Quentin Bargate and Dominic Bulfin examine the key considerations of acquiring a superyacht in Superyacht Investor
This article was originally published in Superyacht Investor and can be accessed here.
Quentin Bargate, CEO and head of the Firm’s Superyacht group. He is an expert in yacht contracts and other commercial contract work.
Dominic Bulfin, Associate in the Firm’s Superyacht group based in London. Dom advises owners and their representatives on all aspects of superyacht ownership and management.
Acquiring a superyacht: what you should consider first
Owning a superyacht is an aspiration for many of the planet’s elite, and one which is achievable for most, Quentin Bargate, CEO of the law firm Bargate Murray Ltd, and Dominic Bulfin, solicitor with the law firm write.
However, in a world where financial transparency and environmental responsibility are treated with ever increasing importance, there is far more to consider when buying a superyacht today. Much more than than size and design that counted most just a few years ago.
At the 2019 Monaco Yacht Show, the writers attended conferences, such as the Mare Forum, where the sense from industry stakeholders that the need for real change to embrace the environment was palpable.
And change is happening – all-electric or hybrid pleasure craft are now viable alternatives to those using traditional fuels. Many of the industry’s best-known builders are not only supporting green initiatives but changing the way their projects are designed and constructed to lessen the lifetime environmental impact of each vessel.
This is still in its infancy, but you only have to look at Feadship’s Savannah and, more recently, Oceanco’s Bravo Eugenia to see that the industry is, at least, heading in the right direction.
How do you plan to use the yacht?
Having a good understanding of how you intend to use your yacht is vital at the outset of any superyacht purchase, as this will impact everything from the ownership structure, registration, running costs, day-to-day management and tax planning, to name but a few. Changing your mind about any of these factors at a later date can give rise to issues which may be costly to resolve.
Serious consideration should be given to how often you will realistically use your yacht, and what you want to do with it when you are not onboard. For some owners the idea of anybody using their yacht without them is out of the question, some may be willing to let friends and family use the boat, whilst having reservations about third-party charter. Others will look to offset as much of the cost of ownership as possible by working their yacht hard during the charter season.
There is no right or wrong way, but planning ahead is vital so that you can ensure the level of access to the yacht you want, and make sure you do not fall foul of the authorities, in particular, customs officials.
How will you finance your purchase?
For as long as there have been superyachts there have been myriad ownership structures and finance options available to potential buyers. Whilst outright ownership through a cash purchase is the most straightforward and, seemingly, obvious way to buy a yacht, cash-flow considerations, limitation of liability and fiscal planning lead many prospective superyacht owners towards bank finance and indirect beneficial ownership.
Most European-based international banks cater for the superyacht market, however we at Bargate Murray have seen prospective owners struggle to access such finance in recent times. Whether this is down to a reduced appetite for risk by the banks, the imposition of financial sanctions leaving certain borrowers in the cold or simply that the target yacht does not fit within the bank’s lending parameters is often not clear. It is not a given that prospective buyers will always have the access to bank finance which they may have come to expect in their day-to-day business.
Turning to ownership structures, the best- known to many was the now-defunct Maltese leasing scheme which the EU Commission ultimately deemed to operate contrary to EU tax laws.
Today, however, there are approved ‘rental solutions’ available, such as those offered by Dominion Marine in Monaco and Cyprus. Under these structures VAT on the hull’s value is paid, but rather than a lump sum at the start, the owner’s VAT liability is spread throughout the period of ownership.
How will your yacht be managed?
No matter how large your luxury yacht is, some level of external management will be necessary.
Whether you opt for a one-stop-shop with one of the larger providers, spread the various management tasks around different specialists, or employ your own team will depend largely on personal preference, budget considerations, how many yachts you own and how you plan to use them.
With so many providers offering yacht-management services, it can be difficult to know where to start. Word of mouth is a great tool and, if you were drawn to yachting after spending time on someone else’s boat, you could do worse than to ask for a recommendation from an owner with experience.
Employing the right specialists for you will pay dividends throughout your period of ownership and allow you to do the one thing you set out to do – enjoy life on the ocean wave.