According to some estimates, the superyacht industry contributes a staggering a €24 billion per year to the global economy. To put that into perspective, that’s about €3 billion more than the total GDP of Iceland. For industry insiders, that figure may be unsurprising, especially when you consider that the average price tag of a newly built ‘midsized’ superyacht is circa €50-80 million and the industry has grown steadily at a rate of, on average, 7% per year for the last ten years and shows no signs of slowing down anytime soon. Indeed, many of the top shipyards currently have a limited number of build slots available for yachts over 100 metres in size.

It’s worth pausing here to note the change that has occurred in our industry – in the early 90s, there were only a handful of yachts in the world larger than 100 metres. At the time of writing, there are almost 70 yachts over 100 metres. It is, therefore, imperative, in my opinion, that yacht buyers and those advising them have a clear understanding of this unique and demanding asset class.

This article outlines the key legal and practical issues for buyers and their advisors to think about when involved in the sale and purchase of a second-hand yacht – as well as the positive steps buyers and their advisors can take to help ensure a positive purchase experience.

Sale and Purchase transaction

I am often asked “What are the key issues for us to think about in a sale and purchase (S&P) transaction?”

It’s a broad question to answer, but let’s start by briefly considering the dynamic of a yacht S&P transaction. You have two very wealthy individuals and their advisors coming together to convey a movable, technically complex and very expensive asset. This is an asset which, more likely than not, has a full-time complement of crew, stretching, in some cases, to 50 plus people.

Whilst there are many issues to be considered when purchasing a yacht, some of the headline issues to think about include:

Consider the tax position: After confirming the sale price, this is one of the first issues that I start to explore with my clients. Take, for example, a yacht that is based in the EU: Has VAT been paid on the yacht? Has the yacht been operating commercially? Where is it flagged? How was VAT paid? What evidence is available to prove the payment of VAT? These are all questions to ask the brokers and the seller or, if you are a seller yourself, these are questions you should be ready to answer. A failure to do so as a buyer can result in a potential 20% uplift on the purchase price (in the form of VAT). It is an expensive thing to miss.

The inventory: As a prospective buyer, when you view a yacht, you see it in all its glory; the aft deck infinity pool, the bespoke, personally designed interior and, moving down, the fully-equipped beach club, with all of the associated water toys. Naturally, you might expect that the yacht will come equipped as seen, right? Well, sometimes sellers (especially sellers who own more than one yacht) want to take some things with them: a statue they are particularly fond of, a vintage tender or a chair they have grown to love.

The inventory is where both parties make clear what they expect from the sale and purchase and its importance cannot be overlooked in a world where works of art and tenders are selling for multiple millions of pounds

Future use planning: As a buyer, you may have very clear expectations about what you intend to do with the yacht; for example you may know that you only ever want to use it privately with your family and friends. To the contrary, some buyer’s like the idea of offsetting some of the running costs through chartering it out to third parties. Either way, it is important to consider how you will use the yacht prior to becoming the owner. This is because the manner in which a yacht is used has a direct relationship with its tax status and the certifications the yacht must have, i.e. whether it meets the relevant standards for commercial operation.