Yacht Purchase Due Diligence

Due diligence is the structured verification a buyer carries out before committing to acquire an existing yacht: who owns it, whether they can sell it, what is registered against it, what its regulatory and tax position is, what condition its records describe, and exactly what the sale includes.

It is wider than a survey. A survey examines the physical yacht; due diligence examines the yacht as a legal, regulatory, tax, technical and operational asset. A clean survey does not mean clean title, and clean title does not mean a sound hull.

Light screening begins before an offer: identity of the yacht, the seller entity, broad registry and class status, and any obvious red flags. Detailed verification usually runs after the purchase agreement is signed and the deposit lodged, in parallel with survey and sea trial.

The buyer's maritime lawyer normally leads title, registry, encumbrance and contract work. The surveyor leads physical condition. Tax advisers lead VAT and customs. The broker coordinates the timetable, document requests and communication between parties.

Before an offer, a buyer can reasonably ask for the yacht's official identifiers, flag, class society, seller entity type, a summary of refit history and the general VAT position as stated by the seller. These are seller statements until verified.

Sellers often share documents through a data room after a non-disclosure agreement. A good document index lists each document, its date and its issuer, and separates current certificates from historical records.

Access should be restricted to named advisers. Registry extracts, corporate documents, tax evidence and proof of funds are private and should never be forwarded informally.

The registered owner is the person or company shown on the yacht's registry. The beneficial owner is the individual who ultimately owns or controls that company. Most large yachts are held by a company, so the two are usually different.

Buyers verify the registered owner through the registry, and the beneficial owner through KYC carried out by lawyers, banks or escrow agents. Beneficial ownership information remains private and is not published.

Due diligence confirms that the seller company exists and is in good standing, that its directors have approved the sale, and that the person signing is properly authorised. Where a power of attorney is used, its scope, validity and execution are reviewed.

In an asset sale the buyer acquires the yacht itself and the seller company remains with the seller. In a share sale the buyer acquires the company that owns the yacht, including its history, contracts and any liabilities.

A share sale is not a shortcut. It usually needs company due diligence as well as yacht due diligence, covering accounts, contracts, employees, tax filings and claims. Whether either structure suits a buyer is a question for legal and tax advisers.

A title search on the registry shows the registered owner and any registered mortgages. A registered mortgage does not automatically stop a sale, but it must be discharged, or otherwise dealt with as agreed, at or before closing.

The usual approach is for the mortgagee to confirm the redemption amount and to provide a discharge at closing, paid from the sale proceeds through the agreed account.

A maritime lien is a claim that may attach to the yacht itself, for example for crew wages, salvage or certain damage, and in some jurisdictions it may survive a change of ownership without appearing on the registry. A registered mortgage and a maritime lien are different things.

An arrest is a court order detaining a yacht as security for a claim. Buyers ask about pending litigation, unpaid crew, yard and supplier claims, and rely on contractual warranties and indemnities, because not every claim can be found by searching a registry.

The registry extract should be recent, ideally obtained close to signing and again before closing. Buyers check whether the yacht will remain on its current registry or be deleted and re-registered, and what deletion certificate and timing the seller must provide.

Flag is not the same as VAT status, class, or the purchase vehicle. Flag tells you which state's rules apply to registration, safety and crewing.

A commercially registered yacht is typically operated for charter under a relevant code and may carry specific certificates, manning and survey obligations. Commercial registration does not mean the yacht can charter everywhere, and it does not prove VAT has been paid.

A buyer who wants private use should understand what changing status involves, and whether booked charters must be honoured.

A class status report shows whether the yacht is in class, the dates of upcoming surveys, and any conditions of class or recommendations. It should be dated close to the transaction.

A condition of class or recommendation is not the same as a survey defect, and a yacht in class is not proof of good condition. Upcoming class renewal surveys and dry-docking can represent significant cost.

Depending on size and use, review may cover load line, safety, pollution prevention, tonnage, minimum safe manning, radio and other statutory certificates, with their expiry dates and any outstanding items. Port state control history may also be relevant.

Guest capacity, helideck certification and other special-system approvals are verified from the documents, never inferred from listings, photographs or size.

'VAT paid' is a seller statement. On its own it does not say in which jurisdiction, on what value, when, or whether later events such as modifications, commercial use or exportation have changed the position.

Evidence typically includes original invoices, customs or import documents and proof of payment. Flag, commercial registration and the location of the yacht are not evidence of VAT status. A qualified tax adviser should review the evidence; this guide does not advise on structuring or avoidance.

Some yachts operate under temporary admission or similar regimes. A buyer needs to understand how a sale, the buyer's residence and the place of delivery may affect that status. Delivery location and sale location are not proof of tax status and should be agreed with tax advice.

A planned maintenance system (PMS) records scheduled and completed work. Buyers review it alongside invoices, logs and the surveyor's findings. A service record shows work was recorded, not that the system is in good condition today.

Engine and generator hours, overhaul history, manufacturer service reports and oil analysis help the surveyor and engine specialists form a view.

Refit claims are verified against yard invoices, specifications, class records and completion documents. Cosmetic work is not technical work, and a major refit is not a rebuild. Stated refit spend is not proof of the value added.

Warranties from yards and manufacturers are checked for duration, transferability and open claims.

As-built drawings, manuals and system documentation should transfer with the yacht. Navigation, AV, IT and monitoring systems may rely on licences, subscriptions or accounts held by the seller or a manager. Passwords, admin access and cybersecurity handover are planned before closing.

The inventory list should state what is included and the list of exclusions should state what is not. Tenders, toys, a support yacht, a helicopter, a submersible, artwork and personal effects are often treated separately, and some may be owned by other entities.

Charter inventory such as linen, tableware and water-sports equipment should also be listed.

Crew employment does not automatically transfer with the yacht. Contracts, employer entity, accrued wages, leave, repatriation obligations and potential crew claims are reviewed, and the buyer decides whom to retain.

The captain's knowledge of the yacht is valuable during handover. Management agreements, and ownership of PMS data and records held by a manager, are reviewed for termination and transfer.

If the yacht has charters booked, the contract must say whether they will be honoured, who receives charter fees and deposits, and how the central agency arrangement ends or continues. A buyer who wants private use should resolve this before signing.

A berth is usually held under a licence or lease, not as real estate ownership. Transferability, remaining term, fees and landlord consent are checked.

Insurance does not normally transfer automatically. Buyers arrange cover from closing and ask about existing claims, loss and incident history and how damage was repaired.

The purchase agreement sets out conditions, the acceptance process, seller representations and disclosure schedules. Matters found in due diligence are often addressed through specific representations, conditions or indemnities drafted by counsel.

The closing document list is transaction-specific and is prepared by the lawyers. It commonly includes:

A deposit secures the transaction timetable; it is not security against bad title, and paying it is not due diligence. Deposit terms, account holder and release conditions are reviewed by counsel.

Legal and title review, technical survey and sea trial, and tax review usually run in parallel. Each produces findings that feed the buyer's decision.

Not every finding matters equally. An issue is material when it affects title, safety, regulatory status, tax exposure or value in a significant way.

An issue does not automatically lead to a price cut. Options include cure by the seller before closing, accepted risk, a specific indemnity, an escrow or hold-back, renegotiation, or walking away within the contract terms.

A lender's due diligence protects the lender and does not replace the buyer's own review. Asking price is not value after diligence; findings on refit needs, class cycle, crewing, management, insurance, registration and VAT shape the revised acquisition economics.

Banks, escrow agents, lawyers and registries carry out know-your-client checks on both sides, including proof of funds, source of funds, buyer structure and seller KYC. Sanctions screening is carried out by qualified parties against the facts, never by assumptions about nationality.

Lund Group does not provide guidance on avoiding KYC, AML or sanctions controls, and declines transactions that cannot pass them.

Off-market, direct-owner and friend-to-friend sales need the same verification as public sales, often more, because fewer documents may be prepared in advance. Brokered public sales usually provide a document pack, but listing data remains a seller statement until verified.

Information on Lund Group listings comes from sellers, central agents and public sources. It is not a substitute for verification and may change.

A transaction is ready to close when the lawyers confirm the agreed documents, discharges and funds are in place, acceptance has been given, and delivery arrangements are agreed. Timetables follow the contract; there are no universal deadlines.

This guide is written and reviewed by the Lund Group Yacht Desk and the Charter & Brokerage Desk and updated when practice changes. It is educational only and is not legal, tax, sanctions, financial, regulatory or survey advice, nor a substitute for maritime counsel.