FAQs About the Vessel Sale Process and Our Services
These FAQs are designed to address common concerns and questions potential buyers, sellers and other interested parties might have about the commercial vessel sales process.
Stage 1 FAQs - Identify Vessels to Buy
Common pitfalls include not thoroughly inspecting the vessel, overlooking regulatory compliance, misjudging the market value, and failing to get a good grasp on operational costs.
Market knowledge helps in understanding current pricing trends, availability of vessel types, and future market projections, which are crucial for making informed decisions.
S&P brokers facilitate the buying and selling of vessels by connecting buyers with sellers, providing market insights, and assisting with negotiations and transaction details.
Choose brokers based on their experience, client testimonials, industry reputation, and their understanding of the current maritime market. We can introduce you to well-vetted brokers who meet these criteria.
Well-established brokers typically have a strong track record, extensive network, positive client feedback, and are often recommended by industry professionals.
Ensuring that your broker has no conflicts of interest (such as undisclosed fee arrangements with both the buyer and seller) is crucial for getting unbiased advice and the best deals without compromising your interests.
A law firm can identify potential legal, regulatory, or financial issues early in the process and suggest solutions to ensure the sale proceeds smoothly.
When we’re asked to oversee a broker’s efforts, it often involves regularly checking in on their progress, and providing legal and practical guidance to facilitate the sale – which includes addressing and resolving any legal or regulatory issues that could impede the sale, thus increasing the likelihood of a successful transaction.
Stage 2 FAQs - Conducting Preliminary Due Diligence
Checking a vessel’s legal status involves investigating any potential legal issues that could impact your ability to purchase and use the vessel as intended, such as title problems, existing liens, and compliance with regulations.
A clean title means the vessel is free of unresolved claims or liens, ensuring that there are no legal barriers to transferring ownership to you.
Creditors may register liens on a vessel for services like fuel or supplies provided to the vessel; they often record these liens with the vessel's registrar to secure payment. To identify any recorded liens or encumbrances that could impact the vessel, a search of the registry must be conducted.
Maritime liens are claims made against a vessel for debts associated with its operation or maintenance. These liens can complicate the selling process and must be resolved prior to transferring ownership of the vessel.
Regulatory issues can include restrictions on who can own a vessel (for example, only citizens of certain countries), limitations on where it can be registered, and other compliance requirements that differ based on jurisdiction.
It depends on the laws of the country where the vessel is registered. Certain countries restrict vessel ownership based on citizenship. We assist in identifying these limitations and explore possible legal workarounds.
If a vessel or its owner is on an international sanctions blacklist, it may be illegal for you to engage in any transaction with them and could make you subject to government sanctions if you do so anyway.
Red flags can include frequent changes in ownership, registration in high-risk countries, or a history of sanctions, all of which might indicate legal or operational issues with the vessel.
Purchasing a vessel with undisclosed liens can lead to financial liabilities and legal disputes after a sale closes and could result in the court-ordered arrest of the vessel and its possible judicial sale to pay the outstanding liens.
If issues arise, we can advise on the legal implications and potential solutions, which might involve negotiating the sale terms or deciding against the purchase.
Stage 3 FAQs - Negotiating Sale Terms and Deposits
Yes! A Bill of Sale MAY confirm the transfer of ownership (if title is good and the sale has been properly authorized by the seller such as through duly executed corporate resolutions), but even if the Bill of Sale is valid, both buyer and seller may be exposed to significant risks without a detailed contract covering important aspects such as the condition of the vessel, specific warranties, and legal protections against claims or liens. Without a comprehensive contract, there is no formal agreement on matters like dispute resolution, compliance with regulations, or remedies for non-compliance. This can lead to misunderstandings, financial losses, and legal disputes if any issues arise after the sale, such as hidden defects, disputes over the terms of sale, or unmet expectations regarding the vessel’s condition and specifications. Always ensure a detailed purchase agreement is in place to protect your interests fully and legally.
A purchase agreement typically includes the sale price, payment terms, specifications of the vessel, delivery conditions, and legal clauses such as warranties, representations, and covenants to protect both parties.
Protective terms can include clauses on indemnification, limitation of liability, insurance requirements, and specific conditions under which the sale can be voided or renegotiated.
An escrow agreement ensures that the deposit and other payments are securely held and only released when certain agreed-upon conditions are met, protecting both the buyer’s and seller’s interests.
Typical covenants include the seller’s obligation to deliver the vessel free from encumbrances, with good title and in the agreed condition, and the buyer’s obligation to pay the agreed price according to the set schedule.
Setting up an escrow involves selecting an escrow agent to hold funds, defining the conditions under which the funds will be released, and drafting an agreement that details these processes, all services that our firm provides.
Common disputes arise over price, vessel condition, and compliance with specifications. These can be avoided through clear communication, thorough inspections, and detailed contracts.
If the vessel doesn’t meet agreed conditions, the purchase agreement should outline remedies, which can include repair obligations, price adjustments, or even contract termination.
Breaches of the contract typically trigger consequences outlined in the agreement, such as financial penalties, the right to terminate the contract, or obligations to rectify the breach.
Using a non-lawyer can lead to incomplete or incorrect documentation that may not comply with legal standards, potentially resulting in disputes, financial losses, or void transactions due to non-compliance with maritime laws.
Maritime law has specific practices and terminologies that require expertise in the field to ensure that contracts are legally sound and enforceable in maritime disputes.
Stage 4 FAQs - Inspecting Vessels To Buy
Conducting a thorough assessment ensures that the vessel aligns with your operational requirements, complies with regulatory guidelines and identifies any possible concerns that may affect safety or result in additional costs.
Neglecting a thorough assessment may result in acquiring a vessel with undisclosed defects, leading to unforeseen repair costs, safety hazards or non-compliance with regulations.
Typically, key experts include a marine surveyor, an engine specific mechanic and sometimes a naval architect or other technical specialists relevant to the specific circumstances.
Select a marine surveyor by considering their certifications, experience with comparable vessels and standing in the industry. If you're uncertain about whom to select, we can offer suggestions.
Verify their qualifications by reviewing their professional certifications, requesting references and confirming their status with relevant professional organizations like The Society of Accredited Marine Surveyors (SAMS).
The report should assess the overall condition of the vessel, including its structural integrity, the performance of its machinery and systems, any noted problems or required fixes, suggestions for meeting regulatory requirements, suitability for the buyer's intended use and valuation based on market standards.
To help ensure a comprehensive evaluation, it's important to hire experienced and certified experts, clearly define the scope of the assessment and bring in additional specialists if necessary.
Typical issues discovered during inspections include structural weaknesses, outdated or faulty equipment, non-compliance with safety regulations and indications of inadequate maintenance.
If a vessel does not meet your standards during inspection, you can consider renegotiating the terms of purchase, asking for repairs to be covered by the seller or backing out of the deal according to the agreed upon conditions.
Stage 5 FAQs - Funding the Purchase
Financing options include loans from marine financiers, traditional banks, private equity sources, and sometimes seller financing where the seller provides a loan directly to the buyer.
Qualification typically depends on your creditworthiness, the vessel’s value, its condition, and sometimes the intended use of the vessel. Lenders also consider your maritime experience and the projected income from the vessel.
Seller financing takes place when the seller provides credit to the buyer for part of the purchase price. Typically, this loan is secured by a mortgage on the vessel and involves prearranged repayment conditions. Benefits include more flexible repayment terms and easier qualification criteria than traditional bank loans, especially if the seller is motivated to sell.
A vessel mortgage refers to a lien that is placed on the title of the vessel, serving as security for the loan amount borrowed against the vessel. In case the borrower fails to meet their obligations, the lender has the right to take possession of and sell off the vessel in order to recoup the outstanding debt.
Yes, we can put you in touch with a variety of financial professionals who specialize in maritime lending, such as banks and private equity investors who have expertise in providing financing specifically for vessels.
This is a financing arrangement where you charter the vessel for a period with an option to purchase it from the owner at the end of the term, similar to a lease-to-own arrangement in real estate. This arrangement allows you to use the vessel while making payments and ultimately decide to purchase it, spreading out the financial burden over time.
A maritime attorney can examine and negotiate financing agreements, ensure adherence to maritime regulations and offer guidance on structuring financing in a manner that safeguards your interests.
Stage 6 FAQs - Forming Holding Company (Optional)
Coming soon...
Stage 7 FAQs - Preparing Closing Documents and Closing the Sale
Key closing documents include the Bill of Sale, corporate authorizations, a commercial invoice, an undertaking to effect flag deletion, any documents required to release liens, and the Protocol of Delivery and Acceptance.
This document is signed by both buyer and seller at the time of the physical handover of the vessel. It confirms that the buyer has inspected and accepted the vessel’s condition.
The commercial invoice provides a breakdown of the financial dealings related to the sale, covering aspects such as the selling price, adjustments, charges and payments made to settle any outstanding liens or obligations, much like a real estate closing statement.
Once all sale documents are signed and all conditions met, the escrow agent releases the funds to the seller, completing the financial transaction of the sale.
Possession is transferred after the buyer and seller execute the Protocol of Delivery and Acceptance, signifying that the buyer has inspected and accepted the vessel.
According to the usual terms of a vessel sale, the vessel should be in the same condition as it was during the buyer's final inspection, except for normal wear and tear. If this is not the case at delivery, it could mean that the seller is not meeting their obligations under the sales contract. Any issues should be resolved before both parties sign off on the Delivery and Acceptance Protocol. Possible actions include discussing repairs or changes to the terms of sale if needed.
Typically, the buyer's maritime attorney prepares the closing documents to ensure compliance with all legal requirements and protect the buyer’s interests. The attorney also coordinates signing of the closing documents, ensures legal compliance, holds escrow funds, and facilitates the smooth transfer of ownership.
Stage 8 FAQs - Registering the Vessel
More to come ...
Stage 9 FAQs - Exporting / Delivering the Vessel
More to come ...
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