The Troubles of Bareboat Chartering
SAFE CHARTERING SERIES
The Troubles of Bareboat Chartering and how to make sure you’re up to code
The United States Coast Guard (USCG) has been cracking down on illegitimate charter operations in South Florida recently, with good reason. A growing number of operators are slipping up on the legal requirements of a bareboat charter, some without even knowing they are breaking the law. What’s more, the USCG is growing impatient with the growing number of illegitimate operators while growing frustrated with the complex framework they must enforce. While I frown on those breaking the law, there’s one truth we must acknowledge: the existing bareboat framework is convoluted, unsafe and inefficient for today’s recreational charter market.
What’s the Problem with the Bareboat Framework?
I was recently designing a charter business in response to a frequent request. Clients were looking for a day boat they could use exclusively for the weekend while staying at a premium members-only Florida club. Additionally, most weekenders don’t have a car, so as added value, the boat would pick them up in Miami, bring them to the club, and return them at the close of the weekend. The program would provide convenience and luxury all aboard a brand new day boat with a professional crew. Clients would be charged an all-inclusive fee and would have menus, schedules and activities planned around their family’s style. Our prospective team had years of experience in charter operation, hospitality, and capital management. The operation would have properly licensed crew, business and vessel insurance, and proactively seek USCG approval to ensure the safety of our guests, crew and the vessel.
The unfortunate reality? There is no USCG legal format allowing this program. And I don’t mean there are courses and licenses required in order to execute the program. I mean it is objectively illegal.
To make it legal, we’d have to reduce the quality of the program and leave the client with significant liability.
Why is Following Bareboat Law So Difficult?
I sympathize with an operator mistakenly breaking bareboat law because the legal framework required is disconnected from providing a safe, well-managed yacht charter. Under bareboat law, the vessel can’t have full-time crew, the charterer must select the crew themselves, organize their own food and drink, fuel the boat themselves, and pay the fees to the owner and crew separately. Ultimately, when we’re doing our job right, the customer’s experience is more complicated than it is enjoyed.
We did a quick questionnaire with charter operators to gather what the dream framework would be:
The Chartered Vessel should: a.) be safe, b.) be from an approved manufacturer, and c.) have necessary insurances
The Charter Captain should: a.) be properly licensed, b.) be respectful and knowledgable, and c.) be sober [obvious but worth the mention]
The Charter Operator should: a.) be a legal, tax-paying business, b.) operate with the best interest of all parties, and c.) have necessary insurances
In this hypothetical circumstance, the Charter Operator is responsible to staff, execute and hold the liability of the entire charter experience. This keeps all parties invested to provide customers will an optimal experience. Instead, your Bareboat Charter leaves the charterer with all the liability, especially since they are “choosing” the crew who is running the boat. If the captain runs the boat aground, guess who’s liable?
While its the most used day chartering legal format, Bareboat chartering wasn’t written for day chartering. Its an antiquated format meant for bigger ships, ones who are subcontracted by businesses to operate over longer periods, for longer distances, with more larger crews.
Are There Any Bareboat Alternatives?
Objectively YES, there are other formats, but all boats don’t qualify.
Experienced operators would prefer to fall under UPV laws, otherwise known as an “Uninspected Passenger Vessel” or a “crewed charter”.. Although this format limits the guest count to six, it allows operators to control staffing and stocking of the vessel to run a choreographed program.
There are two focal issues with this format:
For vessels under 100GT, it limits guest count to six (6), and
Any foreign-built vessel must qualify under a MARAD exemption, which is not available until the vessel is 3 years old
So, find a boat built in the United States, or a foreign vessel 3+ years old, and you can run a 6 person crewed charter. If that serves your business, you’ll be ok, but I know plenty of operators who’d experience a drop in business if their Pershing 70, VanDutch 55, or Azimut Fly was limited to six passengers. And get this… There is NO way to increase your capacity to 12, unless you go Bareboat. Now you’ve entered the conundrum.
The Crew Selection Dilemma
A Bareboat Charter is when a vessel owner signs over complete liability and control of the chartered vessel to the charterer. This includes the vessel’s plan, choosing the crew, bringing your own food and beverage, fueling the boat and all the liability until the boat has been returned to its owner.
Why do Bareboat Charters require the charterer to select its crew?
Think in terms of renting a car: Hertz hands you the rental keys and says, “Bring it back in one piece.” A bareboat contract has a similar structure, with the exception of requiring a licensed captain to operate the vessel. Oddly enough, Bareboat law leaves the selection of that captain to the charterer, not the owner.
Now think in terms of a luxury car service: If you own a luxury car service, would you leave your customer to hire your driver, or would you prefer to staff the car knowing who is best behind the wheel? This question is rhetorical. In fairness, as a charter client you should receive a list of approved captains. You don’t have to go and find one yourself. But again, is this fair and equitable to all parties to leave the crew selection to the paying customer? We, as operators, want to staff vessels with our single best and brightest captain; the guy or girl who knows the boat in times of trouble, who can best serve the needs of the client, and who best knows applicable laws. To expand complications, the list of approved captains may not include employees or “representatives” of the vessel owner and/or the owner’s agent or broker. The selected crew needs to be mutually exclusive from the vessel owner and represent the interests of the charterer first. Ain’t that something…
Your Charterer Has More Liability Than They May Know
Bareboat charters are not only mystifying in their crew selection process, but they also require the charterer to stock and fuel the boat. Consider the literal name of “Bareboat” when thinking through the charterer’s responsibilities. What does that mean? It means the vessel owner (or its agent) cannot have a hand in the fuel, food, beverage, or activities while the vessel is on charter. This further removes our ability as operators to give clients a turnkey, safe and robust experience.
Now, you might be saying, “Reed, just use another legal format to get what you want.” “Stop worrying so much about Bareboat Chartering.” “You’re being a baby.”
Unfortunately, existing maritime regulations leave other formats unattainable as we’ve discussed in the UPV section. The best scenario is the aforementioned “UPV”, which limits you to six passengers and vessels built in the United States or any vessel 3 years or older. I love my country but were not exactly housing a plethora of the world’s best boat builders. Bareboat chartering is the catch-all for those unqualified for UPV, which is most operators in the market.
Keys to Running a Legal Bareboat Charter
Leave crew selection to the charterer, and make sure the available options are not employees of the vessel owner or its agent.
Crew must be paid and tipped by the charterer in a separate transaction directly to the crew. An agent can distribute funds, but cannot be a representative of the vessel owner.
Charterers may not be charged by the vessel for anything beyond the cost of the vessel itself. This includes fuel, food, beverage, crew, and/or incidentals.
Make sure your marketing materials mirror your actual operation. If you’re promoting a framework on your website that’s different from the real world, you’re playing with fire.
I write this article out of confusion and frustration. I have no format to provide the very valuable service mentioned above, even with the best vessel, best staff, best legal team, and best insurances. Our only option is to operate under a bareboat contract which would reduce our ability to execute the premium experience we want to provide. The bareboat system is a legal format equally disadvantaging the vessel owner, charter operator and charter client, all to give complete control of a vessel to a charterer who likely doesn’t want the responsibility.
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About Reed Nicol & RN Marine
Reed Nicol is a licensed yacht broker with a wealth of industry knowledge. He’s worked as an executive and sales director in yacht manufacturing and distribution, has started and managed commercial charter operations, and works now as a consultant and private broker helping his clients buy and sell great boats. Read more about Reed’s marine journey, his love of helping 1st time boaters and his entrepreneurial spirit here.
Reed Nicol [Licensed FL Yacht Broker #11926]
(201) 264-6356
Reed@RNMarine.com
