Buying a boat in Italy.

[spindreams]

Hi, hope this is the right forum for this.

I am in the process of buying a 13m sailing boat (valued at 72.500 EUR) privatly. I am in the phase of drafting a contract to then be able to proceed to a survey and sea trial.

I have run into a couple if issues.

We have agreed a 5% deposit and I have basically taken a contract from an italian website and modified it with a few things I felt needed to be include. In essence I have added the following two clauses -

1. If the seller decides not to sell for personal reasons then they must return any funds already paid plus an additional €3625 EUR (5%) from the seller to cover buyers expenses.
2. If the survey finds any undisclosed structural, electrical or mechanical faults other than would be considered cosmetic then the seller agrees to repair the faults or reduce the price to cover the cost of repair, the buyer also reserves the right to withdraw from the purchase with the return of any funds already paid plus an additional €3625 EUR (5%) from the seller to cover buyers expenses.

The seller has basically disagreed with these clauses and sent back a contract that removes any form of penalty to the seller for misconduct, basically all the risk is on us. deposit, survey and haulout costs, travel costs (7 hour round trip), we don't mind these costs if the boat is indeed in the almost perfect condition he says it is. From my untrained eye it does look good but I don't feel comfortable having no safety net as it were.

In my eye he is only risking his time if there are no penalties which seems to negate the point of a contract which IMO should be in the buyers favor since the buyer is the one taking the majority of the risk.

Another problem is that he has no VAT invoice to prove VAT has been paid, the ownership log shows the boat had three owners, a leasing/mortgage company then a private couple (I am guessing they became owners once they had paid off the leasing/mortgage) and then the current owner who purchased the boat two months after the first couple became owners (I am guessing the first couple settled the mortgage to allow them to sell the boat).. What would people here do in this situation? the current owner insists that it proves the boat is VAT paid due to the fact he purchased it from a private individual, I think that is BS and I don't see why there wouldn't be some form of invoice unless the VAT is not paid?

Am I being paranoid or over the top? Am I wrong with my contract?

regards

Sam

 

[Heckler]

Hi, hope this is the right forum for this.

I am in the process of buying a 13m sailing boat (valued at 72.500 EUR) privatly. I am in the phase of drafting a contract to then be able to proceed to a survey and sea trial.

I have run into a couple if issues.

We have agreed a 5% deposit and I have basically taken a contract from an italian website and modified it with a few things I felt needed to be include. In essence I have added the following two clauses -

1. If the seller decides not to sell for personal reasons then they must return any funds already paid plus an additional €3625 EUR (5%) from the seller to cover buyers expenses.
2. If the survey finds any undisclosed structural, electrical or mechanical faults other than would be considered cosmetic then the seller agrees to repair the faults or reduce the price to cover the cost of repair, the buyer also reserves the right to withdraw from the purchase with the return of any funds already paid plus an additional €3625 EUR (5%) from the seller to cover buyers expenses.

The seller has basically disagreed with these clauses and sent back a contract that removes any form of penalty to the seller for misconduct, basically all the risk is on us. deposit, survey and haulout costs, travel costs (7 hour round trip), we don't mind these costs if the boat is indeed in the almost perfect condition he says it is. From my untrained eye it does look good but I don't feel comfortable having no safety net as it were.

In my eye he is only risking his time if there are no penalties which seems to negate the point of a contract which IMO should be in the buyers favor since the buyer is the one taking the majority of the risk.

Another problem is that he has no VAT invoice to prove VAT has been paid, the ownership log shows the boat had three owners, a leasing/mortgage company then a private couple (I am guessing they became owners once they had paid off the leasing/mortgage) and then the current owner who purchased the boat two months after the first couple became owners (I am guessing the first couple settled the mortgage to allow them to sell the boat).. What would people here do in this situation? the current owner insists that it proves the boat is VAT paid due to the fact he purchased it from a private individual, I think that is BS and I don't see why there wouldn't be some form of invoice unless the VAT is not paid?

Am I being paranoid or over the top? Am I wrong with my contract?

regards

Sam

Run a mile!
They will expect you to pay the dosh on the strength of their word?
Really!
Stu

 

[Norman_E]

The leasing/mortgage company presumably paid the manufacturer or importer for the then new boat. Can you or the present owner get them to confirm whether or not the boat was VAT paid? If the boat was originally chartered outside the EU (e.g. in Turkey) it might have been bought VAT free or sold outside the EU and lost its VAT paid status. Quite often people buy a boat which they do not sail, but have it managed by a charter operator, and if that was the case with this boat it is very wise to insist on proof of its VAT status. When I bought my ex charter boat I obtained its original VAT invoice from its original owner, who retained a copy in order to deal with his own tax authority.

 

[Fr J Hackett]

I would say a fair compromise would be to remove your expenses clause but keep the refund clause if he won't do that it's a no deal. I know that in Italy they actually issue a VAT invoice and receipt if the boat is not that old and you know where the VAT was paid there is a good chance that you may be able to get a copy. On the other hand it may have been used as a charter vessel with no VAT paid and the subsequent sales were done in the hope of creating enough of a break and an attempt to hide the VAT status without which I would not touch the boat.

 

[ffiill]

Surely its buyer beware in so much as you only make an offer once you have had a survey done that satisfies you and provides you with a market value?
Of course it costs you money but you can then either walk away or make what you think is a fair offer.
If the seller is not happy then he can walk away.
We do that here with houses in Scotland and I did it with my current boat which I bought for £26 k cash.
I certainly would not sell my boat on the basis of subject to survey but would intimate that I was quite flexible in the price I would accept.

 

[gianenrico]

Hello Spindreams,
I'm Italian, based in Italy, boughy and sold my boats in the past 40 years or so.
Let me clarify a couple of things:
1 - IF any deposit has been given and accepted, then the party who received it is bound to refund a DOUBLE amount if he/she decides to walk out of the deal; same if "concealed defects" are revealed by an agreed survey. I guess the seller is just tryng to take advantage of a "foreigner"; if by PM you let me know the place and the boat, I can try to check who the subject is, and what his standing is. This will not imply any obligation from You in my respect: we call it "sailor's frienship". You could also act through a broker.
2 - Is the boat italian-flagged?
3 - VAT must be paid in Italy from the origin of this tax, so either the boat is very old or it cames from a rather long story of sales or...they just lost the papaers.
Please keep in mind that in Italy (as in France) it is very common to get hold of a boat through a "Leasing Contract" (usually 36 months long, the boat being in the ownership of the finantial company and the user becoming the "owner" if and only if he pays a small final sum (1 to 10% of original boat value); boats acquired through a leasing have a favorable VAT treatment: 11% instead of 22% in Italy. As the boat was owned by an incorporated company, there MUST be a VAT record. Be advised that any boat longer than 10 meters in ITALY MUST be REGISTERED at the Capitanerie Di Porto and as You probably have seen, the boat has a "License Plate"; all transactions concerning a registered boat MUST be recorded by a Notary and the references written in the boat's license. Sales between private subjects are not subject to VAT, so only the original sale from Builder to first owner (finantial company OR private citizen) will have indication of a paid VAT. But all of the boat's history is trackable...if honest!.
Have the seller send You a scanned copy of the entire Boat's Licence (10 pages from cover to end of writtable pages, then a few pages of "Notices". Numbers written on the pages' foot).

I'm very sorry to hear You are having problems and, as said before, if I can be of any help, don't hesitate.
Gianenrico

 

[PuffTheMagicDragon]

Apart from VAT issues, do get the present owner to handle the de-registration formalities of the boat if, presumably, she is under the Italian flag. It is a long process (mine took around three months) and, as I understand it, needs to be done in person. In my case the seller lived in Rome but the boat registry was at the Porto di Santo Stefano in Toscana so she had much toing and froing before the removal from the Italian register was granted.

 

[Tranona]

Surely its buyer beware in so much as you only make an offer once you have had a survey done that satisfies you and provides you with a market value?
Of course it costs you money but you can then either walk away or make what you think is a fair offer.
If the seller is not happy then he can walk away.
We do that here with houses in Scotland and I did it with my current boat which I bought for £26 k cash.
I certainly would not sell my boat on the basis of subject to survey but would intimate that I was quite flexible in the price I would accept.

That is not the way that boat transactions normally work. An offer is made following inspection and based on the seller's description (if it is through a broker this will be in the form of written details plus sight of relevant documents) and is subject to survey. If the offer is acceptable both parties sign a binding contract. If the survey finds undeclared faults either the price can be renegotiated, seller can make good defects or buyer can withdraw if there is no satisfactory resolution.

It is unwise to incur the cost of a survey before making an offer or signing a contract as the seller is under no obligation to either let you have access to the boat or to sell to you at all.

 

[Tranona]

Am I being paranoid or over the top? Am I wrong with my contract?

regards

Sam

You are making it overcomplicated. The model RYA contract is a good basis and covers the issues you want to add. It can be equally applicable to buying in Italy except the seller is unlikely to accept dispute resolution under UK law. Not surprised he rejects any condition that relates to your travel expenses pre sale - that is your risk, as is the survey and haulout. The deposit is of course returnable if the sale does not complete because of the outcome of the survey. If he withdraws then he is in breach of contract so in theory he should cover your costs but actually recovering them might be hard work.

A contract should be fair to both parties, not biased to the buyer or seller and on balance the RYA type contract achieves this. It is rare for a seller to withdraw once he has signed a contract - that is the whole purpose of the contract to get both parties legally committed.

As to the paperwork for the boat, if it is registered in Italy then that is sufficient to show that VAT has been paid as it cannot be registered without evidence - that would have been done at the time the boat was transferred from the leasing company. This is different from the UK where we have no compulsory registration system and the only record of VAT payment is the original invoice to the first private buyer. Provided you have record of registration and transfer of title to you together with deregistration from the Italian register you will not have any difficulty with officialdom about VAT.

 

[Elessar]

Hi, hope this is the right forum for this.

I am in the process of buying a 13m sailing boat (valued at 72.500 EUR) privatly. I am in the phase of drafting a contract to then be able to proceed to a survey and sea trial.

I have run into a couple if issues.

We have agreed a 5% deposit and I have basically taken a contract from an italian website and modified it with a few things I felt needed to be include. In essence I have added the following two clauses -

1. If the seller decides not to sell for personal reasons then they must return any funds already paid plus an additional €3625 EUR (5%) from the seller to cover buyers expenses.
2. If the survey finds any undisclosed structural, electrical or mechanical faults other than would be considered cosmetic then the seller agrees to repair the faults or reduce the price to cover the cost of repair, the buyer also reserves the right to withdraw from the purchase with the return of any funds already paid plus an additional €3625 EUR (5%) from the seller to cover buyers expenses.

The seller has basically disagreed with these clauses and sent back a contract that removes any form of penalty to the seller for misconduct, basically all the risk is on us. deposit, survey and haulout costs, travel costs (7 hour round trip), we don't mind these costs if the boat is indeed in the almost perfect condition he says it is. From my untrained eye it does look good but I don't feel comfortable having no safety net as it were.

In my eye he is only risking his time if there are no penalties which seems to negate the point of a contract which IMO should be in the buyers favor since the buyer is the one taking the majority of the risk.

Another problem is that he has no VAT invoice to prove VAT has been paid, the ownership log shows the boat had three owners, a leasing/mortgage company then a private couple (I am guessing they became owners once they had paid off the leasing/mortgage) and then the current owner who purchased the boat two months after the first couple became owners (I am guessing the first couple settled the mortgage to allow them to sell the boat).. What would people here do in this situation? the current owner insists that it proves the boat is VAT paid due to the fact he purchased it from a private individual, I think that is BS and I don't see why there wouldn't be some form of invoice unless the VAT is not paid?

Am I being paranoid or over the top? Am I wrong with my contract?

regards

Sam

buy whitelighter beer and take his advice. He got stung on an attempted italian purchase.

 

[sailaboutvic]

We not long sold our last boat privately and not only are both seller and buyer happy we become good friends ,

You say your payin 72k , but What was the asking price of the boat ?

 

[gianenrico]

By italian law any transaction concerning registratio/deregistration MUST be carried out by the public officers within 20 (twenty) days.
To save administrative costs (an italian boat sale IN ITALY is subject to specific taxation and registration cost by a Notary) once You and the seller agree, he can ask for the "Nullaosta alla cancellazione dal RID" (Permission of cancelling the boat from the Italian Register of Boats), once he gets it, he can register under UK flag (SSR?) with your help and then proceed to a sale in the UK, under UK terms and laws (which, in my understanding, does not imply any taxation but I might be wrong).

 

[Sailfree]

Just an aside on invoice proving VAT paid.

I bought our boat new in UK and paid VAT - I therefore have the original invoice with VAT paid.

The boat was immediately put out to charter and the VAT was reclaimed so the boat was effectively not VAT paid yet it would appear to be if I chose to misrepresent it's status with the original VAT invoice.

When I closed the charter company and sold the boat I issued a new invoice for the second hand sale price with added 20% VAT and paid that amount on that quarters VAT return but others might be less honest.

In my experience I have never been asked in nearly 20yrs of new charter boat ownership of needing to prove VAT status nor is there any adequate method in the UK of proving VAT paid status.

 

[macd]

nor is there any adequate method in the UK of proving VAT paid status.

Absolutely right. There is merely evidence, which is very, very rarely conclusive (as in the ex-charter case you describe).

 

[theoldsalt]

..... nor is there any adequate method in the UK of proving VAT paid status.

Not true. This is one example - I purchased a boat without VAT paid. I paid the VAT and received a laminated receipt from HMRC which was passed to the new owner when I sold the boat. So the new owner had evidence of VAT paid and HMRC had a record of the money received and the receipt being issued.

 

[macd]

Not true. This is one example - I purchased a boat without VAT paid. I paid the VAT and received a laminated receipt from HMRC which was passed to the new owner when I sold the boat. So the new owner had evidence of VAT paid and HMRC had a record of the money received and the receipt being issued.

...but let's say the person you sold to lived in Jersey, and that's where the sale took place. So the boat was exported and no longer VAT-paid in the EU. Your laminated VAT receipt would still exist and could be waved about to any interested official, but it would not prove the vessel was VAT-paid, because it wasn't (although it might satisfy said official).

Evidence, not proof.

 

[KINGFISHER 9]

When it's all over, first count your fingers and then check that you actually own the boat! ... :encouragement:

 

[Tranona]

Not true. This is one example - I purchased a boat without VAT paid. I paid the VAT and received a laminated receipt from HMRC which was passed to the new owner when I sold the boat. So the new owner had evidence of VAT paid and HMRC had a record of the money received and the receipt being issued.

That is no different from a commercial receipt, and HMRC are very clear that they keep no records of the actual payment. As macd says the boat could still its "status" by being exported or changing hands outside the EU.

 

[theoldsalt]

...but let's say the person you sold to lived in Jersey, and that's where the sale took place. So the boat was exported and no longer VAT-paid in the EU. Your laminated VAT receipt would still exist and could be waved about to any interested official, but it would not prove the vessel was VAT-paid, because it wasn't (although it might satisfy said official).

Evidence, not proof.

Yes, I take your point; that if VAT is reclaimed then the original VAT receipt will exist whatever it's source.

You might think that HMRC should insist on the surrender of the VAT receipt (or endorse the receipt) before refunding VAT ? - HMRC must have sight of the VAT receipt to know how much VAT to refund ?

So it can be advantageous to buy a boat on which VAT has been reclaimed if the original VAT receipt exists as the boat can be purchased for approx 20% less.

 

[macd]

You might think that HMRC should insist on the surrender of the VAT receipt (or endorse the receipt) before refunding VAT ? - HMRC must have sight of the VAT receipt to know how much VAT to refund ?

As Tranona indicated, HMRC linking VAT payment to a particular item or service, such as in your case, is the exception. Indeed there is absolutely no link in VAT returns between a specific item and the VAT tendered to (or reclaimed from) HMRC. All that counts is the bottom line, the nett amount owed or reclaimed. This makes for a system which is cheap to administer (which is why VAT-type taxes are so popular around the world), but one which is not at all definitive regarding specific VAT events. It has always sat uncomfortably with UK boats (but less so in several other European countries, where VAT payment is very clearly tied to registration).