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FYBA BROKERAGE FORMS UPDATE

• Posted 07-30-2014
• IYBA  

The FYBA Purchase and Sale Agreement (PSA) and Listing Agreement forms were recently updated. The key changes to the forms are described below, including a comparison of the new provisions to the old provisions and the reasoning for each change. Most of the changes are not intended to vary the intent of the agreements. Their purpose is to clarify and deal with potential misinterpretations by “heading them off at the pass.” 

There also were some very important changes to the PSA designed to strengthen its integrity. The first deals with the situation in which a buyer signs a PSA but never “antes up” the required deposit. Previously, a buyer could generally just “walk away scot-free” but no longer. A provision also was added so that, in the event of litigation, the prevailing party will get its attorney’s fees whereas previously each party to litigation paid its own freight. 

Other important changes to the Listing Agreement deal with what happens when a person to whom a broker showed a yacht purchases it after the original listing has expired. In addition, the standard length of a listing was increased to one year.

PSA Updates

New Provision: Whether or not the buyer inspects the yacht, he rejects it if he fails to provide timely written notice of acceptance: Although the PSA already provided in paragraph 3 that a buyer rejects the vessel if he doesn’t accept it in writing, it is now absolutely clear that no inspection is required in order for a rejection to occur. The change was made to deal with the potential argument that in order to be able to reject the vessel, a buyer had to inspect it – and if the buyer didn’t inspect, he waived his right to reject.

New Provision: The seller is solely responsible for the broker’s commission: Although this provision is already in paragraph 5 of the Listing Agreement (and is the law even without an agreement), it was added to the PSA because buyers ask the question often enough. Now, a broker can point to paragraph 5 of the PSA and reassure the buyer, since buyers aren’t parties to and don’t see the Listing Agreement. 

New Provision: If the vessel is damaged and repaired after acceptance, the buyer now has an explicit right to inspect those repairs: If the vessel is damaged after acceptance, the seller is obligated in paragraph 7 of the PSA to make repairs if they can be made for less than 5 percent of the purchase price and require fewer than 30 days to complete. Previously the PSA did not state the obvious, that a buyer had a right to inspect those repairs (and make an issue out of it if the repairs were not done properly). The update makes it clear that the buyer has the right to inspect such repairs. 

New Provision: The seller will retain the buyer’s deposit, notwithstanding any other term in the contract, if the buyer fails to pay the deposit when due or the closing is not consummated due to Buyer’s nonperformance: The PSA already provided in paragraph 8 that the seller will retain the buyer’s deposit if the buyer breaches. But what happened if the breach was not paying the deposit?  

The new language includes a hammer. The new approach is as follows: If a buyer signs a contract but doesn’t pay the deposit, he no longer can walk away by saying, “Hey, I had a right to reject by not accepting anyway.” The PSA responds to that type of buyer by saying clearly, “No siree, Bob!”

The message to a buyer is now, “If you are going to sign a contract, you had better be serious, because there is a consequence.” The consequence is that a yacht’s value is affected by an accepted contract, especially when the contract price reflects any reduction from the listing price. And if a buyer plays that game, he is at risk for the amount of the deposit he should have paid.

New Provision: The buyer warrants that he is not relying on any representations by the seller or the broker: Paragraph 10 was revised to make it clear that a buyer warrants he is not relying on any representation made by the seller or the broker. The previous version only included the broker. This change puts an accent on the concept that the sale truly is “as-is” and the buyer can’t rely on anything other than what is in the PSA.

New Provision: The prevailing party in any litigation arising out of the PSA is entitled to expenses, attorney’s fees, and costs for all pretrial, trial, and appellate proceedings: The attorney’s fee provision in paragraph 16 is new to the PSA. The addition of this provision discourages frivolous lawsuits, or parties taking unreasonable positions, because if there is going to be a lawsuit, the losing party will have to pay the costs and attorney’s fees of the prevailing party. 

New Provision: All notices are effective upon delivery with proof of delivery retained. Notice is no longer accepted by U.S. mail: The notice provision in paragraph 16 was modernized to conform to today’s business standards. The update removed the option to provide notice by U.S. mail and made notice effective upon delivery with proof of delivery retained. This change was also incorporated into paragraph 16 of the Listing Agreement. This should eliminate arguments about whether or not proper notice was given.

Listing Agreement Updates

New Provision: The term of the listing is now one year and it automatically renews for successive one year periods. After the first year, either party may terminate the Listing Agreement with 30 days’ written notice: Previously either party could terminate the listing after 180 days with 90 days’ written notice. The change to paragraph 9 makes things simpler by extending the time before termination is allowed to one year and shortening the number of days required for written notice of termination.

New Provision: A commission is due to the broker if within six months after the listing ends the seller sells the yacht to any party to which the broker physically showed it. At the seller’s request, the broker must provide a list of persons physically shown the yacht: Previously a commission was due to the broker if within two years of the listing ending the seller sold the yacht to a buyer whom the broker or a sub-broker showed “or provided information”. Also, under the previous version, no commission was due to the broker if the seller relisted and sold the vessel through a different broker.

The update to paragraph 10 of the Listing Agreement significantly changes this provision. The time frame for which the seller is responsible for a commission is tightened and there is a new requirement that the broker must have physically shown the vessel to that buyer. If requested, the broker must give the seller the list of persons to whom it physically showed the yacht – so it’s a very good idea (it should be a requirement of each brokerage house) that every broker keep such list. In addition, the new language provides that a commission is due to the broker even if the seller relists the vessel with a new broker.

Robert Allen Law is located at 1441 Brickell Avenue, Suite 1400, in Miami. Contact the firm at 305.372.3300 or visit RobertAllenLaw.com.

Article Author: Stephanie Klein, Bob Allen & Christopher Anderson

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Comparing the ybaa and iyba purchase and sale agreements.

Jun 28, 2017 | Articles

YBAA Yacht Broker News E-Newsletter

By christopher anderson and jane schwed, robert allen law.

Most brokerage yachts on the East Coast and in the Caribbean are bought and sold using one of two agreements – either the International Yacht Broker’s Association Purchase and Sale Agreement for Brokerage Vessel (“IYBA PSA”) or the YBAA Vessel Purchase and Sale Agreement (“YBAA PSA”). While very similar in many respects, there are a few distinctions worth noting. This article will explore the main differences between these two agreements.

• Time is of the Essence

The YBAA PSA contains a “time is of the essence” clause. This clause holds the buyers and sellers strictly to all of the deadlines in the contract. This means that those clauses that call for termination of the contract if the deadline is missed are enforced. IYBA, on the other hand, does not have a time is of the essence clause. This means that the clauses requiring signatures by a certain deadline are not strictly enforced. For instance, there is a clause in the IYBA PSA that requires the buyer to deliver the deposit within three days of the seller executing the document. Under the IYBA PSA, if the buyer misses this deadline but delivers the deposit in a reasonable amount of time, the seller most likely will not be able to terminate the deal over a one or two-day delay.  If your client absolutely must get their boat by exactly 12PM on a Saturday, then the YBAA PSA may be the better choice.             

• Venue for Disputes

The IYBA PSA requires that any claim or proceeding relating to the agreement be brought in a court in the state of Florida, either in the county of the main office of the selling broker, or in Broward County if the selling broker has no office in Florida and no other jurisdiction is written into the blank in the contract. Disputes under the YBAA PSA go to arbitration under American Arbitration Association rules in the city and state of the selling broker’s office.  Therefore, if you have a deal where the selling broker’s office is located in Maine, and the buyer, seller and boat are in North Carolina, then (i) under the YBAA PSA the parties would end up in arbitration in Maine, and (ii) under the IYBA PSA the parties would end up in the courts of Broward County, FL (assuming no other jurisdiction is written in).            

• Choice of Law for Disputes

Florida law governs all disputes under the IYBA PSA.  Choice of law under the YBAA PSA is in the state of the main office of the selling broker. The courts of different states interpret contracts differently.  How one state looks at an agreement differs from how another state looks at an agreement.  Florida, for instance, requires specific disclosures for a contractual provision for liquidated damages to be effective while other states don’t have similar requirements.  Because the YBAA PSA can be governed by the laws of various states based on where the selling broker’s office is located, it may make sense to have a local lawyer take a quick look at the contract.  

• Dual Brokers

Both YBAA and IYBA agreements include a clause that addresses the conflict of interest issues that arise when the buyer and the seller have the same broker. Both agreements allow for a dual broker relationship between the parties. The IYBA agreement also requires that a broker may not disclose to the seller that the buyer is willing to spend more than the asking price without the buyer’s consent, and that a broker may not disclose to the buyer that the seller is willing to sell the vessel for less than the asking price without the seller’s consent. This requirement is a solution to the problem dual brokers have when trying to abide by laws requiring the broker to represent their principal’s best interests. By receiving consent from both parties, a dual broker involved in a IYBA PSA is given stricter guidelines on how to avoid a conflict of interest.

Both IYBA and YBAA have a clause that establishes three requirements that must occur for an agreement to occur. Both require that necessary documents – such as necessary title, proof of removal of encumbrances, etc. – are delivered before the closing occurs. Both also require that the purchase price be paid. The difference in IYBA and YBAA’s closing clauses is that IYBA requires that for a closing to occur, the vessel must be delivered, while YBAA only requires that the buyer confirms they are prepared to close.

• Wire Transfer

IYBA specifies that the purchase price must be delivered by wire transfer. In contrast, YBAA requires that the purchase price has been collected by the seller or selling broker as of closing.

• Prevailing Party Legal Fees

In a dispute under the YBAA PSA, absent theft or fraud, the party who wins pays his own legal costs.  In contrast, in any dispute under the IYBA PSA, the prevailing party party’s legal fees and costs are paid by the other party.

• Risks and Losses

Both agreements have a clause that holds the seller responsible for all damage done to the boat after acceptance but before closing. The IYBA PSA has different outcomes depending on the severity of the damage. Under the IYBA PSA, damages that cost 5% of the vessel purchase price or less and take less than 30 days to repair must be repaired by the seller, but the contract is adjusted and deadlines are extended by however many days it takes to repair the damages. If damage is more extensive, than either party may terminate the agreement.  Under the YBAA PSA, the seller must repair any damage to the vessel, regardless of the size of the repair, subject to approval of the buyer who has the right to request a reasonable price adjustment or to cancel the sale if substantial damages cannot be repaired to his satisfaction.

These are some of the important differences between the YBAA PSA and The IYBA PSA to take into account when deciding which agreement to use for your next deal.

*This article is a general overview and should not be considered legal advice.

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As a major benefit of membership, YBAA members are invited to use the association's standardized, copyrighted contractual forms, for both U.S. and Canadian transactions. Each Form is designed as an interactive PDF for ease of use.

When properly used, the forms help to clarify the terms and agreements between seller/broker, buyer/seller and broker/broker. In co-op sales with other YBAA brokers, you will know what to expect in the way of documents to be signed.

IMPORTANT NOTE : The YBAA Forms are updated annually, with the valid year-of-use indicated on the bottom of each Form. Be sure to only use current Forms in all transactions. All prior versions of the Forms should not be used; such use will be deemed in violation of the YBAA Membership Code of Ethics. 

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