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Old 19-10-2015, 04:59   #1
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boat co-ownership

I am in the process of purchasing my first cruiser. My initial plan is to take the boat down the ICW and spend some time in the Keys/Bahamas. I am not an experienced cruiser though I have completed ASA training, have crewed on a J30 in club racing and national competitions. I race my own dinghy (flying scot) in club racing on LIS. I do not have steady crew and would rely on getting friends and family interested. So, I have recently come across an opportunity (via CL)to partner with 2 other sailors for a boat that they intend to bring south to bahamas and back to LIS for summer. My understanding is that my partnership share would cost about $5,000. The lead partner is an experienced sail instructor and charter operator. This sounds ideal for my situation. I have not seen the boat yet and plan to sail with the lead partner later this week. Assuming that the boat is without issues, what questions should I be asking about the partnership and what is the worst case scenario if it does not work out? For instance, can I get insurance to limit my liability in a partnership situation? Thanks for any input.
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Old 19-10-2015, 05:44   #2
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Re: boat co-ownership

So, what do you get for your 5k? What kind of boat is it? What is the value of the boat? What kind of contract? If you feel strongly about this, GET A LAWYER.
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Old 19-10-2015, 06:43   #3
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Re: boat co-ownership

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Originally Posted by meridian28 View Post
So, what do you get for your 5k? What kind of boat is it? What is the value of the boat? What kind of contract? If you feel strongly about this, GET A LAWYER.
Thanks. I will try to clarify but, I do not want to divert the conversation to the merits of the boat per se. Let's just say that the boat value is about $20K and it is a competent cruiser in well-found condition that meets my purpose. This is more of a lease vs. buy question. Anyone have personal experience with co-ownership for either personal use or peer to peer rental/charter?
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Old 19-10-2015, 06:45   #4
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Re: boat co-ownership

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Originally Posted by trunorth View Post
Thanks. I will try to clarify but, I do not want to divert the conversation to the merits of the boat per se. Let's just say that the boat value is about $20K and it is a competent cruiser in well-found condition that meets my purpose. This is more of a lease vs. buy question. Anyone have personal experience with co-ownership for either personal use or peer to peer rental/charter?
Should add that, as minimum, I would get 4 months availability of the boat with possible option to rent to third parties.
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Old 19-10-2015, 08:39   #5
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Re: boat co-ownership

There needs to be a written partnership contract, and you need to read it very carefully. Anything that you do not understand, you need to get explained to you BY A LAWYER.

Then, when you completely and clearly understand the contract--exactly what you are getting and exactly what you must pay--you will be able to decide for yourself whether or not it is a good deal for you.


Good luck.
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Old 19-10-2015, 08:57   #6
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Re: boat co-ownership

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Originally Posted by denverd0n View Post
There needs to be a written partnership contract, and you need to read it very carefully. Anything that you do not understand, you need to get explained to you BY A LAWYER.

Then, when you completely and clearly understand the contract--exactly what you are getting and exactly what you must pay--you will be able to decide for yourself whether or not it is a good deal for you.


Good luck.
Thanks again for the input. I am especially interested to hear from anyone who has personal experience with co-ownership of a boat. I have lots of experience with contracts and attorneys.
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Old 19-10-2015, 09:02   #7
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Re: boat co-ownership

Quote:
Originally Posted by trunorth View Post
I am in the process of purchasing my first cruiser. My initial plan is to take the boat down the ICW and spend some time in the Keys/Bahamas. I am not an experienced cruiser though I have completed ASA training, have crewed on a J30 in club racing and national competitions. I race my own dinghy (flying scot) in club racing on LIS. I do not have steady crew and would rely on getting friends and family interested. So, I have recently come across an opportunity (via CL)to partner with 2 other sailors for a boat that they intend to bring south to bahamas and back to LIS for summer. My understanding is that my partnership share would cost about $5,000. The lead partner is an experienced sail instructor and charter operator. This sounds ideal for my situation. I have not seen the boat yet and plan to sail with the lead partner later this week. Assuming that the boat is without issues, what questions should I be asking about the partnership and what is the worst case scenario if it does not work out? For instance, can I get insurance to limit my liability in a partnership situation? Thanks for any input.
Without seeing a contract its hard to comment. What is the share and limit to liability? 4 months access doesn't seem to include downtime for maintenance or repositioning.

Are all parties paying $5k. Seems expensive for a $20k boat. Seems more like one of several purchase payments rather than a lease.

Will it be used as a charter vessel? Who earns, who pays.

Overall it smells iffy. You mention purchasing your own boat. But you describe a very complicated partnership for a $20k boat.

What would your best friend advise you to do?

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Old 19-10-2015, 09:51   #8
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Re: boat co-ownership

I do not have personal experience with it, having watched others who did persuaded me not to go this route, but I'm not a very social type either.
But for $5,000 if you can take the time off to actually use it for several months, I'd see it as a cheap lease, even if it only lasts one year.
I've seen partnerships break up good friends, who pays to fix it, it isn't clean, all kinds of issues, what you consider clean is not what they consider clean.
Agreement has to state all kind of things, like fuel tank must be filled prior to hand over, how much set aside there is for maintenance and what happens when that is exceeded, who does the maintenance etc.
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Old 19-10-2015, 09:56   #9
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Re: boat co-ownership

I have shared boats for a few years - always through a professional fractional outfit.

On the plus side, there is only three of you. So you should get good usage. The down side, you don't know them.

Is someone drawing up a contract? There must be a good contract to lay out costs obligations and responsibilities of each member. It sounds like an older boat, so things will go wrong. Try Nuaticed for some sample sharing docs.

Each member should put $3000-$5000 into escrow to cover costs of damages by an individual, (your responsibilty -3-5000), or major maintenance, (ie new engine) - everones responsibility $9-15000).
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Old 19-10-2015, 09:58   #10
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Re: boat co-ownership

I've done partnerships on several boats. In both cases, it's been fairly inexpensive older boats. It's always been between friends, and we've always handled all partnership issues as they come up informally, without even needing to refer to our partnership agreements (which I drew up with zero legal training or consulting).

I suppose having such a thing drawn up by an attorney would be the safe thing to do, but there's a thousand little scenarios and situations that can occur with a boat and with partners. I've got to believe that a proper legal agreement covering every conceivable situation would be huge, and consume massive attorney time ($$$). I suppose if we're talking a million dollar yacht it might be applicable, but are you really willing to pay thousands in attorney fees for a $5000 partnership?

In my opinion, on a cheap older boat just make sure you're real comfortable with your partners, make sure all partners are on the insurance and title, cover the basics on an agreement (use of boat, splitting costs, rules for exiting and entering partnership etc.), and move forward.
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Old 19-10-2015, 10:00   #11
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Re: boat co-ownership

Figure out an exit strategy, for every owner.
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Old 19-10-2015, 10:15   #12
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Re: boat co-ownership

This is all really useful input. It mostly confirms my experience: make sure their is trust and mutual interest to begin with and then put in place basic safeguards (like escrow), boundaries, and a clean way out. Thanks.
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Old 19-10-2015, 10:18   #13
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Re: boat co-ownership

I owned a boat in partnership with a friend for 6 years and it worked out pretty well. We stayed friends but there were some differences of opinion at times.

Stu and Denverdon both mentioned good points. I would make sure of all the following.

- The insurance is valid for multiple users AND if there is the chance of renting the boat to outside parties is valid for chartering. Make very sure of this as otherwise you have the possibility to being on the hook for a large liability claim if someone is injured or you boat damages another and you get sued.

- Yes, a plan for an exit strategy. What happens if another member wants to bail and you don't? Will you have to buy out his/her share? Will you have the first option to buy his/her share if you want to? What will you get for your share if you sell?

- Who pays if the boat is damaged? With full hull insurance there might still be a large deductible. Is that shared? What if something happens that isn't your fault, say a chainplate with a hidden flaw that causes the mast to come down? Are you stuck with the whole bill just because you happened to be onboard when it failed?

- Ongoing maintenance, what if there's a really big bill like new engine? How are these costs shared.

- Will your name be on the title? What if the guy with the title decides to take off?

- Who decides when and where the boat will be based? What if the primary owner wants to move the boat to Panama and you don't want to go there?

I could go on but as you can see, there's lots and lots of questions that may or may not ever come up. Bottom line, especially with strangers, I would not put any more into this that I could walk away from.
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Old 19-10-2015, 12:09   #14
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Re: boat co-ownership

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But for $5,000 if you can take the time off to actually use it for several months, I'd see it as a cheap lease, even if it only lasts one year.
I have done it and would not recommend doing it with strangers, unless of course the above applies. A contract may save you a few dollars in the long run but may prevent you from developing a working relationship based on trust, which would ruin the experience.

If you go into this, it has to be with a 'What the hell, I'll give it a shot additude", or not at all.

I purchased a late model sailboat with a friend. The purchase price was very modest, about $15K each, so there would not have been big consequences if it all went south. Of the $30k, 25k was for the purchase and $5k was to generate an up front kitty for the coming years expenses. We also agree to each put $250 a month into the kitty for a 5 year period to maintain the kitty for expenses (haul-splach, mooring, maintenance, etc.). It has worked out great for us, however:


1. I accepted this upfront as potentially a huge mistake, one that I was willing to make because I couldn't/wouldn't have done it myself and because I did this with a very good friend and knew myself well enough to know that I would never let this affect our friendship, even if it failed.

2. We had no formal contract.

3. We were both listed as owners and listed on the insurance policy.

4. Who will do all the DYI work? and there will be lots.

5. What if one of you wants a new chart plotter and the other wants to have the keel dropped and re-bedded?

6. Who gets the boat, when?

7. We started out being sailing partners, but ended up not sailing together very much once we bought the boat because we were always on it at different times, each with our families.

The list goes on.

It worked out for us, but you both have to be very flexible and care more about the partnership than the boat.
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Old 19-10-2015, 12:32   #15
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Re: boat co-ownership

Do you find it at all unnerving that the lead guy is an experienced sailing instructor and charterer but is looking for co-owners for a $20000 boat? Is he going to be using it as a sailing school or budget charter operation his 4 months of the year?

I would be concerned he's using your $5k to finance his sailing school.

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