Boat co-ownership

[BandB]

Originally Posted by Stumble

A good agreement can save massively on any future issues. Just a simple forced liquidation clause and a mediation clause alone will pay for the entire partnership agreement is/ when a problem occurs.

It does provide some insurance against an issue arising since issues are clearly layer out. But what you are really insuring against is the potential legal cost of litigation in the future.

Yes, certainly while they don't eliminate disagreements, make the cost of litigation much less expensive and I include Mediation and Arbitration collectively in that cost.

[Certeza]

Hmmm... after reading this thread it seems that the yacht world must be a bit different than the house boat world. We are just talking about a basic time share here which is VERY common in house boats at many vacation spots around the country.

In my experience, they work well on older boats and not as well on new boats. Older boats have typically already been pretty abused. A bunch of kids jumping around and getting things wet and dirty isn't a huge deal. Everyone just cleans things up really well when they are done. Maintenance is expected on an older boat too.

New boats are a different story. Many share holders want it to look and feel new for quite some time. If they are only getting 3-6 weeks of use out of it, they don't want it to look like a 5 year old boat after just a year of use. To some owners it will feel like each time they come out on the boat something new is damaged. This can be very frustrating.

Also in my experience, there is always one couple (sometimes two) whom are handy and clean. These people spend A LOT more time keeping up the boat than the others who simply enjoy their time and clean up a bit before they leave. On an older boat this hasn't seemed to be as big a deal, but on new boats I would write it into the contract to get it professionally cleaned and have professional maintenance.

[Horror Hotel]

Yes boats are very, very, different than houses. Say we share a boat, it's low on oil, no one checks it, I motor for 5 hours, it's now totally shot, neither of us can do the job, it's 15k, I have it done. Cough up $7500 yesterday.

[a64pilot]

My major thing is my wife's idea and almost all others idea of what clean is vary hugely, plus I carry maintenance to a little bit of an extreme. Odds are against us finding another couple that have similar peculiarities.
I've seen many partnerships with airplanes, it almost always is a great way to turn a friend into an enemy, make the partner family and it gets worse

[sanssouci]

Has anyone used a Tenants In Common deed with a T.I.C. agreement on boat ownership?

[BandB]

Originally Posted by sanssouci

Has anyone used a Tenants In Common deed with a T.I.C. agreement on boat ownership?

While Tenants in Common agreements are possible for boat ownership, there are many issues that can arise since they are not commonly used. Even in real estate there have been people to get shocked in various states at bankrupticies of one tenant and other occurrences. The are used largely for tax purposes but even there the IRS has frowned upon their use in 1031's frequently. Tenants in Common are also popular among unmarried couples sharing a home.

I would think in a boat an LLC or other arrangement would probably be a better business structure. Certainly the rules are better defined and legal ramifications better understood and agreed to by courts. In some states they TIC's are difficult to form, California being a prime example. On Real Estate there it requires approval by the Department of Real Estate which often takes 6 to 9 months. I don't know of any provision there which would accommodate it for a boat.

What benefit were you looking to gain from a TIC that isn't available from a partnership or an LLC? And wouldn't you prefer limiting your liability to your investment as you could through an LLC?

[sanssouci]

My boat is currently documented as a LLC and two friends would like to own thirds as tenants-in-common. There are existing T.I.C. Agreements that address most of the issues. I am wondering if other agreements exist.

[IdoraKeeper]

I would never want to be owned by more than one boat at a time!

[Stumble]

Originally Posted by sanssouci

My boat is currently documented as a LLC and two friends would like to own thirds as tenants-in-common. There are existing T.I.C. Agreements that address most of the issues. I am wondering if other agreements exist.

Not a chance in H3$$ I would agree to this. We don't have TIC here in Louisiana, so I am not more than passingly familure with it as a concept. But one of the major issues with a TIC is that the other tenants have no control over who a fellow tenant sells their share too. That share becomes a fungible asset in bankruptcy or legal dealings, and can be sold at auction to anyone who wants it.

Again, no way would I agree to this.

A partnership or LLC is a much more flexible way of getting the same advantages, but has a lot more on top of it. One of the majors being a partnership / Formation agreements that spells out the rules for the owners.

[Brocker]

Originally Posted by a64pilot

My major thing is my wife's idea and almost all others idea of what clean is vary hugely, plus I carry maintenance to a little bit of an extreme. Odds are against us finding another couple that have similar peculiarities.
I've seen many partnerships with airplanes, it almost always is a great way to turn a friend into an enemy, make the partner family and it gets worse

Yes, different standards in cleaning and maintenance can definitely lead to contention. Nearly all of the comments to date have lead me to believe it's likely not a good idea to partner on a boat. Too bad really, because a good partnership where each partner has the boat for a few months, could lead to a lot of savings. But lots of variables pointing to the negative.

[GrandpaJim]

Brocker,
Sent you a private message.
Jim

[skysinc]

Originally Posted by Stumble

Brocker,

I am currently involved in a few co-ownership agreements, and have written a number of them over the years. When they work it can be a huge money saver, and help relieve some of the stress of ownership. When they don't work it can be the biggest mistake you can make with a boat.

The biggest issues I see are not having enough money dedicated to the boat at the outset, and not having clear rules about how things like usage, disagreements, maintenance will work.

I have drafted a few for clients, plus my own and have a pretty good idea of how to work thru these problems, but it can be tricky.

Would you be willing to share a sample agreement? Thinking of doing the same and can only find very pricey templates. Our local boat rental business would thank you! If so, email is skylor dot sinclair at gmail dot com