You're Buying a New Boat. Do You Really Know Who's Reaching Into Your Wallet?

Yacht Brokers Aren't the Only Ones With Transparency Issues

This is the second in a series of commentaries providing perspective on the class-action lawsuit challenging the American way of buying and selling boats. Phil Friedman is a fellow Substack author writing under the banner of For Yacht Builders, Buyers and Owners.

The circumstances described below do not apply to every boatbuilder. That said, buyers ought to know the score before they begin making those bank transfers. And those receiving payment owe their customers transparency, especially if the money follows a complicated path.

An earlier version of this story was prompted by a May 2023 news story in the South Florida Sun Sentinel about boat buyers being cheated, which quoted the author on the subject.

Virtually all contracts for the construction to order of a new yacht provide for an initial payment, plus several more “progress” or “milestone” payments during the build. Indeed, most contracts for the construction of new custom or semi-custom yachts have the buyer paying, in-total, as much as 90 percent of the purchase price prior to completion and delivery. Doing so generally involves significant financial risk and, consequently, a key question for most buyers is,

What protections are available to safeguard that up-front investment, between the time of contracting and receiving delivery of the vessel?

My more or less “standard” answer to that question can be found in a blog of mine headlined Financial Protections for New-Build Yacht Buyers. However, in the current context, we need to back-track a step or two first.

When considering a to-order boat deal, you might think, “Well, I pay a deposit and make milestone payments along the way and if, for some reason, I don’t get my boat, I’ll get my money back.”

However, the reality is never that simple.