Superyacht Personal Guarantees and Warranties of Title

Each issue, I am asked to write about something interesting that has crossed my desk over the past few months and, on this occasion, it is superyacht Personal Guarantees and Warranties of Title.

It is well known that the US and Europe/rest of world utilise very different forms, but it is not so well understood how they differ, and the implications for clients. It is normal for a superyacht to be owned by an SPV, a single purpose vehicle established for the sole purpose of owning the yacht. The primary advantages are discretion and near-anonymity for the ultimate beneficial owners, and a distancing of risk.

The consequence, though, is that when a yacht is bought from an SPV, if a debt or claim should be discovered after completion of the sale, the selling entity would be a value-less SPV, and a financial recovery would be near impossible. It is not unheard of for debts to arise a year or more after completion of the sale. Debts such as berthing, fuel, crew salaries and shipyard costs attach to the vessel, which means they can be inherited unknowingly by a new owner.

Therefore, we insist on taking a personal guarantee and indemnity from the beneficial owner of a selling company. Ten years ago, a guarantee was seemingly provided in sub-50% of transactions; they are now de rigueur and almost universally provided.

In the US, it is normal for a Warranty of Title to be granted, which simply says that the seller guarantees free and clear title. By contrast, the MYBA Personal Guarantee, the long established worldwide benchmark, is in fact more limited than most users realise: it can only be called upon once the yacht has been arrested, which puts the new owner in a very difficult position. We have started tailoring our MYBA Personal Guarantees accordingly, although it remains the most widely used protection for incoming owners.

James Jaffa
Managing Partner