Buying a Boat

J

J.R.

Guest
I and two others are contemplating purchasing a boat. The price range we are looking it is not great but, I have been wondering about the smartest way to engage in this transaction - should it happen. Question - What is the safest way for three non-related parties to enter into a purchase of a such an item? Looking specifically for any advise about forming a corporation etc. Any advise or opinions would be appreciated.
 
Can't comment on merits or otherwise of forming a Corporation but I've been involved in 2 successful boat arrangements and know of many others, so for what it's worth here's my view:-

1. Ensure as best as possible that your individual interests are understood in advance and can be accommodated. No use one wanting to use it exclusively for racing or fishing if others prefer to go cruising.

2. Tease out the entire proposal in great detail, to include method of purchase/financing, berthing arrangements, usage including whether it can be used by non-partners, maintenance schedules/ongoing enhancements (surprisingly expensive sometimes), how to share the usage, how to deal with accidents/breakages or any event which prevents another from taking his/her turn. Decide how major decisions are to be made - majority etc.

3. Draw up and agree a detailed budget. Boating is not cheap so assume that it'll cost more than you first think!

3. Consider all the situations where one or all might want to end the arrangement and agree what is acceptable - I know of a case where a partner became mentally ill and the others weren't free to dispose of the boat or plan any enhancements etc.

4. It might sound very formal but draw up a legal agreement. It's less to do with protecting your rights as you shouldn't be going into the arrangement if you can't trust your mates and you probably won't wish to sue them anyway. It's more about your individual commitment to taking the matter seriously.

5. The exercise is worthwhile even if it's only a cheap boat. If the arrangement works out, you'll be itching to upgrade in no time!

Happy boating!

Pat
 
Pat:
Yes - this is the type of "been there done that" advise I was looking for. How did you handle insurance in your case? Was it in one person's name or did it list all owners (this is where I was getting the idea of incorporation)? Did you go so far as setting up a separate account from which all fees / maintenance of the boat were drawn from? Thanks for your response!
 
Hi J.R.


Insurance. List the 'skippers'. You'll probably be asked to anyway and it'll make things a lot easier if there ever was a serious problem.

Re Bank account. We didn't have one on the basis that it's not about where the money is kept but how it's managed that's important. It doesn't mean you shouldn't open one though! Whichever way, appoint a Treasurer and decide how he/she is funded. Develop an annual budget and end-of-year accounts. Keep receipts. Provide for the possibility of unexpected expenditure. Work out a procedure for buying consumables (especially fuel, but also food and stuff if it's a cruising boat). Decide what to do if an individual has to spend money in an emergency - to replace a dud battery or to pay a mechanic. Breakages - "you break it, you replace it" works if it's a cup but not if the propellor falls off and disappears. Don't worry if you don't think of everything in advance. In fact trying to nail it all down tight can be off-putting. Sort out the main items and if the attitude is right you'll work it out as you go along.

Proof of ownership should be shown in some document that everybody has a copy of - your agreement, the original receipt if you buy new, etc.


And a few more things....
Allocating roles spreads the work and makes everyone feel involved. Also there's less confusion about whether something has been done or not. Everybody should be expected to pitch in for annual cleaning, painting, anti-fouling etc but one person might take primary responsibility for maintenance or as I've said, the accounts. Roles can be rotated if you wish.

If it's a boat you'll use individually, it's important that everybody understands what condition it should be left in. It's the small things that irritate most so agree for example to always put things back where they belong! Have a communication system for when you won't be back on time or if there is a problem.

It's largely common-sense and a little forethought!

Pat