Sharing your yacht with friends, family or trusted business partners can prove to be a cost effective way of ‘having your cake and eating it to’. It’s fair to say that generally your purchase will be emotional and involve a dream. However, every purchase has a cost point where your wishes and reality intersect and this should be considered. Depending on your needs or time restrictions, if sharing is something you would consider, then using a shared ownership model may make your dreams more achievable and at a cost that will be reasonable. Where once individual ownership was considered the norm, a shift in shared ownership through a syndicate agreement has become more common, especially in the larger superyacht sector.
Three options are available to manage your yacht syndicate scheme. The first is where you pay for a management team to run the whole operation. The second, being the do-it-yourself approach or third a hybrid of both. In considering which approach is the best there are many considerations from; the size of your vessel; cost of a management team; your time availability; and most importantly your own experience and how much control you are prepared to relinquish. All of these factors and more will play an important part in your decision-making process. Either way, it is fair to say that having good legal advice on board should be high on the list of considerations in guiding you in your options. I believe the starting place for deciding which path you choose is considering your experience both on and off the water.
For those lucky enough to have had many years of experience starting with the small motor or sailboat progressing through to larger second hand vessels and finally the commissioning of a new build, this will have provided a solid starting point with respect to understanding what is required to manage your own yacht and a syndicate but more importantly, your limitations. If there is any one thing that humbles even the most successful business person, it’s enduring nature’s elements on a yacht. In essence, the idea of a self-managed yacht is that once you get your friends on board, you can hire the best crew, and the best captain, which means the best experience for you and your friends. This private agreement relies on trust between the owners and on good personal relationships.
In line with this view, my experience has been typical that owners know each other prior to entering into an agreement but as we all know, close personal relationships can fail. With significant assets tied up in the relationship, costly disputes can arise. And while the self-managed scheme certainly reduces the annual spend by splitting costs between several parties, joint-ownership can be a risky venture. It is therefore essential, like any contractual relationship, that all parties know exactly what they are signing up for from the outset, while also recognising above all else, owning a yacht should be above everything else enjoyable.
The Maintenance of Enjoyment
If a well written, thought out and most importantly well-understood contract is in place disputes are less likely to arise. The idea is not to have a lengthily long-winded contract that nobody reads but to put on paper the actual agreement as understood between the parties. This point cannot be overstated, as the contract can be likened to a ship’s chart that shows the way. The contract needs to be fair, well balanced and easy to follow for all parties. If this is achieved apart from the original drafter there should be no need for the partners to get their own legal advice. If however, the relationship does break down the agreement should serve as a helping hand to guide the owners to an amicable resolution with clear pathways to issues such as how a share is sold or how expenses are considered at the point of separation, just like any transfer of an asset.
Whilst I understand the principle of keeping-it-simple and concede that many contracts are unnecessarily wordy, as a lawyer I cannot advocate strongly enough for a well-written contract that covers all required bases. Unnecessary complexity can be removed by carefully listening to what is actually required in the agreement and an acceptance of the limitations of the agreement by the owner. However, as with all contractual rights they never completely fool proof and can be manipulated if the personal relationship between parties becomes bitter. Risk can be reduced but never completely removed.
But what if you do not have the luxury of years of experience can a self-managed syndicate work? The answer can be yes if you are prepared to accept advice from knowledgeable people in the marine industry. So for all intents and purposes while you may be at the helm you will be well supported with the main consideration being the cost of this support. At the end of the day this pathway allows you as the owner to decide such things as; the design and fit-out of the new build; who the captain and crew will be; what share of the vessel you will control; how many co-owners will come onboard; and most importantly the rules and how the yacht will be shared. In essence, the owner gets to design what this hybrid looks like and how it will be implemented.
Apart from experience, a significant limiting factor in self-management may be access to time, as it seems that being time poor is pretty common these days. In this case, a commercial syndicate may be the best option as they do the hard work for you, thus reducing your time and energy required in all areas of management. The boat syndicate company will do all the heavy lifting for you from arranging the rules through to owner’s rights, legal agreements, importing, purchasing and maintenance. However, this service comes at a cost to the owners. As is often the case, this is well earned especially when considering such difficulties beyond the initial and general running of the yacht such as weathering international complexities when voyaging overseas.
A clear example of where the commercial approach provides the owners with much solace is in respect to the planning and implementation of international voyages as in recent times this has become even more difficult and complex. Considering the heightened threats of the modern pirate through to the changes in customs reporting requirements as a result of anti-terrorism laws, more stringent entry laws such as visas and custom’s law have become commonplace especially when shipping a vessel into foreign territories. In the past an owner could have remained anonymous due to assurances were given by the shipping agent. However, this is not the case anymore.
Owning a boat, regardless of contractual agreements, has a sole purpose and that is enjoyment. The idea of boat syndicates, in whatever shape it may come, is to make available this enjoyment of owning a yacht available to more than just a sole owner. While boat syndicates most certainly cause headaches for lawyers, its ever-increasing importance in the maritime industry should not be understated. The importance of a well-drafted contract that describes this agreement is paramount. Nevertheless, contracts no matter how well drafted only serve to protect syndicate members to a certain point. While good commercial syndicates should offer the support owners need to navigate through the complex waters of regulations and laws. Owners in private agreements do not have this luxury and it is essential that these syndicates have the support they need to enjoy their yacht.
Owning a boat can be seen as an exercise in expense. On top of the hefty purchase price, there are the costs of fuel, the marina, storage or transportation fees, registration, insurance, and the seemingly endless upkeep and maintenance costs to consider. On average a boat in Australia is taken out just 14 days per year, trying to justify these ongoing expenses can be quite a challenge. Therefore, considering options such as a yacht syndicate scheme may mitigate some of these costs but not at the expense of the wonderful and rewarding experiences that come with boat ownership.