Buying a s/h stock boat - mortgage question

[Deleted User YDKXO]

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Ie, the indenity is worth Jack Schitt and you're £3k down on legal fees.


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In your opinion only, jfm, and as I have already related it worked in my case. Way better than sitting on your hands and doing f all. The only other suggestion seems to be phoning some random finance co's to ask whether the boat is mortgaged by them. As if some spotty oik on the end of the phone is going to give confidential details of finance arrangements to a complete stranger. Yeah right

 

[Nick_H]

Strangely, they do. When I was about to purchase an S37, I phoned round the mortgage companies, and they all took details of the boat, HIN no. etc, and phoned me back to confirm if they had an interest in the boat or not.

As it happens, one did, and the seller hadn't disclosed it, so I pulled out of the purchase, as I couldn't then trust him to tell me if he had other loans secured on it.

 

[Deleted User YDKXO]

I stand corrected then. Is there no issue of confidentiality or data protection? I don't think I'd want finance co's releasing details of my finance arrangements to any stranger who happens to phone them up. I know brokers should do this as a matter of course when selling a boat but then they are generally known to the finance co's
It wouldn't have helped in my 1993 case because the owner had used the boat as collateral for a business loan with a bank not involved with marine mortgages and the bank had not registered the loan with the Ships Registry either

 

[Nick_H]

Yep, it's definitely not a cast iron guarantee of no finance, but it's another step a buyer can take, and, on a pareto basis, it's fairly easy to do.

 

[henryf]

Re: finance houses declaring an interest. They will tell you if they have an interest, what they won't do is tell you how much and to whom. It is a bit like looking for a needle in a haystack.

My first port of call (pardon the pun) would be Hpi equifax who keep a record of finance, insurance loss, theft etc on cars. I suspect the bank my well have registered the boat with them in 1993.

I can't believe there isn't a database for boats. If there isn't then I need to be setting one up at £30 a check.

Henry /forums/images/graemlins/smile.gif

 

[Nick_H]

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Re: finance houses declaring an interest. They will tell you if they have an interest, what they won't do is tell you how much and to whom. It is a bit like looking for a needle in a haystack.

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You ask the seller if they have a mortgage or other loan secured on the boat, If they say they don't, you phone the 5 or 6 major marine lenders (covering 90%+ of the market), and if they say they have an interest, you walk away from the boat purchase. You don't need to know how much the mortgage is, you only need to know if the seller is telling the truth.

 

[jimmy_the_builder]

Is is a reasonable assumption that if one lender has finance secured on the boat, then there won't be any other lenders with an interest in it?

Cheers
Jimmy

 

[henryf]

I would be surprised if a lender would lend on a boat already financed, certainly in the motor trade it needs to be settled before the next loan can be put in place.

I think a lot of people who say their boat isn't financed fully intend to settle it once they have received funds. There are even some who assume (incorrectly), that they can continue to pay the finance once they have sold the boat and all will be well.

I am still amazed there is no central record of marine mortgages. I suspect someone in the trade will be along soon to tell us there is.

In your csse Jimmy ths finance company have retained part of the paperwork so having full papers must go a long way to ensuring no third party interests.

Henry /forums/images/graemlins/smile.gif

 

[Nick_H]

I'm not sure, but I can't believe another mortage company would knowingly lend money against it, but that's not to stop the owner using it as security for other loans or debts, or for that matter selling it or part of it, then selling it again. It would be fraudulent of course, but that doesn't mean someone couldn't do it.

Personally i'd be pretty relaxed buying it through EBY, they have a good reputation it seems, and wont risk losing that, plus they've been up front about the mortgage.

 

[jimmy_the_builder]

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In your csse Jimmy ths finance company have retained part of the paperwork so having full papers must go a long way to ensuring no third party interests.

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Yup, that was my thinking - I imagine all the main lenders require original boats papers, which Lombard are currently holding. All good.

Thanks for the replies.

Cheers
Jimmy

 

[Deleted User YDKXO]

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I am still amazed there is no central record of marine mortgages

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There is. Finance co's require that a boat be Part 1 registered just so that the mortgage can be registered at the Registry of British Ships. I don't know whether they will pass on information on a mortgage over the phone to an unknown person though. I'm not aware of any HPI type service for boat finance/insurance write-offs

 

[acbruce]

Well, I asked one of the banks a couple of years ago whther they required a boat tro be Part 1 registered to lend and they said no, up to £60,000 without registration.

 

[Deleted User YDKXO]

Interesting. I thought the limit was about £25k

 

[jfm]

Mike, ffs, it's nothing to do with my opinion. you bought a boat off a bank and got an indemnity off a bank. Of course that's a great answer and of course it worked for you, but the reason it worked was that the indemnifier was a bank. But that was only possible cos you bought a repo boat off a bank. For an ordinary purchase from a non bank, an indemnity from the seller is, as I and ari have pointed out, plainly worth jack schitt

 

[Observer]

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Nope, I'm proposing that the seller ie the dealer signs a letter of agreement to the effect that the boat is sold to the buyer free of all liens ie the dealer is imdemnifying the buyer to that effect. I've posted this before but I bought a secondhand Princess 435 in 1993 from a finance co who had repo'd it from their borrower. During the course of my investigations into the boat and it's history, I became concerned about the fact that the boat had been used as security for loans other than the finance co mortgage so I consulted Ward & McKenzie who proposed that the finance co provide me with a letter confirming that the boat was sold free of liens. I can't remember the exact wording but it was a form of legalese. After I bought the boat, I was in fact contacted by a bank who claimed that the boat had been used as security for a business loan taken out by the previous owner (obviously fraudulently as the boat was already secured against the mortgage). I sent them a copy of the letter and referred them to the finance co who had sold me the boat and I heard nothing more. I'm no marine law expert and I don't know whether the law has changed such that my position would be different today but it certainly protected me in 1993

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A warranty/indemnity from the seller to the effect that there are no liens adds absolutely zilch in most cases because the seller (either by statute or by reason of the written contract terms) is warranting good title anyway. Getting another piece of paper to say the same thing adds nothing.

WRT your purchase, it looks to me (reading between the lines a bit) as if this is what may have happened:

- the finance company you bought from (Lender 1) had a legal mortgage or other security interest in the boat you bought as security for a loan to their customer

- the customer had defaulted and Lender 1 repossessed the boat

- customer has also raised finance from another bank (Lender 2) against the security of the boat. I'm guessing the boat was not Part I registered. If it was, I would have expected Lender 1's mortgage to be registered, which would have made it a lot more dificult to raise the second loan on the security. Or possibly Lender 2 was happy with a second charge that ranked behind Lender 1's security. Either way, Lender 1 had security for its debt and Lender 2 had a second ranking security interest.

- Lender 1 gave you a warranty that there were no liens on the boat (other than theirs) and (possibly) a specific indemnity if the warranty was breached. They would not have done this lightly and must have been very sure that they would not have to meet a claim by you. Assuming they did not know about Lender 2, the simple reason they would have done that is that the selling price to you was less than the debt they were owed so they KNEW that any second ranking security would be worthless anyway.

The above is obviously very far from a typical situation. As stated above and by jfm and ari, an additional undertaking from the same person adds nothing and (perhaps this is where you have misunderstood) does not bind anyone else who does have a valid security interest.

 

[Deleted User YDKXO]

I take your points, Observer, but the question remains as to why a respected firm of marine lawyors, Ward & McKenzie, advised that this was done if it wasn't going to be worth the paper it was written on? Were they wrong or just generating fee income?

 

[jfm]

Blimey mike! We're agreeing it was sensible in your particular case, as the indemnifier was a bank. So, no criticism of Ward and M - looks like their advice/actions were good

But your circumstances were rare, in that your indemnifier was a bank. In general, Joe Public is buying a boat from John Doe, and in that case no 3rd party bank is going to give an undertaking/warranty/indemnity that the boat is unencumbered. Applying your solution to a normal transaction, and hence getting such a warranty/indemnity from John Doe as seller, is self-evidently worth Jack Schitt. It adds nothing, but costs fees.

You were proffering the indemnity idea as a generic piece of good advice, which it just isn't. It's good advice if you happen to be buying a boat from a bank, but that isn't the normal scenario and wasn't Jimmy Le Constructeur's circs.

 

[jimmy_the_builder]

It's actually getting (slightly) more interesting in my particular case at the moment. As I mentioned before, EBY were completely open about the fact that they have mortgaged the boat with Lombard; in fact, this is proving to be to my advantage in that the boat is part one registered in Guernsey - and because of the mortgage, Lombard obviously require all the paperwork for the boat to be completely tip-top. It turns out there are a couple of anomalies in the bill of sale chain (MCA forms used instead of Guernsey forms) and the simple existence of the mortgage is requiring all of this to be straightened out. The net result will be that by the time my purchase completes the papers will all be completely pukka.

Cheers
Jimmy

 

[Observer]

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I take your points, Observer, but the question remains as to why a respected firm of marine lawyors, Ward & McKenzie, advised that this was done if it wasn't going to be worth the paper it was written on? Were they wrong or just generating fee income?

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I don't know the terms of the sale and purchase contract under which you bought. It may (should) have included adequate specific terms regarding title anyway and a person selling in the course of a business to a consumer (which I assume you were) cannot exclude the implied (by Sale of Goods Act) warranty as to title even if there is no specific condition (I would imagine but I'm not certain that this applies to a mortgagee/receiver selling property subject to a mortgage or charge - jfm?).

If there was no express warranty about title in the sale agreement, a specific warranty in a separate agreement obviously puts the buyer in a better position and, if an indemnity was included, better still.

So, what jfm said plus 'belt and braces'. Given the object of the sale was a repossessed item with a known security interest and (for all W&M knew) any number of other, unregistered security interests (one of which actually emerged), a separate, specific warranty/indemnity was a very sensible move by W&M.

You may have been adequately protected without the separate warranty/indemnity, but getting it in unequivocal terms made damn sure you were. Assuming that Lender 2's security was generally valid, Lender 2 did have a valid second ranking claim against the boat you bought. It may be that Lender 2 contacted Lender 1 (after you had pointed them in that direction) and found out that their second ranking security was worthless anyway (as I suggested earlier). Or it may be that Lender 1 had received more than the debt owed to them and made a settlement with Lender 2 because they knew you would have a irresistible claim against them if Lender 2 came after you.

In these particular circs (without full knowledge of the background), I'd say W&M did a good professional job.

In a run of the mill case where you're buying from a dealer, the standard sale and purchase contract should adequately cover you and if that doesn't, the Sale of Goods Act does. Better though to have the specific statement in the sale and purchase contract and, for general information, the key words you should be looking for are "seller sells with full title guarantee" (or substantially that). That phrase "with full title guarantee" has a very specific statutory meaning that ensures you have clear recourse to the seller if there are any other security interests. However, it's only as good as the seller's covenant. So if you have equivalent assurance elsewhere, repeating it (or something that has a similar effect) in a separate agreement serves no purpose.