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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.

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