Buying a boat in Cyprus
All You Need To Know To Keep it Plain Sailing.
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One of the benefits of living in Cyprus is that you can buy a boat and really enjoy using your pleasure craft sailing around the island. It can also be a wise investment.
When embarking on a purchase, you’ll need to choose:
- the type of boat you’d like (cruising, fishing or water sports),
- its size and
- its age.
How the legal process is handled largely depends on whether the boat you are purchasing is used or new. You will need legal representation for both processes. The contractual and regulatory issues that you need to be made aware of are too numerous to list in this article and will vary depending on the circumstances, however I describe below some common and important issues that you should keep in mind when setting out to make your purchase.
Buying a used boat in cyprus
Used boats are typically sold by (i) dealers (who buy the boat from a third party and sell the boat onto you for a possible profit) or (ii) brokers (who don’t own the boat but quite often represent a seller and earn a commission for their services) or (iii) the current owner of the boat.
Below are some things to keep in mind:
- Don’t agree anything verbally. Make it clear that when you are making an offer to buy a boat that it will be a subject to a written contract. That way, your lawyer can insert terms and conditions into your contract to protect you. You should also make sure that your offer to buy the boat will be subject to a satisfactory survey and a sea trial;
- Always make a list of what’s included in the sale of the boat. This avoids misunderstandings later on. This list is called an inventory and will include the machinery and equipment on board the boat that will be included in the sale;
- At the current time, a deposit of 10% is seen as standard but there is nothing to stop you negotiating less with the seller;
- If you are buying from a yacht broker, it is wise to check that he is a member of an industry approved organisation e.g. YDSA or ABYA. I have quite often seen these certificates displayed on the walls of brokers’ offices. If you are unsure just ask them and tell them to provide confirmation. They should provide the information to you without any problem at all;
- Check that your broker has public indemnity insurance;
- Check the seller’s title. You will need to ensure that the person selling the boat is in fact the owner and a search at the flag registry will need to be made to check that the boat is free of any mortgages, loans or monies owed to third parties e.g. port/marina fees;
- Ensure that the relevant taxes that should have been paid by the previous owner or any other previous owners have been paid because if they haven’t you will be landed with a hefty tax bill and in the meantime may be unable to travel freely throughout the EU with your boat. For example, a seller must prove the VAT status of the boat.
Buying a new boat in Cyprus
A new boat is generally bought directly from (i) the boat manufacturers or ship yard or (ii) a broker or agent. The build and purchase of a brand new boat can be a very bespoke process. Its design and manufacture will in many instances be tailored to a customer’s specific requirements. Your legal representative will need to be involved from the outset. Missing details in the negotiation may cause the need to conduct expensive upgrades after delivery and may negatively affect the boat’s resale value.
Some of the issues you should be aware of when buying a new build are as follows:
- The salesman from the boat yard or the broker may hand you over a glossy brochure and inside the back flap of the brochure on the last page there is, what is often referred to as, “the standard contract”. The salesman or broker advises you that signing the contract is a standard practice and that if you have any questions to ask the boat yard’s lawyer. As it’s a “standard contract” you think it should be fine and you should be protected, right? Wrong. Shipyard contracts are generally drafted very much in favour of the yard and a lawyer acting for the yard and being paid by the yard is generally acting in the best interests of the yard.
- The boat should be equipped and built in accordance with EU safety standards; Cyprus has harmonised a huge amount of EU safety legislation into its own national laws and these laws should be referred to in your contract;
- Ensure you pay for the boat in stages. A typical stage payment would be a 10% deposit upon signing of the contract and then three stage payments of 30% as the build of the boat progresses until completion;
- You will need to check what your rights are if the yard alters or modifies your boat. Do you have a right to reject the boat or are you forced to accept the alterations or modifications the yard makes?
- What are your rights if the yard delays delivery of your boat?
- What happens if the yard goes into liquidation while your boat is being built? Can you get your money back if that happens?
- When does ownership of the boat pass to you? This is important as this will determine who has to insure the boat and will be responsible of the loss and damage sustained by the boat before it’s delivered to you;
- Check the warranties. This is the yard’s promise that they will fix various problems that may arise during a stated period of time after you have taken delivery;
- Check the jurisdiction clause of your contract. This is the clause that states how disputes will be handled and where they will be handled. During the excitement of buying a new boat, a new buyer may not give this clause much thought. But, if five years down the line, you end up in a legal dispute with the other party, you may not want to travel to Australia for three weeks to fight out your dispute with them!
I have already stressed that independent legal advice should be taken before buying a new or second hand vessel. But the point is that you should not only take independent legal advice but ensure that the lawyer you have instructed has the necessary shipping expertise in order to advise you. You should not be embarrassed to ask about your lawyer’s background and ensure that he or she is experienced in maritime law matters.
The information and opinions within this article are for information purposes only. They are not intended to constitute legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to your particular circumstances.