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post #31 of 36 Old 06-18-2014
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Re: Charter fleet ownership

In reality it just doesn't make sense no matter how you look at it. I considered putting a boat in with both the moorings and sunsail programs.
I thought the longer Caribbean seasons would make it work.
There was a program a few years back where you could put down 25per cent and get the boat free and clear after 5. Year's. I nearly went for it but it doesn't, seam to exist anymore.

The fact is I just couldn't afford a new boat and relying on charter income was not going to change the facts.

If you can afford a new boat and want to cut the costs of ownership it may work for you. So long as you can afford it. And realize you are going to loose money.

I worked with a local charter company for several years. In the PNW. They were much more honest than the picture painted by one poster's description of the business plan.
They chartered more north American boat's back then and did not stick with one manufacturer.
Each boat was individually chartered. By name and picked by charter. And marketed individually. The revenue split was much better at 60 40.
The season to short you just would not get enough chatters to break even.

In reality the buisness plan works for the charter company very well.
No huge financing overhead. No cost for unsold weeks. No cost to insure boats. No cost to moor boats. Small profit from maintaining boats.
All above born by owner.

It can work for an owner who can afford the loss. Helping to reduce the anual cost of ownership.
I would recommend local over Caribbean.

I used to charter regularly local.
I bought an older boat I could afford. It made no sense at all financially. But I like it
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post #32 of 36 Old 06-18-2014
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Re: Charter fleet ownership

Originally Posted by Uricanejack View Post
In reality the buisness plan works for the charter company very well.
No huge financing overhead. No cost for unsold weeks. No cost to insure boats. No cost to moor boats. Small profit from maintaining boats.
All above born by owner.
This is not true for all charter programs. Yes, many are like this, but there are also guaranteed programs like Moorings and Sunsail (as well as a few others) where they cover all the costs during the charter and you just pay a nominal turn around fee.
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post #33 of 36 Old 06-18-2014
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Re: Charter fleet ownership

This thread beautifully illustrates that making the decision to put a boat in a charter program is a complex decision. Very complex.
We have had boats in charter programs for more than fifteen years now, so you me consider us experienced.
First consideration: Make sure your CPA is very familiar with all the rules, and comfortable with them, and will support you. Second: Assume the IRS will audit you. Third: You must repeat must conduct this a business. You must be able to show you investigated the decision to get into this business, and have the records to prove it (make a copy of this thread, and keep it.), and records to show that you are running it as a business. As such there is a limit on how much you can use the boat. Our CPA walked into our audit with 2 1/2 filing cabinet drawers full of records. Our additional tax bill was $1.98 - after two months of IRS review.
Bottom line: cash basis - a small loss. Accounting records - a very big loss Result: we came out ahead because we used the accounting paper loss to offset other gains.
Suggestion: if the charter company is only willing to keep your boat for four years or less, they probably are not maintaining it the way you would want
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post #34 of 36 Old 07-04-2014
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Re: Charter fleet ownership

Charter boat ownership has pro and cons.
I went through a very sorrow experience and took my boat away from one outfit after the good experienced owners got bought out.
the new outfit NYC looks pretty good after my boat and things seem to go better.

I wrote a nice article 'CHARTER BOAT OWNER BEWARE' with pictures of what happened but can't post it on here with the pictures. If somebody could help with this technical issue I would appreciate as this article about my experiences is a MUST READ for everybody who has or plans to have a boat in a charter outfit.

right now I am working on getting a charter boat owners association going here on the coast of BC as the individual owners are not getting aware of issues....... and I can tell you there is not a lot of support from the charter outfits on this......most of them don't like to have somebody looking over their shoulders.

Please support this issue, PM is very much appreciated.

below the article without pics.

Charter Boat Owner Beware!
When on July 22nd 2013 the sloop Ars Vivendi had a rock hit in the Octopus Islands in Desolation Sound when out on a charter, a strange and very frustrating journey for the owner of the vessel started. This story is a must read for every boat owner on the cost of BC who has or wants to put his vessel into charter as it will show some behavior, contractual issues and treatment one gets as a charter boat owner by charter outfit, repair yard and insurance.
The information about the rock hit received me, the owner of the vessel Ars Vivendi, on July 23rd via phone, after the boat had been viewed by the charter outfit owner. The charter was abandoned and the vessel traveled to the nearest ship yard for haul out and inspection.
Being a proud boat owner and interested/concerned about the vessel I took the time and traveled down to Vancouver Island, a 2800km roundtrip, to view my baby and get an idea about the damage. The ‘fender-bender’, as the damage got classified by some insiders, turned out at the end to be a repair of more than $ 73,000.00, so a substantial damage.
While present for ~ 7 days and visiting the charter office I got aware of last minute calls for chartering Ars Vivendi which rightfully had to be turned down by the charter company or which have been directed and booked onto another vessel which was still available for the time requested. But why should this concern me as the insurance has a ‘Loss of Revenue Coverage’ as has been verbally communicated to me by the charter company to cover all this lost charters ……. How wrong my belief in this was I got aware in December.
Spending some time on the charter dock and talking to boaters, crews etc I could overhear conversations about the ‘inexperience’ in handling a vessel of some charter captains which I looked at in a different perspective when a 2nd charter rock hit within this outfit happened later this season.
Duty called me back home and I followed the repair situation via phone and some pictures that have been mailed to me. Everything looked fine and as boat owner who has the vessel in charter you got to be aware about and accept the risk of having a charter incident so nothing to worry for me. The repair was finished and the vessel brought back to the charter outfit for winterizing and to await the next season.
In November a long standing wish of mine got granted, I sold my house and moved to Vancouver Island as was my goal for some time. Naturally one of the first visits was to my boat which was slumbering for the winter. Being down on Vancouver Island now, I imagined some cruising during the quiet times of the year and having a very well equipped boat I requested to have it prepared for some Christmas cruising.
Was I in for an awakening!
And I would never have gotten aware of all the following if I would not have moved i.e. mean being present on site, near the boat and been able to look into all of this! How many of you charter boat owners are living far away in Edmonton, Calgary or other interior locations and rely on the faith and trust
you have to your charter company as I had? How big would the bill be for me in spring if all these items would have come up then and everybody could with the time passed deny its responsibility?
After settling on Vancouver Island I visited the charter outfit and renewed my request for a copy of the insurance policy covering the incident, especially the ‘Loss of Revenue Coverage’, which I previously requested via e-mail end of July ’13 but never received. After some hesitation within the administration I got several pages copied….and that’s all I have till today as no official copy of the fleet insurance covering my vessel has been forwarded to me neither by the charter outfit nor the insurance company…… but I paid for the insurance!
After studying these copies I realized that the Loss of Revenue Coverage is only for pre-booked charters, so the lost bookings and redirected charters were not respected. Furthermore a clause in the policy which covers the ‘right of the charterer’ offers the charterer unlimited legal coverage……but where am I, the boat owner, no legal coverage for me. Needless to say that this got me up in arms as I felt that my rights were poorly covered and respected in regards to the ‘Loss of Revenue’ and the legal coverage. Thanks god the incident happened in July and not in early May as then there would probably not have been many bookings and I, the boat owner, would have to cover then the cost for the yearly expenses as the vessel would not have created any revenue to cover them as usual! Where is the insurance coverage I was made believe I had? Knowing that most charter companies on this coast have the same insurance where is the proper ‘Loss of Revenue Coverage’ for you?
4 days after my request to have the vessel ready, the day I wanted to board, I received a phone call from the charter company owner that the fresh water system on board was leaking. Nevertheless I made it out that day and there was a mechanic on board, the Espar heater was not working either. It turned out it was not electrically reconnected after the repair, the cables were labeled but not connected, see picture.
Now I got seriously concerned as I was under the impression that everything on the vessel has been checked and was in working condition as was verbally confirmed to me weeks earlier by the charter company owner.
Suspicion awakened I started looking into details; lots of scratches inside the vessel (the vessel had to be totally gutted to perform the repair), incomplete bolting on the floor boards, sticking up corners of the floor board (your feet would like that) out of order light switch, broken forward head cabinet door lock, the oven didn’t line-up with its lock etc, see pictures; certainly enough to have my emotions in the wrong ph-values. So I started questioning the charter outfit owner about a performed sea trial, performance check of all appliances and equipment etc and received negative or vague answers.
The next morning has seen me boiling some water as the water heater did not work which certainly did not improve my moods.
On closer look outside the vessel I found that all the cotter pins of the standing rigging had not been bent properly (see pictures); now that is a safety issue as they have sharp ends and can cut into pants, hand, feet and ankles not to mention damaging the sheets.
So I decided to visit the ship yard and discussed things with them. Very friendly and understanding they were, help was assured in case something would not be right and I should feel free to contact them any time. They stood up to their word later which has to be remarked positively.
Back to the vessel/charter marina in the afternoon and meet the charter company owner, discussing a possible sea trial for the next day as no test under sail had been done and I wanted to do some boating over Christmas & New Year. The sea trial was envisioned but I was then later sent a text with ‘Sorry no sea trial tomorrow, we have plans, see you next year’….well now, that is very nice and you really feel how important you are as boat owner. Not feeling comfortable with the whole situation I decided to dump my plans for a Christmas cruise.
How important are we as boat owner to the bareboat charter business on the coast of BC?
Of the ~ 150 vessels in charter more than 90% are owned by people like you and me…… so we are the backbone, the foundation of that business…… but did I feel as being treated as a back bone….more like a discarded dog bone I’d like to say.
Needless to mention my confidence into the charter outfit had deteriorated within 14 days from full confidence to very suspicious. So I started making my home work and prepare for the worst that could happen in the New Year.
January brought some new sights and the first talk. I finally received the written information about the lost booking (and boy was that a fight to get it!) where a potential charterer inquired first part of July to charter of Ars Vivendi in August. The charterer was then informed on July 24th (2days after the rock hit) that my vessel was not available due to the incident. The charter was offered another vessel in the fleet which was not booked for the required time and subsequently booked this vessel. And all this is nicely done via e-mail, so in writing and a perfect proof that the ‘Loss of Revenue Coverage’ in the insurance is certainly in need of improvement as it does not protect the boat owner as I believed! Now this is clear a lost booking but it is not covered under the insurance policy as a pre incident booking sheet was not filled out. Subsequently this loss of revenue was not even put into the claim as submitted by the charter outfit. This would make the insurance company happy I guess; it certainly did not make me happy.
Now what would the situation be if this incident happened first week in May with an average of 40 – 60% of the bookings are coming in starting May? So would I not have lost then more than 50% of bookings, a substantial financial amount to cover the yearly cost for the boat?
Within that same meeting I was then pressured to sign the outstanding contract for the 2014 season. I was also told that the 20% increase in the moorage as charged by the charter company (charter moorage $ 12.54/ft/month, official marina moorage $ 7.59/ft/month!!) was not discussable, that the care given the vessel was outstanding as it cost more than $ 8,000.00 in 2013 (and why were there so many issues when I wanted to board my boat?) and that I should tread lightly with the insurance company as ‘they (the charter company) could not afford to have my claim of the lost booking giving a negative impact in their good relationship with the insurance company’ !
Hello Charter Company …… who is more important to you, the boat owner or the insurance company?
My decision was made right then and there: Ars Vivendi will be with this outfit no more!
Next morning found me signing the contract with the new charter company which I had contacted between Christmas and New Years……(they were available not like to others with see’ya next year). The afternoon had me writing the official note to the old charter company that the vessel was not available for their 2014 charter season which prompted some surprised responses.
It felt good to shed all the trouble…..but was it over? Not yet.
In arrangement with the ship yard I brought the vessel back for deficiencies which they really did take good care off. Despite other things I was then informed that the standing rigging had not been fined tuned as this was supposed to be done in the marina of the charter company I left (which explains the unfinished work on the cotter pins). Now here is a question: why was I not even told that the standing rigging was not finished tuning by the charter outfit owner before Christmas? This would sure have explained some deficiencies. The reason why the fine tuning of the standing rigging has not happened I did not even inquire but was I ever happy I did not take the vessel out for any Christmas cruising as I am sure that in case of some damage I as owner would have been liable! Interestingly the fine tuning had already been billed for but not been done.
End of January I boarded my boat in the shipyard and took her via a 3 day cruise to her new home.
Feeling good about the situation, the new charter company checked the vessel in detail. During the first week a continued water increase in the bilge was recorded, monitored and investigated. The water intake was finally traced to the drive shaft area, the shaft packing was barely hand tight and even after tightening it there was still more water intake than normal.
We decided on an early pre-season haul out (mid February) to perform an inspection of the hull and the vessel in general. Part of the reason for this haul out was that the insurance company had not sent any marine surveyor out during the repair of the vessel to monitor the progress and verify the proper repair. Not sending out a surveyor during the work is very unusual and certainly not industry praxis as I learned in the course of all that happened. So a proper re-survey or re-certification after repair had not been done either.
The close inspection of the vessel in the dry dock revealed a good repair job on the hull but a substantial play in the drive shaft near the propeller indicating a worn out cutlass bearing. It was decided to exchange the cutlass bearing which required the rudder to be removed. With removing the drive shaft we realized that the shaft packing was hardened (which explained the continuous seepage) and had to be replaced.
How comes that the cutlass bearing was worn out with only 3 days of using the vessel, max 30h of motoring, after the extensive repair has been made? Actually the cutlass bearing was not mentioned as worn out in the spring check/haul-out nor the thorough check after the incident by none of the 2 different marine surveyors. We had all kinds of different philosophies but no real explanation for this premature wear out.
After the repair was finished the vessel was put into the water to let settle for a few days before the final alignment of engine and drive shaft was done. Now we found the reason for the premature wear of the cutlass bearing and the hardening of the shaft packing: the engine was not properly tightened down! 3 bolts of the engine mounts showed only 5 lbs of torque and 1 bolt was loose, see picture.
So within the max 30h of motoring the engine could move slightly resulting in misalignment and therefore the premature wear out of the cutlass bearing which was a repair job of more than $ 3,000.00. The detailed description of the repair together with the bill has been sent to the involved parties for them to decide their individual responsibility (incomplete repair or leftover incident damage). Surprisingly I was informed that this part of the damage was not looked at as the damage surveyor had not noted any damage in the running gear but that it is not uncommon to have this kind of damage on the running gear on a vessel which had as severe a damage as my boat.
Well I was not impressed with all this, but I feel comfortable now to have a thoroughly checked and maintained vessel, a sea trial will follow.
In the mean time the insurance company agreed to pay the ‘Loss of Revenue’ as claimed by the charter company who had the vessel in care (did they really care for the vessel?) at the time of the incident. Upon request I was forwarded ‘all?’ written communication concerning the claim of loss of revenue. The very well documented ‘lost booking’ had not been claimed by the charter company. Furthermore I could read a note of the charter company to the insurance in requesting that the loss of revenue pay should be given to the charter company as the boat owner that is me, would still owe some money.
Now that is very nice as the final invoice, closing invoice, after the boat has been removed from the charter outfit had not yet been issued to me but an image of the boat owner to the insurance company has been painted. This makes me especially happy as it turned out that the amount owed to the charter company was only ~ 30% of the amount of the loss of revenue owed to me.
Here now another question: who is liable to the charter boat owner for the compensation of the lost bookings in case of a charter incident, especially in my case as the one lost booking is so well documented? The insurance company deals only with the charter company the way it looks. The charter company accepts the fleet insurance and the boat owner pays the insurance fee for his boat to the charter company but has no say in it as he does not even get to see the policy. Is the liability of the lost booking then not the responsibility of the charter company for having accepted an incomplete ‘Loss of Revenue’ policy and therefore creating the base for the loss to the charter boat owner? Is this taking proper care of the interest of the charter boat owner, the individual who supplies one of the assets for the charter company to be in business?
I don’t think so! And the charter company has it easy in putting a new booking onto another vessel available thus saving their income, but the boat owner has no option here other than the insurance coverage.
Speaking of charges; the charter outfit has in the closing invoice to the boat owner items like: transfer boat from repair yard to charter marina, consulting to ship yard, travel cost to ship yard during repair, totaling in ~ $ 650.00. Now these are in my books cost caused by the incident and therefore should be covered by the insurance company as cost directly related to the incident. Upon addressing the insurance company I was told that these costs are not covered in their policy and are at the discretion of the boat owner……. We are talking about $ 650.00 with reference to a more than $ 73,000.00 repair bill and an additional loss of revenue payment of more than $ 10,000.00. Now is that not very cheap of the insurance company? And with respect to that the boat owner pays for the insurance and the charterer gets legal protection from the insurance but not the boat owner; how would you feel in having them as your future insurance company! But do you have a say in it as charter boat owner?
Interestingly in this charge to the boat owner is also the fact that in the signed charter contract by the charterer it is clearly stated that the charterer is responsible for all resulting cost/loss occurring due to his caused incident, so why does this charter company charge the owner?
Oh and before we forget: I took the vessel out of the charter outfit before the insurance period was ended so I was granted a refund for 3 month. But how do you figure that the refund was only a fraction of what I paid for the 3 months. On request I was then told that the charter company acts as insurance agent and charges an administration fee which was not refundable and about which I was never informed. In my case the administration fee was an estimated whooping $ 500.00 on top of the insurance premium calculated on .85% premium on the insured vessel value and $ 350.00 for the liability insurance part as no detailed $ values for the premium etc have been forwarded to me. This administration fee makes an estimated $ 12,000.00 of additional income for this particular charter company coming out of boat owner’s pockets!
As boat owner, is my journey which started with the charter rock hit on July 22nd 2013 over? I think not as several items are not cleared and closed yet; some might require the service of a lawyer as right now it certainly goes for my rights and respect as charter boat owner and not only for outstanding money.
As boat owner I feel very badly treated, I got confirmed what I heard often enough that some charter companies take advantage of boat owners who do not live nearby, the charter boat owner gets looked at as cash cow to be used. After all, the boat owners contract with the charter company makes sure that the boat owner will be charged with all expenses (moorage, maintenance, repair, insurance, power, wear and tear etc), the charter company gets their percentage of the bookings, has no risk and no investment but is in charge of proper care for the yacht (which we pay for!) and to market the commercial use of the boat, i.e. sell the charters. Here an interesting question: how many bookings do the very few boats owned by the charter companies get in comparison to the boats owned by others?
As boat owner I would have been happy with the contract I had but my story proves that there is a big deal more to be looked at. With the lack of representation/presence of the charter boat owners we are at the mercy of the charter company and our faith in their proper conduct. I know for sure that my case is not the only one where a boat owner has been badly disrespected by a charter company and the applying insurance has been accepted by more than one charter company, so the coverage issue applies
to all of us and not just my case! They are all organized in associations like the bare boat charter association, Boating BC, marine insurers etc and I think it is more than overdue that the charter boat owners get their own organization going as I see and feel the need to be united, to exchange experiences, to represent and to protect ourselves, to have an organization on site which monitors and protects our interest and our assets.
As a matter of fact, we own more than 90% of thefleet available for charter on this coast; we are the base on which the bare boat charter businesses exist. We all tend to think it is not me who is affected and I for myself must say I thought the same….even 4 month ago, but reality taught me a lesson.
Am I now opposed to charter boat ownership?
Certainly not as my boat is still available for charter. Personally I think the concept of charter boat ownership can very well be to the benefit of the boat owner as well as the charter company and naturally to all boaters who like to enjoy the pleasure of boating but can’t afford a boat themselves.
What is needed to avoid situations like mine?
I think that the charter boat owners should get organized, found their own association which in term shall represent them and have the right and potential to act to protect the owner, his interest as well as his expensive equipment. This should include consulting to boat owners in general, the freedom as the representative of the owner to look into a proper care and maintenance of their vessels, being involved in contractual issues, insurance matters, incident investigation, monitor/spot check on equal bookings, the cost charged and surveys just to name a few which come to my mind right now.
I would like to encourage every charter boat owner, including former charter boat owners who might have taken their boat out of charter after an incident, to respond to this story and give their input about their experiences and what they would like to see/covered in an association. I like to encourage all of you to join this movement to create an organ to represent the boat owners for the future benefit to the bare boat charter business in which we, the boat owners, are a substantial part too but right now are at the mercy of the charter company we are dealing with.
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post #35 of 36 Old 08-07-2014
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Re: Charter fleet ownership

khoclocvn, nice and interesting comment saying 'that's why you charter and don't worry about the boat when you are not on it'...... Ever thought about the fact that without boats owners who offer their boat to charter....there wouldn't be anything for you to charter????

I think the charterers have an absolute responsibility to the vessel they are chartering as with increased incidents less and less boats will be available for them. Additionally charter outfits should feel responsible and take good care of the assets into their fleet.
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post #36 of 36 Old 08-26-2014
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Re: Charter fleet ownership

If you do it, do it with someone reputable. You can really get burned with some companies.

Generally, I'd say it is a really bad idea. If it was a good idea, why wouldn't the charter companies buy their own boats?

If you want a boat that is mostly paid for, but one coming out of a charter fleet after 4-5 years. If you want to use a boat down there, charter someone else's.

I am not going to go into details, but the number of ways you can be screwed is a long list. DON'T DO IT.

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