Buying or selling a boat can be an exciting and daunting prospect for any recreational boater, whether you are purchasing your first boat or selling one that you have owned for years, there are a number of key factors that you should take into account.
Just like when purchasing a house, it is important not to get swept up in the romance of buying a boat and to instead look at the practical and financial implications. Unlike when buying a house however, the law does not stipulate a process for the sale and purchase of boats.
Although the process of buying or selling a boat does not have to be complicated, but there are a number of aspects that require careful consideration.
When and how to sell your boat
As we all witnessed during last year’s summer lockdown, the interest in getting afloat rose dramatically as the good weather increased. Advertising your boat pre-season or at the start of the boating season can be an advantageous time to begin selling your vessel.
If you are looking to buy a boat, keep an eye out for adverts in local newspapers, the yachting press, websites, Facebook groups, brokerages, at local boatyards or often word-of-mouth within the boating community can also work well.
When considering purchasing a boat, you must first decide which type of boat best suits your requirements. These may range from sailboards to very large sailing or powered boats, the type and size of boat itself can make a considerable difference to the process and the price.
If you are selling your boat then choosing a fair and objective price can be a difficult task and if you are a novice purchaser then how can you tell if you are getting an accurate price? The secret to agreeing a fair price is research. Look at similar boats in the market and be honest with yourself about how much this boat is actually worth, what repairs may need to be done and most importantly if buying, what you can afford. Whether you are the buyer or the seller, be prepared to negotiate and have a top and bottom figure in your mind.
The sale of second-hand boats usually occurs between two private individuals and is often conducted via a broker, who acts as an agent for the seller. VAT is not chargeable on the sale of second-hand boats between private individuals but VAT is charged to the seller for the services rendered by the broker. The broker will usually charge the seller a commission for these services.
Prior to entering into an agreement to buy a boat, the purchaser will wish to make sure that the seller does indeed own the boat and have the right to sell it. Also, they will wish to ensure that the boat is not subject to any mortgages, debts, charges etc.
If the boat is subject to a mortgage the RYA recommends that the purchaser discusses the process of redeeming the mortgage with both the seller and the lenders. It is often the case that the purchaser will pay the proportion of the purchase monies that are outstanding on the mortgage, direct to the lenders. The lenders may hold all the title documentation for the boat and upon redemption of the outstanding mortgage, release the title documents direct to the seller/purchaser.
If you are purchasing a boat then it is vital to ask to see a copy of all title documentation so that you may be confident that the seller does indeed own the boat, that the boat has domestic goods status (UK VAT paid) or is VAT exempt, and is Recreational Craft Regulations (RCR) compliant.
When selling a boat make sure that you have your paperwork together, the main documents that you are likely to be asked for include, evidence that the boat has domestic goods status (UK VAT paid), such as the original invoice and evidence that the boat was lying in the UK at the end of the Brexit transition period at 11pm UTC on 31 December 2020; registration documentation, evidence of RCD compliance, where applicable; service information for the engine, generator, sails, water heater; the Builders Certificate (not essential but helpful) and Bills of Sale; Owner’s Manual and further manuals for all the equipment on the boat; and financial records and receipts of any large repair bills.
Whilst verbal agreements between parties are perfectly valid in law, they are notoriously difficult to prove and any disagreement will come down to one party’s word against the other. For this reason, the RYA strongly recommends that a written Sale and Purchase Agreement is used on all boat purchases. If you are a RYA member then you can access the online RYA Sale and Purchase Pack online, which includes a template Sale and Purchase Agreement template with a step-by-step guide to buying and selling boats.
The RYA also recommends that buyers have a survey carried out on a boat prior to finally agreeing the purchase, especially if the boat is second-hand and being sold privately. In most cases the only way to check the boat's condition is to have a survey done, and the results will often determine whether a sale proceeds smoothly, has its terms renegotiated or is terminated.
There is no better way to know how a boat will react when in the water than by conducting a sea-trial. This is something that the RYA recommends and if sellers are usually agreeable to allowing a purchaser to carry out a sea-trial. A satisfactory sea-trial is likely to reinforce the purchaser's desire to proceed with the purchase.
If purchasing a boat, you may want to consider boat insurance, although it is not compulsory in the UK it is highly recommended and at the very least you should consider third party liability insurance.
Buying and selling within the EU
Following the end of the Brexit transition period the UK and EU are now separate custom territories. The location of the boat at the end of the transition period at 11pm UTC on 31 December 2020 will have an impact on the boat’s VAT status. If you intend to purchase a boat in the EU and import it to the UK the default position is that import VAT and duty will be due on the current value of the boat at the time of import, unless you are eligible for one of the VAT relief schemes. If you purchase a boat in the EU with the intention of keeping it within the EU you shall need to obtain and retain evidence that the boat has Union goods status (EU VAT paid) which including evidence that VAT has been paid and evidence of the boat’s location in the EU at the end of the transition period. If the boat has been imported into the EU since the end of the transition period evidence that EU VAT has been paid will most likely be in the form of importation documents.
Additionally, if you are looking to purchase a boat within the EU and import it to the UK you shall need to make sure that the boat is compliant with the new Recreational Craft Regulations. These have replaced the Recreational Craft Directive following the end of the Brexit transition period. From 1 January 2023, if a used vessel is imported from the EU to be placed on the UK market , a new UK Conformity Assessed (UKCA) mark in line with the requirements of the RCR will be required. In order to obtain a UKCA mark, a boat will require a Post Construction Assessment and third-party verification.Similar rules will apply when selling vessels into the EU. Pre-owned CE marked vessels, which were in the UK when the Brexit transition period ended at 2300 UTC on 31 December 2020, when exported to the EU will be required to undergo a recertification of the CE mark when being placed on the EU market. This means a boat will require a Post Construction Assessment in line with the RCD and third-party verification.Estimated costs of Post Construction Assessments and verification are between 500-5000 GBP dependent on the vessel.
UK buyers/sellers are advised to ensure they include an English and Welsh (if relevant Scottish) law and jurisdiction clauses within their Sale and Purchase Agreement.
You can find further information about buying and selling boats by visiting the Legal hub pages of the RYA website: rya.org.uk. If you are a member of the RYA and have a question regarding selling or buying a boat, please get in touch with the RYA Legal team by calling: 023 8060 4223 or by email: email@example.com.