Rejecting a vessel prior to survey

[Snug Harbor]

Did the broker use the YBAA (Yacht Brokers Association of America) purchase and sales agreement? Hopefully the broker is a member and used the standard contract. If so, you are entitled to a full refund of your deposit minus any expenses incurred on your behalf. You would have had to approve such an expense (haul-out for example). There is an "Acceptance of Vessel" date, if you haven't accepted the boat in writing by that date then you have rejected the boat and the deposit comes back to you. No reason required for not accepting the boat.

That all assumes use of the YBAA document of course, a good argument for always using a YBAA member brokerage because their forms are standardized. The brokerage should have a dedicated escrow account for holding deposits. In over 25 years in the business, nobody has ever requested a 3rd party hold the deposit.

 

[Invincible Summer]

I agree with others. No need to spend any more money whatsoever. Contracts are expensive to enforce. They will most likely fold. One other note, however: I'm interested how you came by this information. If the yard gave it to you, you could put the yard in a sticky situation with the boat owner. The boat owner may become mad as a wet hen with the yard. Therefore, if the yard gave it to you, I would approach the yard and tell them your conundrum ... conveying that you do not want to spend any more money, you do not want the boat, but also do not want to put them in a bad way with the boat owner. They will most likely recommend a Houdini for you. Lastly, with each contract I sign, I always make sure there is what I call a "Houdini clause" ... a clause that enables me to easily escape out of the contract. They are very useful in these types of situations. Good luck!

 

[SteveK]

The Marina was sold and the new buyer required a contract that required me to be obligated to protect them in court and hold harmless if one of my guests hurt themselves on the dock.

not a lawyer, but seems like if that was enforceable would mean you have taken responsibility for your guests and have assumed libility for their injury.

 

[BruceK]

Curious how it worked out OP. What did you do, with what result?

 

[mvweebles]

I'm late here but have a couple thoughts to add

First, in my professional life, I was a buy-side advisor for large IT service contracts. I ran a lot of RFPs where suppliers routinely spent well over $500k in pursuit costs, often over $1m for large agreements. I was under no obligation to tell them why they were being cut, and the news was often not received well. But over the years I developed an approach that worked well. After very brief pleasantries, first words out of my mouth was a clear statement "you will not be moving forward in the process." Very direct statement. I would then give a brief summary of reasons, though would not give the nitty gritty - usually a version of "you guys had a good value proposition, but the other guys were better." I would always offer a more indepth debrief and disclose our final decision after we were done. Oddly, this was only requested once or twice.

I do feel that ghosting a deal is not cool. But the buyer is rarely under any obligation to offer a reason.

Second point - and Seevee brought this up mid-thread - is I too always scribble in a very unilateral statement that I can walk if inspections are not to my satisfaction, even if it's obliquely already in the contract.

Finally, while I know there are bad actors out there, brokers won't be in business long if they withhold deposit money. I wouldn't be dumb about signing over money, but it's not the highest order of concern. Brokers need to sell dozens of boats a year to stay in business. Screwing a buyer on a deal could/would jeopardize their entire business.

Peter

 

[Hippocampus]

Mr Clayman offers wisdom. The standard contracts do offer you an out which cannot be contested as long as you haven’t “accepted “ the vessel. Also you own the survey. No one can force you to share it. One can even sell it to prospective buyers or the current owner.
It is reasonable to share the information that caused you to back out with the surveyor. At your discretion and his judgment have him revise the survey to include salient points.
Deposit should always be held in escrow. Failure to do so is malfeasance and actionable to my understanding. Think it would be most unlikely you will have issues in recovery.

 

[Roustabout]

A surveyor would write you a report sight unseen telling you not to buy a boat? I don't think a reputable one would. More like they will write down findings and you decide that is reason not to buy without being advised not to buy.
But south of the 49 may have different standards.

I agree with Steve K. A surveyor should not tell a buyer not to buy. Part of the surveyor’s job is to observe, report and make recommendations that deficiencies be corrected. Buyer decides yea or nay based on what info he or she has, and part of that knowledge comes from a survey. I did many prepurchase surveys and it was certainly understandable that buyer could decide during the survey to halt the survey, not to have surveyor complete the survey. I reduced fee accordingly.

Control of the survey report, if completed, rests with the survey customer. I did not survey for sellers. My survey contract strictly prohibited survey customer from sharing the report with any party other than insurer and lender without my express permission. My reasoning was that I did not want a report floating around months/years after the survey if original survey customer did not buy boat, report ends up in sellers/broker’s hands, and months/years later, after boat has aged/changed/been damaged/value changed, etc. A buyer should not rely on an out of date survey, especially if seller was the survey customer.

 

[ronobrien]

Hello everyone,

We have a contract on a vessel, pending a satisfactory survey, with a survey scheduled in a week.

We came by additional information this week that would make us walk away from the deal even before doing the survey. Unfortunately, there is only one broker (seller’s) involved. And getting truthful information was/is very challenging but now we see too many red flags. I am getting ready to inform the broker but wanted to get opinions from the forum. There is no point going through the expense and time involved in the survey x2, if we are going to reject anyway.

We have never done this before, so I would appreciate any feedback or comments.

Many thanks,

Raylee

Seeing several comments here I agree. The vessel did not pass the first phase of the "survey."

 

[River Song]

Hopefully, your broker used either the standard YBAA or IYBA Purchase & Sales Agreement. We only use these agreements when representing our clients as they do a very good job of protecting the interests of all the parties. As a Buyer, you do not need tp proceed to Closing without providing a reason. In fact, your deposit does not become non-refundable unless you have signed an Acceptance form following the survey prior to the Acceptance Date. You can walk way at anytime unless you have Accepted the Vessel. There is nothing wrong with using a broker who is representing both the Buyer and the Seller provided you are comfortable he / she will do the right thing for both sides. If you are going ahead, make sure you have a very competent survey team.

I am getting ready to list my 1988 GB36, and while reading an IYBA contract, and did not feel my interests were protected. In fact, I was very concerned with the language in paragraph 15, which requires the seller to INDEMNIFY hold harmless and release brokerage (and numerous others) against . . . any and all claims, losses, damages, liabilities, attorney's fees, and other expenses... including, without limitation, any claim by Owner or any other person or entity, that a Released Party may incur [paraphrased: for anything that happens], through all levels of litigation for any claim arising from {(paraphrased: (a) owners negligence, misrepresentations, actions or inactions (b) advertising materials provided by the seller . . . (c) a showing, inspection, trial run, or other running of the vessel...." and so on. Brokerage limits their liability to amount of the potential Commission, but seller's liability appears to be unlimited. Naturally, I have good insurance on the boat, but this is the broadest release I have ever seen. I have read numerous posts saying to strike any language that you cannot live with because once you sign you must live with it. How do I find a broker who will let me amend their form contract to not be so broad? I have asked several who say the paragraph must remain. I would be grateful for any suggestions.

 

[henrymei]

I am getting ready to list my 1988 GB36, and while reading an IYBA contract, and did not feel my interests were protected. In fact, I was very concerned with the language in paragraph 15, which requires the seller to INDEMNIFY hold harmless and release brokerage (and numerous others) against . . . any and all claims, losses, damages, liabilities, attorney's fees, and other expenses... including, without limitation, any claim by Owner or any other person or entity, that a Released Party may incur [paraphrased: for anything that happens], through all levels of litigation for any claim arising from {(paraphrased: (a) owners negligence, misrepresentations, actions or inactions (b) advertising materials provided by the seller . . . (c) a showing, inspection, trial run, or other running of the vessel...." and so on. Brokerage limits their liability to amount of the potential Commission, but seller's liability appears to be unlimited. Naturally, I have good insurance on the boat, but this is the broadest release I have ever seen. I have read numerous posts saying to strike any language that you cannot live with because once you sign you must live with it. How do I find a broker who will let me amend their form contract to not be so broad? I have asked several who say the paragraph must remain. I would be grateful for any suggestions.

 

[henrymei]

I wouldn’t indemnify anyone for anything related to the sale of my boat. It is strictly as is, where is subject to any issues that come up during survey and sea trial. The indemnification language appears to be increasingly popular. I’d cross it out.

 

[mvweebles]

Striking a paragraph likely won't be accepted. Often you can negotiate the terms to vastly reduce their effectiveness.

• Require the Broker to carry professional liability and general liability insurance of $2m, and that your indemnity stands behind their insurer (this type of insurance is not expensive - I paid $1500/year 2-years ago). They must carry it for at least a year after date of Agreement.
• Regardless, Broker is responsible for acts of negligence or ommission (they won't go for this, or will add "gross negligence" which is a very high bar).
• Limit your liability to the commission (just as the Broker did)
• Require the Broker to abide by professional code of conduct for all activities in which they participate; and adhere to industry best practices including guidelines set forth by a professional organization such as yacht broker accrediation association.
• Limit indemnification against third party lawsuits to those third parties who you directly engage on your behalf for due diligence activities.

I'm sure there are some other ways to de-nude the indemnification language. Not a heavy lift for an attorney (which I am not - just offering some thoughts).

Peter

 

[BruceK]

Insurers do not like insureds giving away indemnity entitlements. It fetters their right to recover from an otherwise liable third party. Could severely affect your insurance contract.

 

[mvweebles]

The clause in question is entirely for the benefit of the broker. It effectively states the broker will bear no financial consequence for any/all damages, awards, or costs (including attorney/court fees) even if the broker is at fault. (there is a backstop, at least in the US - "Gross Negligence" cannot be shifted, but that bar is extremely high).

Removing an indemnities section is not realistic. But the boilerplate language is so lopsided that it begs negotiation to reach a reasonable middle ground. But few brokerages are equipped to negotiate indemnities/liabilities without consulting their attorney. Likely they'd say "Sorry, we cannot change that language," perhaps citing insurance reasons.

My question is how successful have people been at negotiating these types of legal clauses in sales contracts? How many people have tried?

Peter

 

[slowgoesit]

Peter,
Not a boat sale contract, but four times now, we've modified (or told the agent/broker) to modify their home listing contract because we perceived that the contract was unreasonable. Three times, some after some gnashing of teeth, and "woe be it to me's", they modified said contracts. The fourth time, they first refused, then told us they'd have to "run it by legal" . . . No contact, then they came back about 10 days later and said, okay, legal said it was all right . . . . I said "Sorry, we've already listed with another agent who didn't have their head . . . well, you get the drift.
Bottom line, my money, my rules . . . to a point. Their brokerage, their rules . . . to a point. If you can come to an agreement, fine, if not, find another broker.

I once sold a boat, to a private seller, using a simple 1 page sales agreement which identified the parties, described the boat, laid out both parties duties, timeline, etc. easy peasey. Then the buyer stated that he'd been advised to use a broker to do the closing . . . . who told me I was "required" to sign a "listing contract" in order to complete the closing. (with a commission to the broker, no less!) Oh hell no!

I wrote the buyer a nice letter stating that per his communication of XX date, I understood that he was backing out of our mutually agreed contract, dated XX, for him to purchase my boat, as of XX date and time, and that the boat was now up for sale again. Should he wish to tender a new offer to purchase the boat, he, of course, was free to do so.

I raised the price slightly, and I showed the boat to another perspective buyer, who expressed interest. Then the first buyer came back and said, all right, I'll buy it. I said, fine, submit an offer. He did, for full originally agreed price price. I came back with the newly advertised price. He finally agreed to pay it. He bought the boat, WITHOUT the broker and, he was miffed at his "broker", for "costing him more money", but he was happy with the boat.

A month later I received a "Bill" from the broker for his "commission and other fees" associated with the "Sale". I chucked it in the garbage and never heard another word about it. . . .

 

[SeaLion]

I am getting ready to list my 1988 GB36, and while reading an IYBA contract, and did not feel my interests were protected. In fact, I was very concerned with the language in paragraph 15, which requires the seller to INDEMNIFY hold harmless and release brokerage (and numerous others) against . . . any and all claims, losses, damages, liabilities, attorney's fees, and other expenses... including, without limitation, any claim by Owner or any other person or entity, that a Released Party may incur [paraphrased: for anything that happens], through all levels of litigation for any claim arising from {(paraphrased: (a) owners negligence, misrepresentations, actions or inactions (b) advertising materials provided by the seller . . . (c) a showing, inspection, trial run, or other running of the vessel...." and so on. Brokerage limits their liability to amount of the potential Commission, but seller's liability appears to be unlimited. Naturally, I have good insurance on the boat, but this is the broadest release I have ever seen. I have read numerous posts saying to strike any language that you cannot live with because once you sign you must live with it. How do I find a broker who will let me amend their form contract to not be so broad? I have asked several who say the paragraph must remain. I would be grateful for any suggestions.

Your interests are of no concern to a broker or the IYBA aka The Boat Brokers’ Club.

Yet another reason to sell it yourself.

 

[River Song]

The clause in question is entirely for the benefit of the broker. It effectively states the broker will bear no financial consequence for any/all damages, awards, or costs (including attorney/court fees) even if the broker is at fault. (there is a backstop, at least in the US - "Gross Negligence" cannot be shifted, but that bar is extremely high).

Removing an indemnities section is not realistic. But the boilerplate language is so lopsided that it begs negotiation to reach a reasonable middle ground. But few brokerages are equipped to negotiate indemnities/liabilities without consulting their attorney. Likely they'd say "Sorry, we cannot change that language," perhaps citing insurance reasons.

My question is how successful have people been at negotiating these types of legal clauses in sales contracts? How many people have tried?

Peter

Currently attempting to negotiate language that puts broker and seller on level playing field. If not agreed to, will seek different broker who is more reasonable.