Vessel Sales: Expert Guidance, Reduced Risk, Affordable Price
Protect yourself and avoid expensive mistakes with cost-effective expert guidance in every step of the commercial vessel sale process, from A to Z
Reduced Risk
Reliable techniques to help protect your interests.
Low Fixed Fees
Transparent pricing with fixed fees for most sales.
Global Reach
Worldwide capabilities with local support when needed.
Learn about the vessel sale process
A Step-by-Step Guide to Buying and Selling Commercial Vessels
This guide is designed for maritime entrepreneurs, the small businesses that are a critical part of the global shipping industry, operating vessels like tugs, barges, offshore support vessels, commercial fishing vessels, island-hopping ferries, or even commercial charter yachts. It’s tailored for those without the large financial resources or dedicated teams of experts that big maritime operators have to protect their interests.
There are ways to protect smaller operators in a cost-effective way. But first, you should understand the sale process outlined below.
Stage 1: Assess Needs and Conduct Vessel Search
The initial stage of the commercial sale process involves:
- Assessing your needs and vessel requirements,
- Determining a realistic budget, including purchase and ongoing costs,
- Searching for vessels that meet your criteria,
- Gathering preliminary information on potential vessels, and
- Conducting initial evaluations of shortlisted vessels.
Buyers typically engage vessel sale & purchase (S&P) brokers to find suitable vessels and guide them through the complexities of the commercial vessel sale process.
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How We Can Help
- Introduce you (if needed) to reputable vessel sale and purchase brokers
- Check for conflicts of interests
- Guide brokers on possible impediments to a sale and offer solutions
If you haven’t already identified a vessel to buy, we can introduce you to well-established and reputable vessel sale and purchase (S&P) brokers to help you find the right vessel. Brokers are a key part of the process, and we work hand-in-hand with them. Good ones should know the current state of the market and can assess market values to help you avoid overpaying. There are also bad brokers with conflicts of interest that you should avoid. We oversee the efforts of brokers and provide guidance when needed. Brokers don’t get paid if a sale doesn’t close so they usually welcome our work to remove potential sale closing obstacles.
Stage 2: Conduct Preliminary Due Diligence
Identify potential issues early, before time and money is spent on inspecting the vessel. At a minimum, preliminary due diligence should entail:
- Ordering and reviewing the vessel’s title abstract to determine if title is “clean”,
- Determining if liens are recorded against the vessel, and
- Assessing if there are regulatory issues that could impact the sale, including laws preventing certain citizens from owning particular vessels and preventing certain vessels from being re-flagged in a foreign registry.
This approach allows for early problem-solving and informed decision-making, possibly saving time and money in later stages of the process.
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- Check vessel ownership and registration history for red flags
- Assess whether the vessel’s title is clean
- Determine if there are recorded liens against the vessel
Stage 3: Negotiate Sale Terms and Deposit
After identifying a suitable vessel, it’s time to make an offer, subject to inspection. Three key documents in this phase are:
- LOI: An initial Letter of Intent outlining the basic terms and conditions of the sale, including conditions that must be satisfied before the deal is complete.
- MOA: After the parties sign the LOI, the agreed upon-upon terms from it are used as the foundation for a more comprehensive purchase and sale agreement, customarily named a Memorandum of Agreement, or MOA, for vessel sales.
- Escrow Agreement: This agreement provides for the tender of a deposit (typically 10% of the purchase price) to an escrow account and clearly outlines the conditions for release of funds.
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How We Can Help
- Negotiate sale terms
- Draft the contract of sale and escrow agreement
- Manage escrow arrangements for the deposit
The core service we offer is to negotiate sale terms and draft the purchase agreement and related sale documents such as an escrow agreement for holding a deposit. These documents cover key deal points such as price, payment terms and vessel delivery conditions, but also include covenants, representations and warranties clauses to protect your interests. Our sale contracts are designed to be thorough and clear, minimizing the potential for disputes and safeguarding your interests. Our escrow agreements detail how funds are to be held and released – a critical step that protects both buyer and seller.
Maritime law is a specialized field with unique terminology and nuances from centuries-old customary practices that are generally not known by non-maritime lawyers. Negotiating and drafting maritime-related contracts should only be performed by a maritime attorney with commercial transactions experience. Because the maritime industry is global, we advise clients on applicable international standards such as the International Tonnage Convention. But insight into local and flag-state regulations is often needed. In these situations, we draw upon our worldwide network for assistance with specific local requirements.
Stage 4: Inspect the Vessel
Conduct a full evaluation of the vessel’s condition and performance to ensure it meets your standards and regulatory requirements. This should be done with the assistance of a qualified marine surveyor, a mechanic with expertise in the vessel’s particular engine and possibly other technical experts. Steps in this process include:
- Appointing a qualified marine surveyor and additional technical experts, as needed
- Conducting a comprehensive vessel inspection
- Arranging and conducting a sea trial
- Analyzing inspection and sea trial results
- Planning next steps, including potential negotiations or repairs
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How We Can Help
- Introduce you (if necessary) to qualified vessel inspection experts (marine surveyors, mechanics, etc.)
- Interpret results and advise on next steps
- Negotiate based on findings
- Identify and mitigate legal risks
One of the most important things you should do when buying a vessel is select qualified technical experts to help you evaluate vessels to buy. We regularly work with highly qualified experts and can introduce you to them. Whether you need a marine surveyor, engine specialist, naval architect, or other technical expert, we’ll guide you in selecting them and we’ll oversee their work. If you already have experts in mind to help you assess a vessel during your pre-purchase inspection, we can help you determine whether they are properly qualified and are looking out for your best interests.
Stage 5: Fund the Purchase
If you’re not self funding the purchase, secure a loan from a marine financier, which could be a traditional bank or sources of private equity. Some vessel owners may also be willing to owner-finance part of the purchase, with deferred payments secured by a mortgage on the vessel. Key steps in this process include:
- Determining financing needs
- Exploring options (traditional lenders, private investors, seller financing)
- Negotiating financing terms and entering into financing documents
By carefully navigating this financing stage, buyers can secure the necessary funds to complete the vessel purchase while ensuring that the terms align with their financial capabilities and long-term plans for the vessel.
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How We Can Help
- Introduce (if needed) buyers to marine financiers
- Negotiate financing terms
- Draft and/or review financing documents (vessel mortgages, promissory notes, etc.)
- Structure seller financing.
If financing is needed, we can introduce you to financiers such as banks and private investors who are willing to fund vessel purchases (which most traditional lenders won’t do). We negotiate financing terms, draft or review financing documents and also structure solutions for when a seller is willing to finance part of the sale. This could be done through a loan secured by a vessel mortgage or the use of a bareboat charter with an option to purchase (essentially the maritime equivalent of “lease-to-own” real estate financing).
Stage 6: Form Holding Company (Optional)
Smaller maritime businesses often conduct operations and hold vessel ownership in the same entity, which isn’t ideal. The standard practice of larger shipping companies is to hold title in a separate entity, which offers several key benefits:
- Isolating the vessel in a separate entity can shield it from liabilities arising from operational activities.
- Operational risks are contained within the operating company, protecting the valuable vessel asset.
- It’s easier to sell or refinance individual vessels when they’re held in separate entities.
This approach allows smaller operators to benefit from improved asset protection just like the big players — and it can be done in an affordable way.
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How We Can Help
We can assist in forming a company to hold title to the vessel, including:
- Advising on an entity type (LLC, corporation, etc.) based on the buyer’s needs
- Analyzing and selecting favorable jurisdictions for vessel ownership
- Handling the entity formation process, including document filing and drafting agreements
- Ensuring compliance with maritime regulations and flag state requirements
- Structuring the entity to maximize asset protection
- Establishing procedures for vessel management within the new structure (such as through a bareboat charter of the vessel to the operating company)
We can create a robust legal structure that protects assets, complies with laws, and provides a solid foundation for your vessel ownership and operation.
Stage 7: Prepare Closing Documents and Close the Sale
In the closing phase of a commercial vessel sale, closing documents are prepared, including the Bill of Sale, corporate authorizations, regulatory filings, and a commercial invoice. Marine insurance is also arranged to cover the vessel from the moment of title transfer.
On closing day, the buyer conducts a final walkthrough inspection. If the vessel’s condition is satisfactory, parties sign and exchange closing documents. Funds are released from escrow, and title passes to the buyer. The buyer receives all documentation needed for vessel registration.
There are also post-closing matters to handle, such as filing the Bill of Sale with the vessel’s registry and requesting deletion of the previous registration.
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How We Can Help
We handle the closing process. Here’s some of what we can do to help:
- Document Preparation: We draft and review all necessary closing documents and ensure they are properly executed.
- Insurance Verification: We confirm that marine insurance coverage is in place from the moment of title transfer.
- Final Inspection Guidance: We advise on the final walkthrough inspection, helping to identify any discrepancies that could affect the closing.
- Closing Coordination: We oversee the closing process, ensuring all documents are properly signed and exchanged, and that funds are released from escrow correctly.
- Title Transfer: We confirm that title is properly transferred to the buyer and that all necessary documentation for vessel registration is received.
- Post-Closing Matters: We handle important post-closing tasks such as filing the Bill of Sale with the vessel’s registry and requesting deletion of the previous registration.
Engaging us to handle this crucial stage helps ensure a smooth, legally compliant transfer of ownership, minimizing risks and potential future legal issues.
Stage 8: Register the Vessel
After the sale is finalized, the vessel must be registered. When selecting a registry, consider factors such as the legal and tax environment, reputation, and regulatory requirements of the flag state. Keep in mind that not all registries are equal. Some registries with demanding acceptance requirements and high costs will not be an option for many buyers of second-hand vessels.
Some buyers may be tempted to choose a registry solely because it charges low registration fees but such registries are usually on the lower end of the spectrum and come with their own problems – such as increased risk of vessels in their registry being subject to Port State Control inspections. For more details, read our blog post entitled “Never Buy a Vessel Before Confirming that a Registry Will Accept It“.
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How We Can Help
- Assist buyers in selecting a vessel registry and, if applicable, a classification society
- Obtain technical and other information needed to re-register and re-class a vessel
- Prepare and submit applications and supporting documents
- Coordinate registry and class inspections of the vessel
- Assess vessel inspection reports
- Guide owners in satisfying the requirements of the registry and classification society (including mandated repairs)
Buyers often need assistance in re-registering a newly purchased vessel and possibly changing the vessel’s flag. We facilitate the transfer of ownership and registration changes. We encourage buyers, well in advance of the closing, to pre-clear registration changes with the registry they choose to avoid expensive surprises and minimize delays. Registries have many requirements that usually require a lot of back-and-forth exchanges between our team and the registry to meet those requirements. Registries and classification societies will typically require the owner to make repairs/upgrades to the vessel following their inspection and we oversee this process to help ensure that such requirements are satisfied.
Stage 9: Export / Deliver the Vessel
After the vessel purchase is finalized and at least temporary registration is in place, the next step involves arranging delivery of the vessel to the buyer and potentially exporting it out of the country where it was sold. Often the buyer’s crew attends to delivery matters but sometimes third-party delivery services are engaged to sail the vessel to the buyer’s desired location.
Either way, it is important to comply with laws that control vessel operations. Buyers who desire to sail their new vessel to a foreign port often underestimate the process of obtaining necessary approvals for their vessel to sail foreign — particularly when the U.S. Coast Guard is involved. Proper planning and coordination with experienced professionals can help mitigate risks and ensure a smooth transition to the vessel’s new home port.
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How We Can Help
- Advise owners on compliance with regulations to sail to a foreign destination
- Negotiate with the Coast Guard and other authorities to remove obstacles to sail foreign waters
- Work with customs officials to obtain clearances to depart port
- Introduce owners, if necessary, to delivery crew services
- Draft vessel delivery contracts
New vessel owners sometimes find it difficult to obtain required approvals for their vessel to clear out of one country and sail to another. These authorities frequently encounter owners (usually with sub-standard vessels) who try to conceal problems and skirt regulations. Such authorities are always on alert to stop such efforts and often take a hard, unyielding stance when dealing directly with certain owners. As a result, such owners are sometimes required to do things like make costly and time-consuming repairs. But we find that when our team gets involved, these previously hardline authorities are more cooperative and are open to considering sensible, practical and cost-effective alternatives. After authorities allow a vessel to sail, sometimes owners must hire a delivery crew to sail the vessel to the buyer’s chosen destination. We can introduce owners to competent delivery crews if needed.
This guide is a general overview of the steps involved in the commercial vessel sale process. Each transaction is unique, and the guidance of experts in maritime law and other fields is crucial to navigate the complexities of maritime transactions effectively. Visit our Learning Center for more information including FAQs, blog posts, and our “War Stories” page with examples of actual, costly mistakes that even experienced maritime operators made in the vessel sale process.
![Lessons Learned Never finalize a vessel purchase without a clear understanding of the costs to make it operational. Repair costs can significantly impact the overall investment. [Learn More] Background A client, intent on quickly purchasing a tugboat, was prepared to proceed without obtaining cost estimates for necessary repairs. The tugboat had been out of service for years, and while the purchase price seemed reasonable, the cost of making it operational was unknown. The Challenge Proceeding without a clear understanding of repair costs risked turning what seemed like a good deal into a financial quagmire. Action Taken We insisted that the client obtain detailed repair estimates before finalizing the purchase, highlighting the financial risks of proceeding blindly. Outcome The repair estimates revealed that the costs to make the tug operational were nearly as high as the purchase price itself, leading the client to reconsider the purchase. Conclusion The client's decision to seek detailed repair estimates averted a potentially ruinous investment, underscoring the importance of thorough financial planning in vessel acquisition.](https://vesselsales.law/wp-content/uploads/2024/02/P0P9WD-scaled.jpg)
Testimonials
What vessel buyers, seller, brokers and others have said about us ...
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Vessel Sale Closing Services
From the initial stages of finding a vessel to buy to its delivery to the buyer, Aegis Maritime Law can help in every stage of the vessel sale process. Choosing us means partnering with a law firm that understands the needs of maritime entrepreneurs and is dedicated to supporting them. We offer the guidance, security and protection you need to close your sale the right way.
Stage 1: Help With Finding Vessels to Buy
We can introduce you to reputable S&P brokers, check for conflicts of interest, guide brokers on potential sale problems (and how to fix them) and negotiate with non-broker intermediaries on commission matters.
Stage 2: Conduct Preliminary Due Diligence
We check a vessel's ownership and registration history for red flags, assess whether its title is clean, determine whether there are recorded liens against the vessel and assess possible ownership and export restrictions.
Stage 3: Negotiate Sale Terms and Deposits
We negotiate terms, draft the contract of sale and escrow agreement, and tailor our contracts for your unique situation.
Stage 4: Guide the Vessel Inspection Process
We can introduce you to qualified vessel inspection experts (marine surveyors, mechanics, etc.), check experts for conflicts of interest and assess inspection reports for legal issues.
Stage 5: Structure Vessel Financing
We can introduce you to marine lenders (banks, private equity, etc.), draft financing documents and structure owner financing arrangements.
Stage 6: Form Title Holding Companies
We form special purpose companies to hold title to a vessel, providing owners with asset protection benefits.
Stage 7: Prepare Closing Documents and Close the Sale
We prepare all sale closing documents, confirm that maritime liens have been paid, manage funds held in escrow and coordinate the closing process.
Stage 8: Register the Vessel
We assist buyers in selecting a vessel registry, prepare and submit registration applications, coordinate flag and class inspections, and guide owners in satisfying registry requirements.
Stage 9: Export the Vessel
We advise vessel owners on how to comply with regulations to sail foreign, negotiate with the Coast Guard to remove obstacles to sailing foreign, work with customs officials to obtain clearance to sail. We handle the process to obtain MARAD approval of certain sales. If needed, we can also introduce owners to vessel delivery services and draft delivery contracts.
Other Services
Our focus is on commercial vessel sales but we can also handle other commercial maritime transactions such as: * Charter Agreements (Charter Parties) * Vessel Management Agreements * Towing Agreements * Manning Agreements and Crew Contracts * Any other type of maritime-related contract
We offer more!
Third-Party Support Services
Recognizing the multi-faceted nature of vessel sales, Aegis Maritime Law collaborates with a network of trusted professionals to provide end-to-end solutions.
Vessel Sale & Purchase Brokers
We've seen many sales fall apart because too many intermediaries are involved in the sale and pile on excessive commissions. After working with many brokers over the years, we know the difference between true brokers who provide a valuable service to their clients by actively facilitating sales, and non-broker intermediaries who merely make introductions and tend to get in the way of sales -- what many in the industry refer to as "joker brokers." We can steer you in the right direction by introducing you to highly reputable and well-established brokerages to help you find the right vessel for your needs
Technical Experts (Marine Surveyors, Mechanics, etc.)
One of the most important things a buyer can do is obtain an accurate understanding of a vessel's condition, what is required to put the vessel into service and whether it is right for the buyer's intended use. Technical experts such as marine surveyors, engine mechanics, naval architects and others play a critical role in such assessments. Because we work with many highly qualified experts across the world, know the quality of their work and their fee structure, we are able to recommend the right expert for your situation.
Marine Insurance Brokers
Marine insurance is unique and is arranged by marine insurance brokers. Good ones should have solid contacts in the world's leading marine insurance market in London. They can arrange Protection & Indemnity (P&I) coverage to protect against maritime-related liabilities and Hull & Machinery (H&M) coverage for damage to the insured's vessel. If you need a marine insurance broker, we can help you find one to arrange the right coverage for you and at a price that's within your budget.
Maritime Financiers
Most of our clients self fund their vessel purchases but occasionally a client needs to finance part of the purchase. We can introduce you to marine lenders, both traditional lenders like banks and private equity sources including individuals who are interested in investing in maritime operations.
Vessel Delivery Crews
Immediately after a sale closes, some clients put their crew on the vessel to sail it out of port. But other clients need a crew to deliver the vessel to the buyer's location. We can introduce you to highly experienced delivery crews who are available to sail your vessel anywhere in the world. We can also point you to heavy lift services for deliveries over long distances.
Vessel Repossession Specialist
When vessel sellers self-finance part of a buyer's purchase, such financiers occasionally need to repossess the vessel if the new owner defaults on financing terms. Our team leader has over 25 years of ship repossession experience and handles the logistics of repos through his company, Vessel Extractions, LLC (www.vesselextractions.com), which is perhaps the world's most widely known ship repossession specialist company.
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Learning Center
Learn more about the full process of commercial vessel sales, from finding a vessel to its delivery.
Who We Are
World-Class Vessel Sale Guidance, Cost-Effective Results
Our team is led by Michael Bono, a seasoned maritime attorney with over 30 years of experience. As a former operator of a 5,000-ton freighter in the Caribbean trade, Michael combines practical maritime experience with legal acumen and a team of highly networked experts to navigate the complexities of buying, selling, and managing commercial vessels around the world. Our mission is to provide expert guidance in the sale process at an affordable, predicable cost to help maritime entrepreneurs avoid expensive mistakes that we repeatedly see happen in vessel sales.
