Surveys and Boat Purchase

For most previously owned boats sold through a broker, it is routine to recommend that the boat be surveyed with the professional surveyor prior to committing to the purchase.  In the vast majority of cases, those surveys turn up issues that are either cleaned up prior to closing; negotiated as a reduction to the purchase price; or they stop the contract altogether.  The parties complete the deal and go their separate ways.  In some cases though, issues arise after closing that lead to disputes.  In my experience, disputes fall into one of four categories: 1) hull or stringer core problems (usually rot); 2) discrepancies between the listed inventory and the delivered inventory; or 3) non-hull survey items that were missed; 4) mechanical problems that were not covered by the survey contract.  Any of these can cause significant post-closing issues.

If there are post-purchase problems, the buyer will be holding the bag.

In the event that there are significant post-survey, post-closing issues, a purchaser can pretty much assume that everyone else involved will step back and deny liability (previously owned boats are different than new boats insofar as they are not warrantied).  Brokers and Sellers will (probably correctly) say that they did not know about the problems, or if they did, that it was the Buyer’s responsibility to find them with a survey.  The surveyor, in all likelihood, will have a contract signed by the Buyer that specifically releases him from all negligence or failure to detect problems, and states outright that the survey cannot be relied on.  The crucial lesson for the purchaser — pick a very high quality surveyor and you would be well advised to personally test every item on the boat as well.  Be absolutely, positively sure that any item listed in the inventory that matters to your purchase is on the boat at the time of inspection, and on the boat at the time of closing.  Buyers should also be aware that if they execute a “conditional acceptance of vessel” that notes certain problems, absent fraud or intentional concealment, the list of items is all that they will be able to enforce if bad things happen.  Sellers, surveyors and brokers — the best course of action is probably to rely on the contract protections written into the deal, and obtain good counsel in the event of a significant claim.

Hull and Core Problems

Hull, core and stringer problems — especially wet, rotten core issues — are usually the worst cases because a bad hull or bad stringers may be so expensive to fix that they make the boat a total loss.  Stringers are notoriously difficult to fix without taking the whole boat apart.  For this reason, a buyer should be certain that proper soundings are performed, a moisture meter is utilized, and if there are any remaining questions, should either walk away or seek further help, such as thermal imaging.  A buyer will have real difficulty recovering any money from insurance or a seller for wet hull issues unless it can be shown that the seller knew about the problem but concealed that in the sale.

Listed inventory versus delivered inventory.

Most boat listings include an inventory of electronics and other features that will transfer with the vessel.  These are usually assembled by the broker and reviewed by the seller prior to the listing — they also usually come with the reminder that the inventory is believed to be accurate but cannot be relied on.  Some items on the inventory will be of limited value, but significant sails, outboard engines, navigational equipment, etc., can be very expensive.  Buyers should confirm that anything that matters is with the vessel, and confirm that it is in acceptable working condition.

Items that should have been picked up in the survey, but were missed.

Generally, a buyer’s recourse for missed items would be against his own surveyor, but that recourse may be limited by the survey contract.  It is a good idea to attend the survey and test everything in the same way that a surveyor would — if it is broken you want to know that before the purchase, not after.

Mechanical Surveys

Most hull surveys do not include any mechanical testing beyond running the boat and noting any discrepancies in the readouts or the boat’s ability to operate properly.  Items such as leaking oil may be noted, but compression problems, worn parts, or other issues that a fully trained mechanic testing the engine would pick up may not be in the survey.  Surveyors will typically recommend that a buyer get a mechanical survey.  As with other issues, if the buyer completes the contract, and it cannot be shown that the seller knew of the mechanical problems, in all likelihood the buyer will have to pay for any engine repairs without recourse against any other party.

Conclusions

Buyers should be diligent in obtaining a survey from a qualified surveyor and taking the effort to be sure that the survey is thorough; no items are missed; and the inventory is accurate.  Sellers, Brokers and Surveyors should be sure that there is contract language to protect them from any claims of problems with the boat that were discovered (or arose) post-closing.  If a dispute does arise, quality representation and investigation will be absolutely imperative.