Maritime | Yacht Sale & Purchase | New Build Yachts

The Negotiation Stage

During the initial stage of negotiations the parties should seek to form a proper understanding of all matters pertinent to the commissioning of the yacht. Consideration should be given to the time period which the yard will employ in the process of building the yacht, payment terms, as well as the quality of the product and service expected. Safeguards should be provided in order to ensure a correct and punctual performance of the obligations undertaken by the parties.

The buyer, with the assistance of professional legal and technical experts, is advised to carefully analyse the terms of his agreement with the builder.We at M. Demajo Maritime endorse the legal and practical knowledge to support the buyer throughout the process of acquisition of a yacht and take a hands-on approach at planning and managing the process of finalising the transaction with the builder and of setting up the appropriate ownership and fiscal structure for the yacht.

Adequate ownership structures which provide for tax efficient solutions are to be considered at these initial stages in order to ensure smooth finalisation of the procedures involved, allowing the owner the ultimate use and enjoyment of the yacht.

In this context, a significant issue is the desired choice of nationality to be attributed to the yacht. The Malta flag allows for the provisional non-operational registration of a yacht under construction. The Maltese Registry also enables the registration of a mortgage as a form of security on the financing of the asset to be registered in favour of the creditors/ financiers of the yacht, ensuring peace of mind to all parties.

The Yacht Building Contract

It is common for yacht builders to offer standard contracts with standard terms and conditions, it is for this reason that prospective yacht owners should analyse carefully the terms and conditions found in the contract of build and protect their position.

One should pay proper consideration to the lengthy period of time which is normally expected for the performance of the contract, leading to a significant impact on the manner in which all the terms and conditions of the contract are executed.

The considerable time frame for the construction of a yacht gives rise to greater possibility of risks and the occurrence of any supervening events which could essentially alter the original intentions of the parties. It is for this reason that the contractual obligations of the parties should be tailored accordingly.

The two main risks which new build contracts bring forth include: the risk of partial or total destruction of the yacht before delivery and the financial embarrassment or bankruptcy of any party at any time during the building process.

It is important that the prospective owner ensures that the yard chosen has adequate insurance cover, financial stability and is duly certified/classed to be able to fulfil its obligation to deliver the yacht in time, and that all parties are well aware that any issue of non-conformity could result in the rejection of the whole project.


When an order is made for the construction of a yacht which is obviously not yet in existence, the purchase is one which relates to a future good. In this respect it takes little imagination to realise that the object for which the purchase has been finalised is in effect not yet complete. Legally no sale is effectively final and possible at this stage but an agreement to sell is placed into effect. The passing of the property will not take place until and unless the completion and transfer of the project.

Most new build contracts deal with the passing of the risk prior to delivery of the yacht from the yard to the buyer once the yacht has been completed, regardless of when the property passes. In standard legal terms the period of delivery of the yacht is the one which significantly gives effect to the passing of risk from the builder to the buyer. When the contract of build has been completed entirely and the buyer accepts delivery of the yacht, their agreement is ratified through the signing of a protocol of delivery and acceptance and title of ownership over the yacht at that instance passes from the builder to the buyer.

Before final delivery of the yacht and payment of the last instalment the owner should ensure that the yacht is in line with what has been contracted and this through the commissioning of surveys, examinations and sea trials.

The yard should provide the owner with the yacht’s Builder’s Certificate and all CE Declarations of Conformity which are necessary documents of proof for the flag State which ensure that the recognised EU standards have been maintained.

The acquisition of a yacht may trigger the imposition of various taxes which become due upon the delivery of the yacht. Adequate legal and financial advice is crucial to ensure tax efficiency, although as suggested earlier it is recommended that advice is sought at an earlier stage. This procedure interlinks with the importation process of the yacht whereby in case the yacht is found and built in a Yard which is outside the EU formal importation procedures would have to be undergone in order to bring the yacht into the EU for the use and enjoyment by the owner in EU waters, without the payment of VAT on importation and without payment of custom duties.

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