A yacht survey found defects. What happens next?

The three routes, in the order buyers usually consider them

Your position comes from the contract, not from the report

This is the point most buyers discover too late. A survey report, however thorough, creates no rights on its own. It is evidence. What it is evidence for was decided when the sale agreement was signed.

Brokered sales of larger yachts

Sales at and above roughly 15 to 24 metres are commonly written on the MYBA Memorandum of Agreement, the industry standard form. Its survey provision works in a specific way. If the condition survey reveals defects other than those already disclosed to the buyer in writing, the buyer may within seven days of completion of the survey serve written notice on the seller requiring the seller to make the defects good, or to make a reasonable and sufficient reduction in the price so that the buyer can make them good afterwards.

The form also defines what qualifies. A defect must be one that was not disclosed in writing before the agreement was signed, and that in the professional opinion of the surveyor renders the yacht unseaworthy or affects the operational integrity of the yacht, her systems or her machinery. The defects relied on must be certified in writing by the surveyor in a separate statement attached to the buyer's notice.

Editions of the form differ, and it is routinely amended during negotiation. The executed document is the one that governs. Read it, and take legal advice on it, before the surveyor boards.

Smaller craft in the United Kingdom

Below that size the agreements published by the industry bodies are shorter and the survey condition is looser. The sale is expressed as subject to survey, the buyer pays a deposit, and the buyer may withdraw or seek to renegotiate if the survey is unsatisfactory. The notice periods and the definition of an unsatisfactory survey vary between forms and between amended versions of the same form.

Private sales

A private sale conducted on a handshake and a bank transfer carries no survey condition at all, because there is no contract to carry one. The buyer who has already paid has no route back. The buyer who has not yet paid has full commercial freedom and no contractual protection. If you are buying privately, the single most valuable thing you can do is put a short written agreement in place, conditional on survey, before any money moves.

Which findings carry weight, and which do not

A pre-purchase report on a used yacht of any age will list dozens of items. Very few of them are negotiating currency. It helps to sort every finding into one of three categories before you go anywhere near the seller.

1. Defects. Conditions that affect seaworthiness or the operational integrity of the vessel and her systems, and that were not disclosed. Water ingress into a cored structure, corrosion or wastage in a fuel or seawater system, a failed or failing through-hull fitting, a structural crack at a bulkhead or keel landing, a gearbox or shaft alignment fault, a defective bonding or shore power arrangement. These are the findings that qualify.
2. Maintenance backlog. Deferred servicing that any owner of a vessel of that age would expect to fund. Anodes near the end of their life, tired hoses and impellers, out of date safety equipment, a coat of antifouling due. Real money, and worth raising, but a seller can reasonably answer that the price already reflects a used vessel.
3. Cosmetic. Gelcoat crazing, tired varnish, worn upholstery, weathered teak. These almost never move a price and raising them weakens the items that should.

The distinction between the first category and the second is where post-survey negotiations are decided. A buyer who arrives with a list of forty items has invited the seller to argue about the weakest ones. A buyer who arrives with six certified defects and leaves the rest aside is much harder to dismiss.

A finding is not yet an argument

There is a large difference between a line in a report that reads elevated moisture readings noted in the foredeck and a defect a seller cannot argue with. The first is an observation. The second requires four things.

• Location and extent. One moisture reading proves very little. A mapped area, with readings recorded at stated points and correlated with percussion sounding, describes a condition. Whether the wet core covers half a square metre or the entire foredeck is the difference between a modest repair and a project.
• Evidence. Photographs that show the fault and its context, instrument readings with the instrument and method identified, and where access allowed it, what was found behind the panel rather than what was inferred from in front of it.
• Cause and consequence. A surveyor who records a symptom leaves the seller room to call it cosmetic. An engineer who explains that the deck fittings were bedded without sealing the core, that the core is therefore taking water at every fastening, and that the laminate will continue to lose stiffness until it is opened and dried, has described something that cannot be polished out.
• Cost to cure. A number, derived from how the work is actually done.

Costing the remedy honestly

Cost to cure is where inexperienced negotiations collapse, because the buyer quotes the price of the part and the seller quotes the price of the part back. On a yacht the part is rarely the expensive half.

The real cost is built from the labour to gain access, the labour to do the work, the labour to reinstate, the yard charges that run in parallel, and the time the vessel is unavailable. Replacing a seawater pump on an engine installed with generous access is a morning. The same pump on an engine installed under a fixed sole, behind a tank that has to come out first, is a different job with a different number. A hull repair below the waterline carries a lift, a stand, a pressure wash, a drying period that may run for weeks, and a relaunch, before anyone has laminated anything.

The defensible figure is one built the way a yard would build it, and better still, supported by a written quotation from a yard that has seen the report. A costed schedule of that kind is difficult to answer with an opinion. A round number is easy to halve.

Where buyers lose a position they had

Four failures account for most of them.

• The deadline passes. Seven days from completion of the survey is not seven days from receiving the report. Reports take time to write. If the survey is on a Friday and the report arrives the following Thursday, most of the notice period has gone. Agree the reporting turnaround before the survey is booked, and diarise the contractual date.
• The negotiation happens verbally. A telephone conversation with a broker is not written notice served on a seller. Warm conversations are useful. They are not a substitute for the step the contract requires.
• The scope was too narrow to find the argument. A standard survey commonly excludes engine internals, tank internals, rig inspection aloft and attendance at sea trial. Machinery is frequently the largest financial risk on a motor yacht and frequently the part nobody opened. A defect that was never inspected for cannot be certified.
• Everything is raised at once. A schedule that mixes a wet deck core with worn upholstery invites the seller to answer the upholstery.

Expect the seller to answer

A seller who is not ready to lose the sale will make one of three replies. That the finding is normal wear for a vessel of that age and price. That it was visible and therefore effectively disclosed. Or that their own surveyor disagrees. All three are answerable, and all three are answered by the same thing, which is evidence written to a standard that survives a second professional reading.

This is the practical reason the quality of the report matters more than its length. A report written as an inspection record satisfies the buyer's curiosity. A report written in the knowledge that it may end up attached to a notice, read by a seller's surveyor and possibly by a solicitor, is a different document, and it is the one that holds its value at the point it is tested.

What to settle before the survey, not after

Almost everything described here is decided before anyone steps aboard.

• Read the survey clause in your own agreement, and know the notice period and the definition of a qualifying defect it uses.
• Diarise the deadline from the day of the survey, not the day of the report.
• Agree the reporting turnaround in writing when the survey is commissioned.
• Decide what is in scope. Haul-out and underwater inspection, sea trial attendance, engine assessment, rig inspection aloft, and whether panels and soles may be lifted.
• Establish that the surveyor is willing and qualified to certify defects in the form your contract requires.
• Confirm that the person inspecting the vessel has no commercial relationship with the seller, the broker or the yard.

A buyer who settles those six points before the survey has the routes described at the top of this article. A buyer who settles them afterwards frequently discovers that the report is interesting but that the moment to use it has gone.