Buying or Selling a Boat? Read This.

Due to the pandemic, boat sales are up significantly this year. Before you buy or sell a boat, you should have a clear understanding of all your legal obligations, or risk running aground.

Unlike other areas of the law, boating law is specialized and may require legal counsel that is knowledgeable about the business of boats. Here are a few issues for consideration to help you navigate the open waters of boating law.

Buyer Beware: Preparation and Inspection Are Key

Many boat enthusiasts equate buying a boat with purchasing an automobile. While there are some similarities, the purchase and sale process can actually be as complex as purchasing a home. And, much like buying property, doing your research and understanding your options will help the process go more smoothly.

  • Consider the purpose of the boat. Will it be used purely for your recreation? Do you plan to use it in a lake or on the ocean? Is a power boat or sailboat more in keeping with your skill level and ability to operate?
  • Assess your options for type and age of craft and ownership structure. This will help you create a budget that factors in purchase price, registration fees, 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.
  • Hire your own marine surveyor to inspect the boat prior to purchase. Boats should be surveyed both in and out of the water, and all electronic equipment should be tested. Surveys and sea trials that turn up flaws or problems can either allow you to back out of the contract without penalty or can be used to renegotiate the purchase price of the boat.
  • Explore your financing options, if financing is needed. New and used boats are usually treated equally in terms of interest rates and down payments. However, if buying an older boat or one in disrepair, there may be additional financing obstacles. Lenders will set their own requirements related to the financing or ownership of a boat, but any loan should allow for prepayment without penalty.
  • Consider insurance. Massachusetts does not currently require boat 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. There are many different options for boat insurance coverage. We advise clients to buy their boat insurance from an agent knowledgeable in this area.
  • Get a Certificate of Title. All boats 14 feet or longer in length that use or are designed for a motor must be titled. The title should show that the and any lienholders have transferred and released their interest, respectively. If purchasing a new vessel, the buyer should obtain a boat builder’s certificate.
  • Register or document your boat. Any boat that is powered by a motor and operated on public waterways in Massachusetts must be registered. Recreational vessels are eligible to be documented through a federal registration system, if they are owned by a U.S. citizen and measure at least 5 tons. Note that documenting a boat does not exempt the owner from paying applicable state taxes.

Seller Smarts: What to Do Before Selling
If you are on the other side of a transaction as the boat seller, there are a few issues for you to consider in order to protect your asset and make the transaction go as smoothly as possible.

  • Assess the appearance, condition and seaworthiness of your boat and consider fixing or addressing any issues, as this will impact the sale price. Based on loan pay-off amount, if any, and improvements you may have made, establish a minimum price you are willing to accept for your boat.
  • Using a broker? If you use a broker, be sure to sign a brokerage agreement, which typically involves a 10% commission for the broker. If you sell the boat privately, you will be responsible for all the paperwork and legal matters.
  • Sign a contract and get a deposit. As the seller, you will want to get a deposit from the buyer and sign a purchase agreement. The contract should 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.
  • Sign a bill of sale. The bill of sale benefits both the buyer and seller, and should include the type and size of the boat, the registration number, the purchase price and date, the form of payment, and any equipment included in the purchase price.
  • Financing the purchase. Some sellers help finance the sale of their boats. If you are doing so, be sure that the amount being financed is properly documented, including the recording of a ship’s mortgage on the vessel being sold.

Clearly, boat ownership involves almost every aspect of the law. The issues can be complex. Retaining an experienced lawyer to help you navigate the unfamiliar legal waters of buying, selling and owning a boat can go a long way to ensuring a pleasant boating experience.

Jim Rudolph has owned several sail and power boats since he was eight years old. In addition to handling boat sales, he has considerable experience representing clients with warranty, boat defects and insurance claims, as well as in many other areas involving the sale and ownership of boats, marinas and boat dealerships.



STAY CONNECTED Sign Up to Get Interesting News and Updates Delivered to Your Inbox