat seller should get a buyer to sign a contract and put down a good faith deposit on the purchase prior to any surveyor’s inspection and sea trial. The contract should also address all key contingencies, such as the time allowed for lender approval, how the boat is to be delivered, which party bears the risk of loss between signing and delivery, and the limitation of any representations and warranties. In most jurisdictions, the seller can make an “as is” sale, but that generally will not eliminate a duty to disclose known hazards or defects.

Both parties will want a bill of sale, showing the type and size of boat, the registration number, purchase price and date, form of payment, list of equipment included with the sale, and the signature of all necessary parties. The buyer should also get a certificate of title, showing that the seller and any lienholders have signed off on the sale. If a brand new boat is involved, the buyer should obtain a builder’s certificate.

The buyer should ask the seller for “chain of title” documents showing who has owned the boat from the time of building to the present, as we’ll as any logs of repair and maintenance, plus proof of payment on insurance and mooring fees. The buyer should also ask for all warranty cards and maintenance records, as well as proof of any necessary loan payoff. In Massachusetts, a buyer can check with the MA Environmental Police, Boating and Recreational Safety Bureau for records of any accident involving a registered boat that resulted in death, injury or property damage over $500.

As of July 2017, a buyer must re-register the boat within 20 days of purchase, providing proof of ownership, bill of sale, and proof of payment of applicable sales tax and title fees. For registration, the buyer will need the hull identification number and the year, make, model and length of the boat. For boats that are at least 14 feet long, a certificate of title is a requirement for registration if the boat is designed so that it can use a motor (even if it is a sailboat and does not have a motor). For new boats, an original manufacturer’s statement of origin is required. Certain large vessels are exempt from registration if they have a marine document and registration issued through the U.S. Coast Guard. Full details are available on the website for the Massachusetts Executive Office of Energy and Environmental Affairs.

5. Insurance and Financing

Any lender or insurer will also set their own requirements related to the financing or ownership of a boat. Massachusetts does not currently require any type of insurance, but many lenders do.

The insurance should be issued by a reputable marine insurer, and should provide specific coverage for damage to the hull, as well as damages suffered due to specific hazards and accidents, including personal injury damages. A good insurer is likely to require a recent inspection by a qualified boat surveyor.

Any loan should allow for prepayment without penalty, and should specify what events constitute a default by the borrower and what can trigger acceleration of repayment obligations, if anything. An experienced lawyer with knowledge of boating can help guide you through all of these issues, providing you with smooth sailing on your transaction rather than choppy seas.

Jim Rudolph is an avid boater, as well as an experienced lawyer. He has enjoyed the highest possible Martindale-Hubbell ” AV” rating from his peers for 30-plus years, and Boston magazine has named him as a “Super Lawyer” every year since 2004.