At the end of the summer, owners usually decide whether to keep their yacht for one more season or put it on the market and buy a new one
by Federico Santini*
During a boom like the one the yachting market has been experiencing for the past year, the demand for available used yachts exceeds the supply and this has pushed undecided owners to sell in order to get the best price and to seek a new buying opportunity. In this regard, the importance for the shipowner to have a good and effective Central Agency Sales Agreement is decisive considering that the buying and selling of used yachts internationally is done almost exclusively through brokers and in the vast majority of cases through exclusive mandates.
LEADING INTERNATIONAL YACHT BROKERS WHO ARE MEMBERS
OF MEDITERRANEAN YACHT BROKERS ASSOCIATION (MYBA) ADOPT
A STANDARD CENTRAL AGENCY SALES AGREEMENT FORMAT APPROVED BY THE ASSOCIATION, WHICH, HOWEVER, IS OPEN TO NEGOTIATION
AT THE SHIPOWNER’S REQUEST.
In general, a Central Agency Sales Agreement is a mandate by which the owner gives the broker worldwide exclusivity for a certain period of time to sell the yacht at a certain price and under certain conditions. Leading international brokers who are members of the Mediterranean Yacht Brokers Association (MYBA) adopt a standard agreement format, which, however, is open to negotiation at the shipowner’s request. Therefore, it is important for the shipowner to understand the most important aspects of the contract and, possibly, seek the advice of a legal expert in the field to review and define the contract.
Clearly, the most important issue is trivially the amount of commission that the shipowner agrees to pay the Central Agent in the event of a sale. At MYBA level, the standard commission is 10% of the gross sales price but it is not uncommon for this high percentage to be reduced in absolute terms or, as the case may be, for a decreasing percentage to be set by price brackets where the final sale price accepted by the shipowner is lower than the minimum sales price set in the contract. In fact, the Central Agency Sales Agreement must set a “target” sales price that the shipowner agrees to accept in the presence of a binding offer; while if a binding offer is made at a lower price, the shipowner will be free to accept or not.Furthermore, in actual practice a shipowner may reserve the right to sell to certain buyers not introduced by the Central Agent, who are already known to the shipowner or are port of his or her circle of acquaintances, in which case the commission to the Central Agent will be either excluded altogether or substantially reduced.
Of course, among the Central Agent’s commitments is to adequately market the yacht through the dissemination of sale-related information on his or her official website, social networks and in specialized magazines.
It is worth mentioning that the commission agreed upon in the Central Agency Sales Agreement includes the commission of the Central Agent and that of any broker (sub-listing broker) who introduced the buyer to the Central Agent. In this regard, however, the shipowner is advised to include an indemnification clause in the contract to be paid by the Central Agent, which will keep the shipowner safe from any claims by third-party brokers with whom the Central Agent has come into contact for the sale of the yacht or otherwise involved in the sale. Another extremely important issue is the duration of the exclusivity; a reasonable term should be set that, on the one hand, pushes the broker to work quickly and well and does not bind the shipowner for an excessive amount of time where, in the absence of satisfactory offers, the shipowner loses confidence in the broker. The exclusivity period is, on average, 12 months, but a shorter term is not uncommon. The Central Agent’s commitments include, of course, adequately pitching the yacht to the market, through dissemination of information about the sale on his or her official website, social networks and in specialized magazines. It is advisable, from the shipowner’s point of view, to place all marketing and advertising costs at the Central Agent’s expense so that they are included in the commission, except possibly providing for his or her contribution to expenses for special initiatives that can be agreed upon with the shipowner from time to time, such as participating in fairs or events.
The Central Agency Sales Agreement is a mandate through which the shipowner grants the broker the worldwide exclusive right to manage the sale of the yacht for a certain period of time to sell his or her yacht at a certain price and under certain conditions.
Other commitments of the Central Agent are, of course, to accompany potential buyers on their visits on board, to interact with the buyer’s broker and to follow the negotiations both during the negotiation phase, from the formulation of the binding offer to the signing of the MOA (Memorandum of Agreement), and during the execution if the MOA (Memorandum of Agreement), during the sea trials and dry inspection and, in case of a positive outcome of these resulting in the acceptance of the yacht, when finalizing the sale. For his or her part, in addition to the obligation of exclusivity, the shipowner’s obligations include, among others: 1) providing the Central Agent with photographs, information and technical specifications of the yacht, including its lay-out and accessories; 2) the willingness to have the yacht viewed by the potential buyers in a manner and with advance notice to be agreed upon; 3) the commitment to convey through the Central Agent any purchase requests should they be received directly by the shipowner or his or her crew. For obvious reasons, a standard clause normally included in a Central Agency Sales Agreement obligates the shipowner to pay commission to the Central Agent if, after the expiration or termination of the Central Agency Sales Agreement, ownership of the yacht is transferred, in any form, to a party who had been introduced by the Central Agent.
(The Central Agency Sales Agreement – Barchemagazine.com – November 2022)