When a superyacht is sold, where does the buck stop with regards the payment of outstanding invoices? In an ideal scenario a vessel’s management company would ensure that all outstanding invoices are settled pre-sale and, for the most part, this proves to be the case. However, erroneous behaviour on the part of the owner’s team can lead to issues and subsequent litigation.
“We were under the impression when a yacht is sold, the management company or broker coordinating the sale, has the responsibility to carry out the appropriate due diligence in order to ensure all supplier invoices have been paid,” starts Da Gama Maritime’s Steve Monk. “Surely this should be done before funds from the sale is released to the seller? When you buy a house you can’t walk out with debts outstanding and expect the next owner to pick it up.”
Da Gama Maritime, which specialises in the supply of navigation management, safety stores and on board crew training, has recently fallen foul of a situation in which a yacht sale has led to a failure to pay invoices and it is this that has sparked Monk’s frustration. After being initially informed of the sale and having ensured all remaining invoices had been submitted for payment, he believed these would be paid off whether the crew remained on board or not but prior to handover of the keys.
“With payment not forthcoming and reminders issued, we subsequently discovered the sale had gone through and the original management company declaring they too were struggling to get funds from the original owner” states Monk.
The value of the invoice, Monk points out, is almost irrelevant; what is more important is the failure to correctly manage the situation. It should be the job of the management company to recognise the processes involved in the sale of the vessel and ensure all parties receive what is due, pre-sale. “In the past we have dealt with a number of top management companies that have acted in this exact manner,” Monk says.
As it transpires, the yacht in question had been a slow payer from the start. “Unfortunately, in this industry, there will be companies who suffer and potentially go under simply because those holding the purse strings know that if they hold back payments long enough companies will either give up or cease to operate,” explains Monk. “Small companies do not always have the ability to employ bailiffs to ensure the yacht is arrested and while it may be asked why don’t we take payment before dispatching the goods (which we sometimes do), crew are often placing short notice orders which we support due to the good working relationship we have with them.”
Part and parcel of the issue, again, is that the less experienced management companies, operating under the auspices of the owner and a single vessel, do not always have the knowledge required to separate the trivial from the necessary. Within the pile of invoices is everything from towels to safety equipment. If, for instance, an invoice for fire safety equipment and charts is not paid and the equipment never reaches the yacht, Port State Control is well within its rights to arrest the vessel in question. However, a marketplace in which suppliers have yachts arrested for late payments is not one that we should aspire to operate within.
It is in everyone’s best interest that the supply chain is adequately rewarded and supported by the largest stakeholders. “Under normal conditions we will dictate that costs be paid within 30 days of the original invoice,” explains Monk. “However, if the boat believes that a single monthly payment is the most effective route, we are open minded to this. Equally if they prefer us to contact the management team directly, that is also fine. We try and remain flexible to ensure the yachting experience remains enjoyable for the owner but would appreciate the same courtesy.”
Unfortunately, such flexibility is, at times, exploited by those who believe they can escape payment.