FAQ's for boats,
Buying or selling a water craft the smart way!
1. WHAT AM I ACTUALLY SELLING OR BUYING?
A third or half interest in a vessel depending on the program, whether it be a pleasure boat cruiser, houseboat or motor or sailing yacht.
2. DO I RECEIVE TITLE AND OWNERSHIP TO THE VESSEL?
Yes. Each time two or three individuals, or businesses or a combination of both have interest in one of our fractional ownership plans, a corporation is formed. You will actually own 33.3% or 50% of all the shares of that corporation depending on the program, and all of its assets.
You decide which method of ownership best suits you.
1/ You can own the entire boating season in the north from May through Oct.
2/ You can own the entire boating season in the south / Florida from Nov through April.
3/ Own half the summer here and half the winter in Florida.
4/ With two owners you can own half of each month in the summer and split up the use in Florida in the winter.
5/ With 3 owners you can own 10 days out of each month and split up use in Florida in the winter or offer to customize a use plan.
6/ If all owners reside in the south, the same time plan options above apply with one added time plan; the monthly rotate time plan where by each owner rotates on a monthly cycle year round for both the third and half ownership plan. Any time plans may be created as long as all plans are agreed to by all parties of the fractional ownership plan.
What ever works for all owners ... can be arranged.
The corporation will own the vessel, and you will be a third or half owner of the corporation. The corporation will then lease the vessel to you under a “right to use” program for the sum of one dollar for your exclusive time of use each year.
For example; You could have exclusive use for the months of May, July & September each year, while the other owner enjoys exclusive use for the months of June and August or vise/versa. Then on a mutual agreement this time can be reversed the following year. With a Fractional Plan, the owners can also customize their time of use each year with the full acceptance of all parties.
The vessel can be dry docked in the winter or shipped to Florida for winter use and enjoyment in the Sunshine State.
It is possible to have fractional plan tailored made if the other parties agree. Yes, of course!
For example; we learned of a Fractional plan between two parties in Vancouver BC, whereby one owner was completely satisfied with having use of the vessel only for the month of July each year which made the other owner very happy with full use of the rest of the boating season, that being for May, June, August and Sept each year. Then the vessel was shipped to Santa Monica, California where they both enjoyed alternating use in the California sun during the winter.
Another fractional plan that was arranged for two parties was one party received total use of the vessel in Florida for the winter and the other received total use of the vessel for the entire summer in Ontario, Canada.
Imagine 100% use of the vessel for 50% of the price and 50% of the operating costs. This ownership concept even allows for a reciprocal 2-week exchange from north to south for both parties providing both parties are in favour of course.
3. WHEN DO MY OWNERSHIP PRIVILEGES BEGIN?
You may enjoy all the privileges of your new lifestyle as soon as your escrow closes and your designated season begins.
4. DOES FRACTIONAL OWNERSHIP MEAN THAT I HAVE OTHER MEMBERS BOATING WITH ME?
No, this is your private vessel during your "guaranteed operational period". The only passengers on board are your family, friends and quests and a captain if so arranged.
5. HOW LONG DO I OWN MY VESSEL?
You own the vessel as long as it continues to qualify for seaworthiness approval. Yachts can remain seaworthy for 75 + years if maintained properly.
6. HOW IS MY MONEY PROTECTED?
Each fractional program can either be Free & Clear of debt or 100% financed. With no debt on the inventory, there is no chance of foreclosure or bankruptcy. However, even with the 100% finance option, the implementation of a reserve fund makes it almost impossible for a foreclosure or bankruptcy to happen as a result of a non-payment because the reserve fund will always cover any unpaid amount and if an owner is late in making finance payments for 60 days, he has agreed to forfeit his "right of use" and the other owner(s) will have the full right to sell his share in the corporation and in the vessel.
7. DO I NEED A CAPTAIN'S LICENSE TO TAKE A VESSEL FROM PORT?
For any vessel under our Fractional program a Captain’s license is usually not required although you must pass an ability test administered by a licensed Captain. This is for insurance purposes and for the peace of mind for the other owner(s). The test is not difficult with relative boating experience and will be supervised by a licensed Captain. You will also be required to have an Operator’s license to navigate in certain harbours where applicable. For yacht ownership in Florida and for insurance purposes, you may be required to be tested by local Coast Guard. For operation in Toronto Harbour, you will need a harbour operators license.
A 3-day navigation course may be administered if owners so decide to prove your ability to Captain the vessel. This usually applies to purchases of Yachts 36 feet and over. You may also contract licensed Captains to make your own arrangements to hire a licensed, bonded Captain.
8. IS FINANCING SOMETIMES AVAILABLE?
Yes, you could seek financing arrangements on all Fractional Plans. You may choose a 5, 10, 15 or 20-year amortization. with attractive interest rates in some cases depending OAC. A good credit rating will be required under any Fractional Plan, but remember financing must be agreed upon by all parties.
9. WHO MANAGES AND MAINTAINS THE VESSEL?
The local management company may be granted a contract for a term of two years where the vessel is based. Following that term, the owners at their own discretion by vote may elect themselves to manage the vessel during their seasonal operation of the vessel.
10. WHAT INSURANCE COVERAGE IS REQUIRED?
A blanket insurance policy will be required to cover all normal problems and major catastrophes, e.g. fire, damage, liability, acts of God, etc. There is also a full hull policy. The final documents will provide additional details about insurance. Insurance coverage varies for all vessels.
11. ARE CHILDREN & PETS ALLOWED?
It is important to remember that Children under the age of 18 must always be accompanied by an adult. Sorry, no pets due to the risk of cosmetic damage to the vessel unless all shareholders are in agreement to allow pets, but we don't recommend unless both parties fully understand that pets will usually cause some cosmetic damage if not more. All policies may be amended from time to time by unanimous vote of the two or three shareholders to benefit vessel owners.
12. WHAT ARE THE TAX BENEFITS?
Depending on State or Province ... if purchasing a yacht or houseboat, it may be considered a second home, therefore you can deduct the mortgage interest if you finance your purchase. If you periodically use the vessel for charter purposes there are additional interesting corporate tax advantages, but remember that the use of the vessel for outside the normal use must be agreed upon by all owners, unless a fractional ownership is purposed by all owners for the purpose of operating a Charter.
Please ask your accountant for tax advise regarding this matter
13. CAN I RESELL MY FRACTIONAL OWNERSHIP?
Yes, and you may treat this the same as any other asset, which means you may sell it, will it, gift it or trade it for anything of value with the unanimous approval from the other owners which shall not be reasonably refused. Some reasons for refusal however is if the party you are selling or assigning to does not possess a good credit rating, does not provide a satisfactory police abstract, does not provide a satisfactory driving abstract or the necessary operator’s license.
14. CAN ANOTHER OWNER OR CREDITOR PLACE A LIEN ON THE VESSEL?
NO! No one can make you responsible for his or her liabilities. It is also not possible for an owner to put a blanket lien on the vessel. In the event a fractional owner is delinquent in paying his proportion share of common expenses (insurance, maintenance etc.), personal or finance payments, the other fractional owners may apply the delinquents owner’s reserve funds that were set aside by him to cover his out standing debt should such an event arise. This is to secure the other owner(s).
If the fractional owner who is delinquent does not replace his reserve funds into the corporation that were used to cover his delinquency within the time set-out in the agreement, then he automatically agrees to forfeit his fractional "right to use" the vessel. The other fractional owners with full uncontested approval from the delinquent fractional owner will immediately suspend the delinquent owners fractional right to use the vessel for his designated season as agreed and may at their sole discretion without objection proceed with one of the following options;
1/ Charter the vessel with a licensed Captain for the entire season designated to the delinquent owner, to cover the delinquent owner’s out standing debt, which does not release him from his obligations of replacing his common expense reserve funds and comply with the other provisions of the fractional ownership agreement. or,
2/ Lease the vessel with a licensed Captain for the entire designated time of use of his fractional share to recover the delinquent owner’s out standing debt, which does not release him from his obligations of replacing his common expense reserve funds and comply with the other provisions of the fractional ownership agreement, or,
3/ Sell the delinquent’s fractional ownership shares, which would terminate his exclusive right to use the vessel and dissolve his share ownership in the corporation. In such an event all expenses, including but not limited to; newspaper sales ads, broker fees, legal fees, depreciation cost, and docking fees will be deducted from the proceeds of sale of the delinquent owner’s fractional share with the balance paid to the delinquent owner.
15/ WHAT ARE MY PERSONAL EXPENSES?
1/ Personal Insurance Coverage ($500,000 for Bodily Injury & Property Damage) for the time of use.
2/ Repair for minor cosmetic damage determined not to be reported to insurance company.
3/ Vessel quality shall be maintained and handed over to the next seasonal shareholder in the same condition as it was when received, normal wear and tear accepted.
4/ Transportation to Port destination in the event of a Florida/Ontario ownership arrangement.
5/ Employment of Licensed Captain if necessary.
6/ Cleaning services. Prior to turn over, vessel must be professionally cleaned and in the same excellent working condition as was received.
7/ Repair of engine in the event of damage as a result of operators error or negligence such as:
the replacement of a dinged prop.
16/ WHAT ARE MY PROPORTIONATE COMMON EXPENSES?
1/ Management / Overall seasonal maintenance inspection
2/ Repairs considered to be of normal wear and tear.
3/ Insurance Coverage.
4/ Docking fees.
5/ Engine maintenance of vessel.
6/ Winter storage fees. (unless vessel is in Florida with other owner(s) time of use)
7/ Replacement or repair of navigational equipment or any other equipment or chattels that is required to be onboard the vessel in working order for safety purposes.
8/ Any additional equipment the corporation decides to purchase with the approval of all fractional parties.
17/ CAN MY "COMPANY" PURCHASE A FRACTIONAL OWNERSHIP PLAN?
Yes. When you see these giant yachts and often wonder how anyone can afford to buy such a luxury… now you know how many of them do it! Corporations benefit even more under our fractional plan because their monthly payments and expenses may qualify as an entertainment and/or marketing expense deduction. Please contact your CPA. The tax advantages can be compelling!
18/ WHAT KIND OF EXPERIENCE IS REQUIRED TO OPERATE THE VESSEL?
Boating experience is required, however no experience of any particular vessel is required. Each owner will receive on-the-water training by a licensed captain at the buyers expense. This will include the skills necessary to captain the vessel skillfully and safely. Each owner will also receive an instructional guide and manual for the operation of the vessel. An operator’s license may be required to operate the vessel in certain harbors. A chart must also be provided by the owners that marks any shallow areas, rocks or other permanent protruding objects in and around the Harbor area where they will be boating.
19/ WHEN IS HOUSEKEEPING AND MAINTENANCE PERFORMED ON THE VESSEL?
The first day following the return of the vessel for turn over. Detailed professional housekeeping both inside and out will be serviced together with regular scheduled maintenance service.
20/ CAN I MAKE AN INCOME WITH MY VESSEL?
If such a Fractional Plan is formed by all owners for that reason and it is acceptable to all owners, then the the vessel will help you earn income by showing you how to charter your vessel with a caring trained and licensed Skipper or on your own if you are licensed to do so. A complete charter kit including brochures, business cards, signage, web site, sample ads, rate charts etc. will accompany this Fractional Income Plan for a one time cost of $495 if requested.
21/ WHAT CAN PREVENT ME FROM BEING ACCEPTED INTO A FRACTIONAL OWNERSHIP PLAN.
We normally leave that up to the parties who plan on entering into a fractional plan together.
The following are usually requested with other boating partners.
1/ Possession of a valid Operator’s permit (license) if the vessel's home port requires a license.
2/ A good standing credit rating.
3/ A satisfactory background check abstract.
4/ Two character references.
5/ A satisfactory motor vehicle drivers abstract via the Ministry of Transportation.
6/ A satisfactory marine abstract if you already possess an operator’s license, other wise not required.
22/ ARE ALL FRACTIONAL VESSELS NEW.
They can be new or used .... again depending what the fractional owners are looking for in a vessel.
Pre-owned buyers should keep in mind that a warranty may not come with the acquisition. We will also make an exception of putting a Fractional plan together for owners who have expressed interest in a particular pre-owned vessel because of good pricing and because it is has low operational hours. Pre-owned vessels will not qualify for long term financing. The new vessels will however which means lower finance payments and larger vessels. It really depends on the boater's requirements.
All vessels will be fully furnished and accessorized with state of the art navigational equipment and all necessary safety equipment on board which may be subject to inspection from time to time. A list of all equipment is available upon request.
Here is how our plan works
1/ Identify the type of vessel desired, one that meets your specific needs. We can attempt to place you in a program with one or two other owners for vessels starting from $18,000. That would mean as little as $6,000 for a one third share, all the way up to $10,000,000 with your one third share being $3,333,000. Yes we do sell yachts plans at these high prices.
2/ Most vessels are divided into two (2) or three (3) equal fractions or shares.
3/ First call your bank and establish pre-approval for your proportionate financing of the boat. The vessel may not be used as security under any individual fractional plan. The reason for this is, so nobody can put a blanket lien on the vessel. The vessel as a whole will be financed with a strong security reserve.
When the other buyer or 2 buyers are found, the vessel will be financed and all 2 or 3 of you depending on the fractional plan will be required to sign the paper work for finance, insurance, security reserves, and the fractional agreements.
Select the best time on the water to suit your boating lifestyle
Fractional Agreements / If you would like to arrange your own fractional plan with friends or colleagues, or if you feel it's a better and faster way to sell your own boat for the obvious benefits, then click here for easy ordering of our fractional kit which includes all the agreements you need to start selling your boat today... the fractional way!
TIC - FAQ's Canada, U.S.A. & International -
Vacation Homes Cottages Condominiums Motor Yachts & houseboats
Buyer match form
Home About World News Advertising Contact Site Map