Buying a new boat: Escrow account for deposit?

I dont think even a stock boat can be Part 1 registered until it has been surveyed for registration? I also cant see how it can be registered until complete. If it is complete of course it is essentially ready for delivery which rather defeats the purpose doesnt it?

Ashtead - I think is correct that with the agreement of all parties this is the safest way to proceed assuming a substantial deposit must be paid. If so I would have thought this is not unreasonable or too much hassle. In my case I do something very similiar and it only took a few days for the Bank to come up with an appropriate letter of undertaking to ring fence funds, albiet in my case I do have freedom over those funds, but it would be fraudulent to use them for the wrong purpose.
 
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It is a nightmare - ok, we run similar risks with cars and houses, but cars are a lot cheaper. Boats can cost as much as houses, but there is so little control over ownership.
 
ip485 said:
I dont think even a stock boat can be Part 1 registered until it has been surveyed for registration? I also cant see how it can be registered until complete. If it is complete of course it is essentially ready for delivery which rather defeats the purpose doesnt it?
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It doesn't defeat the purpose if the dealer needs to borrow money. The fact that it's ready for delivery doesn't mean the dealer has a buyer.
 
pvb - oh I see, I was assuming suggestion was the buyer register a charge. Yes, of course if the dealer / builder has the vessel part 1 registered he could register a charge as well, albeit you would check the charge before transfer (wouldnt you?). Again, I appreciate once the charge is in place and the party goes bust it isnt much help, in fact a positive hinderance as the asset will now be preferential.

I came to the conclusion some while ago however you cut this if you want to be almost totally secure, you pay a small deposit (which you accept you dont mind risking) and complete and take ownership at the same time, or you pay the funds into a solicitors account and accept you might have a bit of hassle with the Law Society if anything goes wrong but that is to be fair very unlikely and even less likely for a simple transaction like this they will not ultimately protect you. Expect to pay maybe £2k for a transaction like this including the exchange of contracts which might well be money well spent.
 
ip485 said:
I came to the conclusion some while ago however you cut this if you want to be almost totally secure, you pay a small deposit (which you accept you dont mind risking) and complete and take ownership at the same time, or you pay the funds into a solicitors account and accept you might have a bit of hassle with the Law Society if anything goes wrong but that is to be fair very unlikely and even less likely for a simple transaction like this they will not ultimately protect you. Expect to pay maybe £2k for a transaction like this including the exchange of contracts which might well be money well spent.
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That won't work for most new boats, which are bought through dealers. The dealer will normally want paying in full some time before the boat is ready, because he has to pay the builder before the boat is released from the (usually) foreign factory. The danger period is when the dealer has your money, before he pays the builder. If the dealer is in difficulty, your money could be mis-used and disappear. Having had the money in a solicitor's account won't help in this event. It increasingly seems that a bank guarantee is the only viable solution.

The new boat market in the UK is nowhere near as vibrant as it once was, and there's an increasing risk of dealers going bust, plus a smaller risk of boatbuilders going bust. Thanks to forums like these, boat buyers are perhaps more aware of the risks than they once were. It would be good to see the British Marine Federation taking a lead and setting up a scheme which would guarantee confidence in dealers.
 
ip485 said:
Tranona

Fortunately I am not a solicitor, and I agree with many of your comments whcih are well informed.

However, I dont agree with your process on the Opal case or transactions of this type not because the theory is necessarily wrong but because with one party involved (the buyer) that might not get the process right, and another party involved (that might for various reasons add additional steps), if the agent or builder goes bust the result is a costly and long running legal dispute that most people cannot afford to pursue even if they want to do so. The practical consequence is an awful lot of pain and as usual with the law it is all very well to suggest a particular route should be safe we all know very well possession is 9/10 of the matter.
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Suggest you read the Opal case as what you suggests is not what happened. The buyers did nothing wrong. They paid the deposit to Opal having been told it was going into a client account. Instead Opal paid it into a general account which was overdrawn. Opal then tried to transfer an aggregated amount of all the deposits it held into the client account. The bank refused to make the transfer as at the time the overdraft exceeded the agreed limit.

So, much more complex than the normal transaction, and the new boat buyers made their claim against the money that was in the client account, most of which belonged to brokerage customers whose funds had been correctly deposited.

The case clarified the particular point about the creation of effectively an individual trust for each individual client - hence the need for a direct connection between the client's deposit and the account. In other words the funds in the account are not owned collectively but individually.

So, as I suggested earlier the case has little direct bearing on the issues raised in this thread, particularly as most, if not all client accounts are now set up and operated in a way that satisfies the the legal points raised in the judgement.

The issue here is where the contract is with an intermediary, not with the builder, and the deposit and stage payments are not held by the dealer, but passed onto the builder. So, a client account is not a suitable solution to provide security. However a mechanism to provide some sort of security of the funds that are transferred to the builder by issuing documents that show the buyer's interest might be possible.

To my mind the ideal solution is a bank guarantee. This is used for example by HR, although in this case the contract is with the builder and the agent is paid a commission. This is different from the dealer model used by most builders, so it would be the dealer that would have to offer the bank guarantee. Suspect it would be difficult for many to do this as they often do not have the assets or capitalisation to underpin such a guarantee.
 
pvb said:
That won't work for most new boats, which are bought through dealers. The dealer will normally want paying in full some time before the boat is ready, because he has to pay the builder before the boat is released from the (usually) foreign factory. The danger period is when the dealer has your money, before he pays the builder. If the dealer is in difficulty, your money could be mis-used and disappear. Having had the money in a solicitor's account won't help in this event. It increasingly seems that a bank guarantee is the only viable solution.

The new boat market in the UK is nowhere near as vibrant as it once was, and there's an increasing risk of dealers going bust, plus a smaller risk of boatbuilders going bust. Thanks to forums like these, boat buyers are perhaps more aware of the risks than they once were. It would be good to see the British Marine Federation taking a lead and setting up a scheme which would guarantee confidence in dealers.
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Not quite how it works with Clipper (or at least for me). As I have explained before, the boat was ready in the factory on a friday and the documents (builders certificate and Bill of Sale to Clipper) were faxed over on the Monday and a BOS from Clipper to us prepared. When I had all these documents I paid the balance by debit card and signed the BOS for my Part exchange and the boat was mine. I had it insured from that point and it was delivered to Hamble on the following Saturday.

The only thing I failed to get was a retention payable after commissioning, although in the event it made no difference as there were no faults and sea trials went without a hitch.
 
Tranona said:
Not quite how it works with Clipper (or at least for me). As I have explained before, the boat was ready in the factory on a friday and the documents (builders certificate and Bill of Sale to Clipper) were faxed over on the Monday and a BOS from Clipper to us prepared. When I had all these documents I paid the balance by debit card and signed the BOS for my Part exchange and the boat was mine. I had it insured from that point and it was delivered to Hamble on the following Saturday.

The only thing I failed to get was a retention payable after commissioning, although in the event it made no difference as there were no faults and sea trials went without a hitch.
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The Bavaria dealer I used demanded final payment in full about 3 weeks prior to scheduled handover date.
 
Firstly could I extend my grateful thanks to everyone who has posted suggestions and comments on this topic, it's been hugely helpful. I am very grateful to you all for taking time and trouble to help me out here.

The finance company have suggested that we could use their escrow account to hold the funds in between drawdown of the finance and physical delivery, so I put that to the dealer. I have now heard back from them. They have confirmed that the use of any escrow account during that period is not acceptable, and have also confirmed that there is no willingness to change the contractual arrangements regarding certainty of delivery date. This leaves me with the unacceptable situation of being obliged to pay a huge sum of money to trigger the delivery of my boat, but with no contractual certainty of receiving it in a timely manner, and no protection for my funds in the meantime.

They have reduced the deposit to 10% so that's a step.

The current position is that the factory requires that the final balance is paid in full one week before the boat is completed and is released for delivery. So, allowing say two weeks for preparation and shipment to the UK, that's about three weeks. Assuming that I could follow a similar process for the bills of sale as outlined by Tranona above, that would at least give me the comfort of having a clear paperwork trail proving that the physical boat did in fact belong to me, even though it was not in my possession. This may be a way forward although at the moment I don't think Mrs A1 will accept this; she is exceptionally risk averse and as it's a joint ownership with joint funding, her agreement is not only desirable but in fact essential.

I'm going to have a chat with them again in the morning to see what my options might be from here.
 
I wonder if you might pay the builder direct? The builder can then deal with the commission without you knowing how much it is (which doubtless they would both wish!) Obvioulsy it depends what you think of the financial integrity of the builder. If the agent isnt keen I can imagine if you say to the builder this is the deal they will not want to risk losing the sale. I would have thought when you make the final payment it should be in exchange for a bill of sale and transfer of title to you - subject to the jurisdiction I would have thought that will earmark the vessel as your property. I also dont see any reason before final payment why you shouldnt insist on "inspecting" the vessel at the factory - any reputable builder should be happy for the client to be "involved".
 
I did ask about paying direct, I may raise it again. We're definitely going out to the Factory, that's something we want to do anyway. Based on Tranona's sequence I've proposed the payment and title transfer steps to the dealer which would de-risk the final payment.
 
A1GSS said:
I did ask about paying direct, I may raise it again. We're definitely going out to the Factory, that's something we want to do anyway. Based on Tranona's sequence I've proposed the payment and title transfer steps to the dealer which would de-risk the final payment.
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Payment the week before was never mentioned to me. You are pretty secure if you only pay in exchange for a Bill of Sale, the builders certificate and the Bill of Sale from Bavaria to Clipper. You then own the boat, even if it is still in Germany. I also insured mine, even though strictly speaking it was not necessary as the transport company confirmed they also carried insurance.

The only "risk" you then have is the commissioning which you have effectively paid for in advance. In practice I found no issues. The boat was delivered to Osmotec in Hamble Point for Coppercoating which I paid for direct. it was then rigged, launched and motored up to Swanwick for the rest of the preparation and fitting of some items I provided. I was able to visit at least twice a week and checked all the work. Sea trial took about 5 hours, setting up the autopilot, checking engine performance (important as I had supplied a non standard propeller) and familiarising myself with all the new stuff.

After a whole season and a bit nothing has gone wrong except an intermittent reading log.
 
Right, well I think I've got an excellent result here. Times must be tough. :)

Summary is that the deposit (now only 10%) will be paid by us to the dealers then immediately back-to-back to the builders, I'll get the boat details and hull number then.

We do a mid-build site visit to the factory.

The balance (90%) will be paid to the builders by the dealer to release the boat to transport, and the boat's Title papers and bills of sale placed into the hands of the Finance Company's lawyers. Once the boat is physically on site in the Hamble, we go down, do an inspection and physical handover prior to commissioning. Then and only then, we pay the rest of the cash balance by debit card which, with the final handover papers, triggers the release of the Finance funds from the finance company, and the Title papers to us.

That's a so much better position that we were in yesterday.
 
Sounds good. Very similar to mine (the dealer paid for the boat before I paid them) except you get to inspect the boat before paying your final amount. With both my new boats there was nothing wrong on delivery nor anything missing but guess one feels better seeing the physical object before paying!
 
A1GSS said:
Then and only then, we pay the rest of the cash balance by debit card which, with the final handover papers, triggers the release of the Finance funds from the finance company, and the Title papers to us.
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Have you checked that your debit card will do it? Mine is limited to £20,000.
 
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