Articles

Boat Purchase 101 - Technical Due Diligence

Thursday, January 18, 2018

Buying a boat (or any major asset for that matter) without undertaking due diligence is exactly like reality shows where the participants either get married or go on blind dates with someone they have never met before.  Sometimes things pan out and we are stoked for them, but more often than not we sit glued to the television waiting for the inevitable train-wreck to unfold.

The importance of due diligence cannot be overstated; a little bit of time and money spent prior to purchasing a boat should (but not always) save a lot of time, frustration and money if she turns out to be other than advertised.

The essential purpose of due diligence as distinct from 'tyre kicking' is to assess whether what you see is what you will get at the end of the day.

The scope of the due diligence exercise will depend on a number of factors including (a) size, age and complexity of the vessel (you are unlikely to do the same due diligence on a runabout as compared to a AHTS vessel), (b) how much is being spent and (c) vessel ownership experience.

Due diligence in the context of a boat purchase is generally split into the technical, and legal side. In this article we will very briefly discuss some aspects of technical due diligence.

Technical Due Diligence

Realistically the main aim of technical due diligence is to investigate how well she has been maintained and how long it will be before you are going to have to tip some cash into repair/replacement of machinery and/or equipment and/or the vessel itself.

Dependent on the type of vessel being purchased, technical due diligence may comprise a combination of desk based and/or physical survey, both of which should be conducted by someone experienced in the area such as a registered surveyor or similar specialist.

The desk based exercise will consider her technical and statutory/convention documents ie logbooks, Class Certificates, Stability Book, CSR, GA, MTOP suite etc and try to minimise any surprises ie engine logbook is missing and no idea as to her maintenance schedule or whether there are recommendations from Class that require remediation etc and the list goes on.

A purchaser would be well advised to at the very least engage a recognised/registered surveyor to provide a pre-purchase inspection/condition survey.  It is suggested that the surveyor engaged has the appropriate recognition (qualification/experience) for the type of vessel being bought/built ie do not engage a surveyor who specialises in wood vessels when you are buying one constructed in steel (common sense really!).

The outcome of the survey may reveal a well-maintained vessel or uncover additional lines of enquiry which could either serve to assist in a decision to proceed with or walk away from the deal or arguably provide leverage to negotiate a reduction in sales price.

It is imperative to ensure that the sale and purchase agreement provide the ability to undertake due diligence in the form of both a sea-trial and condition survey (which should include both the documentary and physical survey aspects discussed in this article) and legal due diligence (discussed in an upcoming article titled Boat Purchase 101: Legal Due Diligence).

This article is not intended to be relied upon as legal advice, but rather to highlight some important areas that should be considered when purchasing a vessel. If you are considering a vessel purchase feel free to contact us and we will be more than happy to assist.

Please kindly direct any enquiries to:

Forrester Grant on (09) 966 3611 (fgrant@mcveaghfleming.co.nz)

© McVeagh Fleming 2018

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.

Recent Posts


Tags

Financial services provider (FSP) Tamarapa v Byerley Frustration Deceased's wishes Valid wills Validity of Wills Protector Six years Personal Ministry Protection Order Fair share Constructive trusts Violence Landlord Acknowledgment Wills Act 2007 Section 14 Family Protection Act 1955 Visa application Tenants Gifts Marriage Tenant Employment Compensation Vessel survey Testamentary Promises Ilott v Mitson 2017 UKSC 17 Psychological abuse Commercial Law Interpretation Act 1999 Section 29 Resident Visa Immigration New Zealand Maritime Lien Case Study Due Diligence Commercial Property Reckless Trading Financial services Charities ''Best Endeavours'' Abuse Section 182 Family Proceedings Act 1980 Property Residential Erceg v Erceg Part payment Executors duty Financial products SN v MN [2017] NZCA 289 Will Limitation Act 1950 Lease Property (Relationships) Act 1976 Contract Law KiwiSaver Limitation Act 2010 Temper Beneficiary Rights Litigation Amundson v Raos Clayton case Seperation Health and Safety Reform Bill Rest Home Subsidies Gifting Trusts Auckland Office Sale of Goods Limitation defence Broadbent v Ministry of Social Development Section 15 Anti-money laundering (AML) Character requirements Civil union Lump sum Commercial Legislation update Division of Functions Partnership based work visa Document Disclosure Loss of income Verbal abuse Personal Properties and Securities Act 1999 Trust Check Up Skilled migrant points Relationship Property Consumer credit contracts Privacy Act 1993 Terms of Trade Asset Protection Maritime Law Murrell v Hamilton Partner of resident Skilled migrant Testamentary writing Break up Resident Mortgagee Repayment Domestic violence Undue influence Mortgagor Recovery of money Elder Law Ship Registration Will that do Intellectual Property Ship Wills Act 2007 Invalid wills Financial Advisers Act 2008 Directors' Duties Estate Administration Lankow v Rose Income Re Estate of Campbell Economic disadvantage Hawkes Bay Trustee Company Limited v Judd Claims against estates Insurance Administrators duty Pattern of offending Wills WINZ Family Trusts Company Law Domestic Violence Act 1995 Interpretation of documents Charity Testamentary capacity Trusts Bill Unfair contract terms White v White Work and Income Albany Office Principal De facto Ministry of Social Development Credit Contracts and Consumer Finance Act 2003 (CCCFA) Testamentary freedom Living standards Section 15A Limitation period Trustee Duties Lease Titles Wills Act 2007 Section 8 Wilson v Donnellan Interpretation Act 1999 SMC Offending Expression of interest Trust busting Wills Act 2007 Section 11 Business Vessel Sale and Purchase Duress Immigration Vessel surveyor Re Estate of Feron Companies Act 1993 Fair Trading Act 1986 Changes Eviction Creating Trusts Shareholders' Agreement Charity begins at home Twelve years Blackwell v Hollings Subsidies Mortgage Zero Hour Contracts Grey Power Physical abuse Interest Acknowledgment of Debt Contract and Commercial Law Act 2017 Financial Markets Conduct Act 2013 (FMCA) Trust Confidentiality Body Corporate Ship's Mortgage

Archive