Boat deposit

[Powersalt]

Looking to put a boat deposit down with a baat dealer, but how do I know my money is safe with them or the manufacturer things being what they are today!!!

Still seems a very lax attitude to deposits which can be very high value and no security....or have I got this wrong. Time on deposit will be several months and without a deposit a build slot wont be given.

Any past experiences or recommendations please

 

[sailorman]

Looking to put a boat deposit down with a baat dealer, but how do I know my money is safe with them or the manufacturer things being what they are today!!!

Still seems a very lax attitude to deposits which can be very high value and no security....or have I got this wrong. Time on deposit will be several months and without a deposit a build slot wont be given.

Any past experiences or recommendations please

The Sadler 290 owners didnt have security, lost most everything

 

[rafiki_]

When I paid a deposit for my boat, the broker put the money into a separate account, that was safe in case he folded. I believe most brokers do this.

 

[sailorman]

http://www.ybw.com/forums/showthread.php?t=189054&highlight=rampart+yachts

 

[strakeryrius]

Check that the dealer/seller is a member of the British Marine Federation. Under their rules thay have to have a separate client bank account, so that your money is ring fenced in case the dealer gets into difficulties.

If its a long build and you are making multiple staged payments make sure that the contract details that your payments secure ownership of each stage of the construction and/or materials acquired for the build. Also check that there is some guarantee of completion by the factory if the dealer goes bust.

 

[jimmy_the_builder]

Looking to put a boat deposit down with a baat dealer, but how do I know my money is safe with them or the manufacturer things being what they are today!!!

Still seems a very lax attitude to deposits which can be very high value and no security....or have I got this wrong. Time on deposit will be several months and without a deposit a build slot wont be given.

Any past experiences or recommendations please

Is it a stock boat or a total forward order? Who's the manufacturer?

cheers
Jimmy

 

[Powersalt]

Is it a stock boat or a total forward order? Who's the manufacturer?

cheers
Jimmy

Its a new build manufacture Jimmy, some 6 months ahead from a mainstrean uk manufacturer through a dealer. The dealer will just pass the deposit to the manufacturer. Under normal times I might even have done it without more than a little thought, but now after substantial redundancies etc etc and who knows what next year will hold for manufacturers...do I have to take the risk to secure a boat

 

[Alrob]

I think we have had this discussed before - dont trust client accounts !! - who has the access to them ???

ask peters opal

pay small deposit by credit card

 

[jimmy_the_builder]

Its a new build manufacture Jimmy, some 6 months ahead from a mainstrean uk manufacturer through a dealer. The dealer will just pass the deposit to the manufacturer. Under normal times I might even have done it without more than a little thought, but now after substantial redundancies etc etc and who knows what next year will hold for manufacturers...do I have to take the risk to secure a boat

Forward order is obviously riskier than stock, just because you are usually asked for more money, and for a longer period of time. The P42 that I bought was a stock boat, and one of the attractive points of the deal was the relatively small deposit when the order was signed, and no stage payments - balance on handover day. When we were planning to buy the V45 to replace it, I did look into protecting the deposit and stage payments, but it wasn't straightforward or cheap and in end we withdrew from the purchase anyway, for other reasons.

Cheers
Jimmy

 

[jimmy_the_builder]

I think we have had this discussed before - dont trust client accounts !! - who has the access to them ???

ask peters opal

pay small deposit by credit card

I doubt you'd be able to do this with a new boat purchase from one of the big four in the UK. They generally stick to material deposits - 10% and up. Bank guarantee is the closest you'll get, and that usually only protects you against the failure of the builder, not the dealer.

Cheers
Jimmy

 

[Powersalt]

I doubt you'd be able to do this with a new boat purchase from one of the big four in the UK. They generally stick to material deposits - 10% and up. Bank guarantee is the closest you'll get, and that usually only protects you against the failure of the builder, not the dealer.

Cheers
Jimmy

Can you explain what a bank guarantee is and how it works??? is that what you menat by expensive. Must say I not so worried about the dealer more the manufacturer who might have anything up to 60k for some time!!!!

 

[jimmy_the_builder]

Can you explain what a bank guarantee is and how it works??? is that what you menat by expensive. Must say I not so worried about the dealer more the manufacturer who might have anything up to 60k for some time!!!!

There are others on here far better qualified than me to advise you on this, but here goes anyway - as I understand it, the bank guarantee is essentially an insurance policy provided by the manufacturers bankers against the insolvency of the manufacturer. There will be an arrangement fee of perhaps a few hundred pounds, plus a charge of maybe 1 to 2% of the sum guaranteed. I think the weakness in the arrangement is that you're not dealing directly with the manufacturer, you are contracted with the dealer, and so the bank guarantee doesn't protect you against the failure of the dealer. Where this gets hairy is when you get close to handover, where you may be required to fund the full purchase price to the dealer before you've actually taken possession, and perhaps before the dealer has taken possession from the manufacturer.

Cheers
Jimmy

 

[Tranona]

Despite what the doom mongers say, client accounts are generally OK provided you have evidence that you money goes direct into the client account. The Peters case was different because they did not pay all deposits direct into the client account. Those buyers who could show that their money went straight in were able to get a share of the funds in the account. Those where the money first went into a general account could not.

You need to look at the contract to see what security is offered for your stage payments. Again the Sadler case is misleading. Buyers did not lose their money because they had title to the boat at each stage of build. So they got part completed boats. Where they did lose is that they were unable to get their boats finished for the same price as they originally contracted for. And some (I seem to remember 3) lost out further because the company they contracted with to complete, both went bust and had a fire which pretty much destroyed what was left.

So apart from illustrating how the law works depending on the nature of the contract, these cases should only be used as background.

If it were me, I would want a bank guarantee such as the Scandinavian builders offer - but suspect that would be difficult because your contract will not be direct with the builder. Next best thing is a contract that recognises your interest (along with the dealer) in the part complete boat covered by your stage payments. At least then you and the dealer get possession of the part complete boat as it is no longer an asset of the builder - should he go bust.

 

[jfm]

The comments on client account are off the mark. No builder will accept that - they rely on the deposit to fund working capital account so it cannot be held on trust. It's really only of pracical relevance when buying 2nd hand from a broker

It would help if you named the builder and dealer. Some are plainly not going bust in the next 6 months, yet one builder is reputed in the City to have had parts inventory taken away by the supplier at the beginning of this year becuase they hadn't paid for it and were dangerously low on cash and facilities. I'm talking big 4 in UK.

You can try to get (i) a builder guarantee of the dealer's performance, and (ii) a bank guarantee of the builder's undertaking. AFAIK, sunseeker will play ball on (i) but are unlikely to do (ii) at a guess. FL will do (ii) not (i) afaik. Dunno about prin and sealine. Then there are the dealers - I wouldn't expect Essex to be bust in 6 months but there are other less well capitalised dealers who could be struggling

Point is, you have to name names becuase this isn't a generic issue, it's specific to the parties

As mentioned, you can get title to a boat once the keel is laid, which means hull moulded in the GRP world. This doesn't cure all your worries because a part built boat isn't a lot of use, but it's better than nothing. FL will do this and I have heard of sunseeker doing it

But if you want a best guess on where it is safest to put your money for 6 months with no guarantees, it would be a FL bought through Essex Boatyards. If other dealers and builders want to come on here and disagree with me, and say they offer a better credit risk, they'd be very welcome!

 

[jimmy_the_builder]

You can try to get (i) a builder guarantee of the dealer's performance, and (ii) a bank guarantee of the builder's undertaking. AFAIK, sunseeker will play ball on (i) but are unlikely to do (ii) at a guess. FL will do (ii) not (i) afaik. Dunno about prin and sealine. Then there are the dealers - I wouldn't expect Essex to be bust in 6 months but there are other less well capitalised dealers who could be struggling

Just to add to this, when I was asking these questions at the beginning of the year, Princess were also ok with (ii), but would not do (i).

Cheers
Jimmy

 

[David_Jersey]

The comments on client account are off the mark. No builder will accept that - they rely on the deposit to fund working capital account so it cannot be held on trust.

Yeah, gotta be aware of what the purpose of the deposit is. Fair play that no one wants to build a boat for someone who can later simply change their mind with no penalty - in which case a suitably worded bank guarantee should suffice so that the only way the manufacturer doesn't get the money on completion is if the boat fails to turn up - but the buyer has no cash at risk if the firm goes broke in the meantime and if the boat never turns up then the guarantee can't be called.

Of course for those firms who need your cash as working capital the above doesn't work - and although I ain't ever gonna be in this boat market, I would be asking myself "if no bank will lend them working capital, why should I?"........for deposits / stage payments secured against a vessel I would want my own professional (with PI insurance!) inspecting the work and signing off with the builder to ensure the stage payments matched the reality - as well as the paperwork.

In the marine industrya few things are "standard" or "how things have always been done" - mostly not in favour of the punter...........and the provision (knowingly or unknowingly) of unsecured credit by the punter is one of the industry norms which should by now have been consigned to history. But no doubt the RYA / BMF are working on this. or not

 

[jfm]

Yeah, gotta be aware of what the purpose of the deposit is. Fair play that no one wants to build a boat for someone who can later simply change their mind with no penalty - in which case a suitably worded bank guarantee should suffice so that the only way the manufacturer doesn't get the money on completion is if the boat fails to turn up - but the buyer has no cash at risk if the firm goes broke in the meantime and if the boat never turns up then the guarantee can't be called.

Of course for those firms who need your cash as working capital the above doesn't work - and although I ain't ever gonna be in this boat market, I would be asking myself "if no bank will lend them working capital, why should I?"........for deposits / stage payments secured against a vessel I would want my own professional (with PI insurance!) inspecting the work and signing off with the builder to ensure the stage payments matched the reality - as well as the paperwork.

In the marine industrya few things are "standard" or "how things have always been done" - mostly not in favour of the punter...........and the provision (knowingly or unknowingly) of unsecured credit by the punter is one of the industry norms which should by now have been consigned to history. But no doubt the RYA / BMF are working on this. or not

Yeah but there are no rights and wrongs to this and at macro economic level it's a zero sum game. Ok, so let's have a world where no customer ever makes a stage payment on a large product. Ergo customers in aggregate retain ore cash, and put it in banks. Boat builders, housebuilders, jewellery makers, etc, all need working capital to pay the rent and wages so they have to borrow it from banks/investors and their cost of capital goes up. So the product price increases. So the customer pays a bit more, offset by the interest he earns on (indirectly, thru banks) lending to the boatbuilder anyway. The risk is less concentrated, but it's still there overall because in aggregate it's a zero sum game

You should take some risk. Risk isn't intrinsically something to be avoided, it's a bunch of opportunities with upside as well as downside. You actually make money overall by taking risks, if you're smart. Puitting it another way, if you take no credit risk on everything you buy, you will for sure pay more for everything you buy

 

[David_Jersey]

You should take some risk. Risk isn't intrinsically something to be avoided, it's a bunch of opportunities with upside as well as downside. You actually make money overall by taking risks, if you're smart.

Yeah, for sure.

I didn't say don't provide working capital - more a caution to think and consider how to protect oneself as best one can, rather than simply relying on trust.

Given the sums involved for boats and an industry with a track record of having punters caught out when the music stops - even if mostly not deliberately (nor of course an everyday event) - then it's a matter of managing your risk as best one can - and for me that would not be about simply sending cheques as and when requested, even if the receipt says "stage payment". Of course everyone's approach to these things is different, but I doubt many folks would engage a contractor to build a property without having some formal independent checks in place throughout the process of what has actually happened, whether that be themselves or a proffessional.

But as I said already, never going to be my concern

 

[Observer]

The comments on client account are off the mark. No builder will accept that - they rely on the deposit to fund working capital account so it cannot be held on trust. It's really only of pracical relevance when buying 2nd hand from a broker

Surely if a builder cannot borrow working capital from a bank, against the promise of future contracted revenue assured by a client account deposit, he will also be unable to get his bank to provide a guarantee unless it's secured by equivalent cash (i.e. the deposit goes to secure the guarantee counter-indemnity); which is the same (in effect) as if it was tied up on trust in a client account.

 

[benjenbav]

Buying new, there are two basic areas from which problems can stem in the event of a failure of one of the parties involved:

1 The buyer has a contract with the dealer. The dealer has a contract with the builder. The buyer doesn't have a contract with the builder.

Forget exotica like constructive trusts and other last resorts which sometimes get cited as ways of backfilling a basic lack of contractual nexus and concentrate on how you're going to get your money back when the party you've contracted with fails and has handed over your money to the builder or how you're going to get your money back if the builder fails and you don't have a contract with him.

2 The part-built boat is worth less than you've paid for it almost until the day it is completed, so even if you get title to the hull at the earliest stage possible, as jfm says, it is only worth part of your outlay because you would have to get a third party to finish it which - unless the build is close to completion - is likely to cost more than the original builder would have charged for the same work.

Builder/bank guarantees are the way I would go and, as others have pointed out, they are becoming a more acceptable route for the big British builders.