Cut to

the Chase

A RISKY BUSINESS

With assets of this size and nature, people buy from people – not companies. Yachts may be advertised by brokerages, but they aren’t sold by them. It’s the individual brokers who do the selling. They often work extremely hard – especially during shows – with an uncertain outcome. They’re patient and diligent, and their commissions are well-earned. They perform a crucial role.

THE CENTRAL AGENCY

When instructing your broker to sell your yacht, a Central Agency (CA) agreement is imperative. The agreement makes it clear that your broker is in charge of the sale, and will be rewarded no matter who actually sells the vessel (including you – so make sure you have explored your own network first). Your CA can provide a valuation, a marketing plan and produce marketing materials (at their or your expense depending on what you negotiate).

At a stroke, scope for argument as to which party was the effective cause of the sale – and so owed commission – is eliminated. Understandably, without a CA agreement in place, most brokers are unlikely to go all-in to prepare the yacht for sale and make every effort to sell: it’s just too easy for third parties to argue that the broker claiming commission wasn’t in fact the (or an) effective cause.

Standard form agreements are available, but many of these are poorly drafted, so contact us to have this checked and amended. A pre-determined sales price is often the default setting, but some brokers may prefer a net-to-seller figure, which they can adjust up or down as they see fit.

MULTIPLE LISTING SERVICES

A Multiple Listing Service (MLS) is a database used by brokers (whether CAs or not) to share their listings, in order to reach a wider audience. MLSs usually have their own public online marketplace, and may supply listings automatically to subscribing brokers’ websites, through an application programming interface (API).

The use of MLSs (and certain brokers’ associations require their use) can lead to very broad market penetration for the seller, potentially leading to a quicker sale, but there are drawbacks.

Use Google Lens and you’ll find identical images posted by numerous brokers. It's not clear which broker has a direct line of communication with the seller.

Where a yacht is listed on a marketplace website (and it’s these which tend to come up first when searching online) it is easy to assume – wrongly – that the broker named in the listing is the CA. The use of API-powered automatic listings may mean that the listing broker knows nothing about the vessel, and may be unaware of the listing itself until an inquiry comes in. The CA’s own website listing, meanwhile, will be languishing well behind on Google simply because the CA’s website’s SEO can’t compete with that of the MLS. The potential buyer is none the wiser. Also, by having the vessel listed everywhere, it's possible that the seller can look somewhat desperate.

Nevertheless, once a second so-called ‘buyer-broker’ is involved (i.e. a broker acting for the buyer) they will be entitled to a share (a half or thereabouts) of the commission. Their brokers’ association rules may require it. With chains of communication also stretched, negotiations can become protracted while passions cool and interest fades.

CLASS ACTIONS

Various class actions have been brought in respect of MLSs. In Ya Mon Expeditions LLC v International Yacht Brokers Association Inc et al, the plaintiff brought an action, in February 2024, against 16 defendants, claiming, in essence, that (in violation of US federal antitrust law) brokers’ associations are requiring members (i) to list all their vessels on an MLS (which may also be owned by that association), and (ii) to follow non-negotiable commission-splitting rules.

Ya Mon claimed that “most buyer-brokers will not show vessels to their clients if a seller is offering a lower buyer-broker commission, or will show vessels with higher commission offers first” meaning that “sellers are incentivized when making the required non-negotiable offer to procure the buyer-brokers’ cooperation by offering a high commission”. Ya Mon also claimed that the defendants’ business practices are anti-competitive, with buyer-broker commissions being about 4% to 5% which is artificially elevated beyond where they would be in a free market.

In Defosey v Boats Group LLC et al, a plaintiff brought another class action, in May 2024, against some 18 defendants, making broadly the same claims as Ya Mon, arguing that broker associations’ rules “force sellers to pay a portion of the commission … to the buyer-broker, someone who provided no service to the sellers” and, as the commission paid to the buyer-broker is not subject to negotiation between the buyer and his/her broker, such rules prevent competition among buyer-brokers based on their commission rates. A similar case was pleaded in Magna Charter LLC v Boats Group LLC et al.

At the time of writing (October 2024) Ya Mon is ongoing, while Defosey and Magna have been terminated, presumably because these have been settled or consolidated with other class actions.

MLSs made a lot of sense where potential buyers would drop by their local harbourside brokerage and might have been interested in a vessel details of which weren’t displayed in the window. But they make less sense in a world where most buyers look online, and could reach out directly to the CA – if only they understood the pitfalls of not doing so, and knew where to look.