What is Bareboat or Demise Charter Party?

Bareboat charter, the charterer both manages and operates the ship. The shipowner, possibly a financial institution, virtually gives up control for a fixed period of time. The charterer is the disponent owner responsible for both crewing and managing, as well as employing, the ship. The owner will receive the fixed rate of hire at regular intervals during the period of the charter. There will also be agreements regarding drydocking and surveys in order for the owner to ensure that the ship is being properly maintained. Bareboat or demise chartering is frequently used in ship finance where it may suit a bank to own the ship, frequently because of tax advantages, but they do not want to get involved in running her. They may also have re-possessed a ship, but in any case, because they do not have the necessary knowledge or experience, they need to find an owner to run the ship. At the same time, the disponent owner can manage the ship profitably but the current market rates will not repay the full capital costs of the ship within the period of a bank loan, so by bareboat chartering it may well be possible for both the bank and the disponent owner to make a profit from the ship. There is frequently an option to purchase at the end of the demise charter. Bareboat charters are often used within a shipowning group for fiscal purposes. Charter parties used for this type of charter are BARECON ‘A’ (short-term 3–8 years) and BARECON ‘B’ (longer term 8–15 or 20 years). These are bareboat charter parties produced by BIMCO and are still used today, despite BIMCO’s revised version BARECON 2001.