Buying a new boat - what happens if the agent goes bust?

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Tarka1

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Having a discussion with someone tonight who has put a sizeable deposit (via an agent rather than direct with the builder) on a new boat that is due for delivery in the new year.
With the financial market as it is, the chat turned to "what if the broker went bust before the boat was handed over?".
Any thoughts on this?
Is there any reason to be worried or should there be some sort of consumer protection in place to protect the buyers?
 
This is exactly the position that several people found themselves in when Opal Peters went bust earlier this year.

The simple answer is that the agent should put the money into a separate client account , and not use it in the running of the business. Unfortunately, Opal Peters was unable to resist the temptation, or so it seems.

The alternative is to ask for a bank guarantee, for which your friend will pay a relatively small service charge. If the fee is not relatively small, or the bank won't offer a g'tee walk away quickly.
 
Whether it is with the builders or the agent it all depends on the nature of the account the money is placed in. Most reputable organisations place deposit money in ring fenced client accounts until it is needed to make real payments against the boat. I would suspect that the agent in this case has to make stage payments to the builder and the big risk for the purchaser then lies in the difference in value between the money actually paid and the value of his boat in the factory, and precisely what title to work in progress in the factory the buyer has. If the buyer has no title then if the factory goes tits up then they have what ever money has been paid and what ever has been built up to that point.

In these difficult time one needs to look very carefully at contracts.
 
Nobody is safe in todays economic climate, as has been mentioned, Opal Marine, enormous, but they went, Sea Ventures, 3rd largest Jeanneau dealer in the UK, in administration. Look at the chatter on these forums about a certain big AWB manufacturer and their debts caused by venture capitalist take overs. I would be looking at putting my money with a trusted solicitor in an escrow account.
Stu
 
i agree an escrow account would be the way to go, solicitors are insured, spending client funds is pretty much an instant striking off offence. It still amazes me that various industries have no regulation or penalty with regard to the handling of client funds.

There might be an insurance product out there if you can't agree an escrow account. The cost of that however might be prohibitive.
 
Agree with all the replies, except the OP says his friend has already paid the deposit. Might be a tad difficult to get it back, especially if the agent has passed it on to the builder.

Maybe worth a chat with a solicitor to see if they can find a way of recovering it, and putting it into escrow without stopping the build.

I think I would be putting on a lot of pressure to be sure exactly where my boat is in the build process, and minimising delays.

The simple answer is that there is no simple answer.
 
[ QUOTE ]
i agree an escrow account would be the way to go, solicitors are insured, spending client funds is pretty much an instant striking off offence. It still amazes me that various industries have no regulation or penalty with regard to the handling of client funds.


[/ QUOTE ]Solicitors are generally honest but the Law Society is very much a light touch regulator News Story . The amazing thing is that he had defrauded 40K and been allowed to continue as a solicitor. If you look at the disciplinary tribunal proceedings you cannot help be be horrified at how many solicitors get away lightly with very serious misdemeanors.

Bit off the beaten track but the moral of the story is trust nobody and don't use a solicitor recommended by anyone you're giving money to.
 
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The simple answer is that the agent should put the money into a separate client account,

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I think many people are duped by that phrase and it does not offer much protection in the event of bankruptcy. Any business can instruct its bank to open an account labeled "client account" but it is just a label. The money in that account is still an asset of the business.
 
Quite right. The important thing is not the account into which it is put, but that the purchaser and agent expressly agree - preferably in writing - that the agent holds the deposit / down payment "in trust" for the purchaser. You then also have to identify the trust conditions.

If the agent holds the money in trust, even if he puts it into a current account, the purchaser is still the owner of the money. In the event of a bankruptcy the purchaser would get the money before anyone else, even secured creditors.

That doesn't resolve the issue of interim payments to a manufacturer. If the agent pays the manufacturer, you need to be worried about the solvency of the manufacturer. You can ask for your agent to pay the manufacturer "in trust" but manufacturers are unlikely to accept that condition.

You would also have to address your owndership interest in the boat as interim payments are made. Ideally, ownership in the boat will transfer to the purchaser pro-rata upon payment of interim amounts, so even if the builder fails, the purchaser will own a part finished boat. Not much consolation, perhaps, but better than nothing.

I appreciate this is not the way agents / manufacturers work, and if you tried to structure a new sale in this manner you might be sent away with a polite PFO. But it is the sensible way.
 
But the difficulty with the escrow account concept is that usually the buyer's deposit is being used by the dealer to be a deposit with the manufacturer, and the manufacturer is probably using the money to fund part of the construction costs. Escrow accounts really only work where the escrow money is not needed to make the product being sold.

In this case, as contracts have already been signed and the deposit paid, probably the best thing to do is to check with the manufacturer that the build has started, keep on top of the production schedule and only make further stage payments (to the dealer if that is what the contract says) if production is on schedule. Sound of stable doors slamming?
 
Thats why the Law Society was divested of its role as regulator and the SRA was introduced, its a seperate body to the Law Society.
 
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Thats why the Law Society was divested of its role as regulator and the SRA was introduced, its a separate body to the Law Society.

[/ QUOTE ]And now we have two organisations, neither of which wants to do anything about a solicitor you've had problems with. If you contact them all that happens is you get passed from one to the other.
 
I have the dubious record that every contractor that has employed me and every dealer that I have bought a boat from has gone bust!!

In engineering we say that every generation needs to learn the mistakes of the previous one. They don't and often repeat them.

I learnt my financial wisdom when Rolls Royce went bust - in the 60's? No company is too big or too good to go bust as witnessed in the 2000's by the banks.

Our 3rd boat I bought from seaventures some 4-5 yrs ago. Seemed an OK company with lots of business then! but I paid the 10% deposit by spreading it over 3 credit cards with 1 to 2% cashback. Then iof it went wrong I could additionally get redress from CC companies.

No stage payments but final payment due before dispatch from factory "No cash - no splash".

While delivery company have insurance I also took out insurance for the boat (inc delivery). I only paid the Jeaneau basic price and deducted commissioning costs and all the extras being fitted by Seaventures. I took delivery and held back money for 18months until all the faults (all Seaventures) were fixed. Without witholding money I do not believe they would ever have been rectified.

Work on the basis that anyone wearing a smart suit and tie are out to nick your money and fairness is best dispensed from a position of power.

If I was buying a new boat today I would only do it with a bank guarantee and try to halve the cost of this with the distributor.

Good luck but at present I reckon your friend is gambling with his money and got about 5% chance of loosing it!

As probably the boat is from abroad your deal is complicated by your contract with the UK dealer (UK law), the dealers contract with the boat builder (French or German law? but unlikely to be UK law as dealer is the smaller party) and finally what protection may be afforded by UK law and European law.

Irrespective of any law ultimately money is King and whoever is holding it calls the shots!

Sorry to be pessimistic and I really hope it all goes OK for your friend but as a Project Manager responsible for multi million £ construction project I only get them completed and right by always thinking of "what if" situations and doing my best to counter possible risks. Funny thing is when you have the risk covered it doesn't go wrong!!
 
Most deposits will be passed on by the broker to the builder. If the builder goes bust - you loose the lot, if the broker goes bust, you have to prove what deposits were paid for which boat - something (some) builders are not good at keeping open records on.

When buying a new boat, the builders require for cash flow purposes, stage payments. So the option of a solicitors escrow account is not often an option.

In this sort of financial weather, it might be far safer to buy a recent second hand boat - and use an escrow account. You only have the brokers word that the account is properly set up as a client account AND you only have his word that he won't abuse it. In my experience, most people are honest - until they are up against an immovable barrier - ie "Barclays has just cancelled my facility" [--word removed--], what do I do? So they borrow on a temporary basis the clients funds fully meaning to return them once things are sorted - but you know that life does not go like that.... So only ever use an escrow account if the amount is substantial.
 
What a breath of fresh air,excellent thinking and you are certainly right about the biggest falling by the wayside, I certainly wouldnt want to be handing over big wads of cash in todays climate!
 
Great post Sailfree.
Couldn't agree more, if you are not holding back cash problems don't get fixed. I bought my boat from Dehler 3 years ago and covered my backside as best I could . Had they gone bust during the build I would have had good title but the hassle of enforcing that does not bear thinking about. You are spot on when you refer to the laws of different countries!

If I was buying new now I'm really not sure if there is a way to protect oneself. I suspect the industry is going to have to rethink itself now and that this recession is going to permanently change the way we buy large ticket items. If it doesn't new build will seriously dry up. (Maybe no bad thing but that is for another thread)
 
Whilst you are correct that there may have been some seemingly odd decisions on disciplining solicitors in the past the bottom line is that clients whose loose out and have to make a claim are compensated-whether the solicitor is dishonest or goes bust.

Fully endorse your comments about using a solicitor you have a relationship with if possible but I think using a solicitor's client account is probably one of the safest options available. In practice I would suspect the problem is getting a solicitor to simply act as an escrow account unless you have a relationship with them or are prepared to pay a decent fee! In these days of moneylaundering even taking on a new client, opening a file & dealing with the paperwork is a costly business and I would be suprised if a solicitor would do this for someone who walked in off the street unless there was a reasonable fee attached.
 
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I would be looking at putting my money with a trusted solicitor in an escrow account.
Stu

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Cant remember the precise number but something like 350 solicitors went bust this year.

Why should the buyer have to fionance the build of a standard boat anyway?
 
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