Buying from a broker, what's at risk ?

[PaulGooch]

Exactly that. There does seem to be a small faction who's main purpose in this thread is simply to rubbish brokers (references to "sloth like" etc).

I made the "sloth like" comment. It was a clear reference to one particular broker, who's female staff member couldn't even be bothered to come out of her nice warm office and show us the boat we had arranged to view. I stand by my comment, but have equally made it clear throughout the thread that i'm not knocking all brokers.

Co-coincidently, my father is in the process of buying a boat at the moment, I'm involved, and we're close to agreeing a deal on one (I hope!).

It is being sold through a broker, we've been to see it, we've made an offer subject to survey and sea trial.

Now (perhaps because of this thread) I actually made a point of saying to the broker when the offer was put in subject to the above that we had never tried one of these boats, although my fathers current boat is a smaller version of a similar type so we have a good idea what to expect. So we need to ensure that if we simply do not like the boat for any reason, be it too noisy, too slow, too uncomfortable, whatever, we just don't like it, that the deposit is refundable without quibble.

Brokers response?

"Absolutely, we wouldn't expect you to commit to complete a purchase when you've not even tried it".

Isn't that a bit hypocritical ? You've consistently been against anyone taking a trial under those conditions, now you expect them when you're buying a boat.

So there it is. This is what happens in the real world for normal sensible genuine buyers.

No, it isn't. It's what happens in the real World for normal, sensible, genuine buyers when they are dealing with sensible brokers. Not all brokers apply those same standards.

Don't be so rude as to suggest that just because you got the opportunity to take a sea trial without being totally commited to buy that those of us who haven't always been so fortunate are in some way not "normal, sensible or genuine".

We'll now put down a deposit based on that and a satisfactory survey, do both, and, all being well, complete.

If all is not well we walk away with deposit returned (less lift out costs etc if it's gone that far, but we'll do the trial first) if not happy with the handling of the boat, or re-negotiate/walk away if the trial or the survey show up issues. It looks a good boat though, so fingers crossed that won't happen.

It really isn't a problem, and certainly not one warranting 18 pages of intense debate and anti broker bile.

Again, it isn't a problem for you, in this instance. You have been offered a sea trial that gives you the chance to reject the boat if you don't like the noise/handling/ etc. Yet, throughout the thread and even within this post, you ridicule anyne else who's suggested a need for such a sea trial.

 

[Deleted User YDKXO]

Exactly that. There does seem to be a small faction who's main purpose in this thread is simply to rubbish brokers (references to "sloth like" etc).

Co-coincidently, my father is in the process of buying a boat at the moment, I'm involved, and we're close to agreeing a deal on one (I hope!).

It is being sold through a broker, we've been to see it, we've made an offer subject to survey and sea trial.

Now (perhaps because of this thread) I actually made a point of saying to the broker when the offer was put in subject to the above that we had never tried one of these boats, although my fathers current boat is a smaller version of a similar type so we have a good idea what to expect. So we need to ensure that if we simply do not like the boat for any reason, be it too noisy, too slow, too uncomfortable, whatever, we just don't like it, that the deposit is refundable without quibble.

Brokers response?

"Absolutely, we wouldn't expect you to commit to complete a purchase when you've not even tried it".

So there it is. This is what happens in the real world for normal sensible genuine buyers.

We'll now put down a deposit based on that and a satisfactory survey, do both, and, all being well, complete.

If all is not well we walk away with deposit returned (less lift out costs etc if it's gone that far, but we'll do the trial first) if not happy with the handling of the boat, or re-negotiate/walk away if the trial or the survey show up issues. It looks a good boat though, so fingers crossed that won't happen.

It really isn't a problem, and certainly not one warranting 18 pages of intense debate and anti broker bile.

Sorry, ari, I think this post is a bit disingenious. You have never admitted it AFAIK but I have always believed that you are in the marine business and a nod and a wink arrangement between 2 mates in the industry is not quite the same as a normal buyer/broker relationship. In your case, the broker has agreed to allow you to back out of the sale in case you simply dont like the way the boat goes but the terms and conditions of a standard RYA sales contract simply do not provide for that. Contractually, a buyer only has the right to back out of a contract if a material defect with the boat is found on sea trial. There is nothing in a standard sales contract which allows a buyer to back out if he finds the exhaust a bit noisy during the sea trial or it slams a bit in a F4.
Yes a buyer, seller and broker might verbally agree something else up front but thats very risky for the buyer if the broker or the seller decide after the sea trial that they dont agree with the circumstances of the buyer backing out and decide to enforce the contract. I still think there should be some contractual mechanism for allowing a prospective buyer a pre offer seatrial

 

[jonic]

The red is my response

Sorry DAKA, I or no Broker I know would dream of "Borrowing money" from a client account. ITS NOT OURS!!!! Members of ABYA must follow the rules about client accounts, if we don't we get thrown out.

I would be more than happy if there was a specific law against it, but It's currently covered by the law of Theft and Fraud.

"Theft" from client accounts just does not go on to anywhere near the degree this thread would imply. Peters were doing wrong and it was wrong, every Broker who is not dishonest knows that.There are hundreds and hundreds of Brokers who would and do utterly condemn them.


The statute makers are the only ones who can add further layers of law to the existing theft and fraud laws. In the absence of that organisations like ABYA have taken the initiative to insist on a properly run client account and PI insurance as a condition of membership.

You are really talking about theft and dishonesty here, and that is a problem with the individual and his morals. That happens in every industry, including yours, to a small degree, specific law or no law.

When you attend the ABYA course one of the sections is a very very serious talk from a lawyer informing you precisely of the current law. He leaves you with no doubt that if you behave improperly you can and will be sued, say goodbye to your house etc. Member conduct is taken seriously by ABYA.

Having said all that, even though 99% of client accounts are run as they are intended I would have no opposition to a specific law to cover Yacht Broker client accounts to stop those intent on fraud committing fraud. Whether it would stop them if they were hell bent on the idea I do not know.

And as this thread is really about seatrials, yes of course I would give a deposit back with no question if the purchaser said it was unsatisfactory. For whatever reason he found it unsatisfactory. As per my contract.

And if he were not happy with the contract wording I would write in big letters "for whatever reason."

16 SEATRIAL (optional clause)
Completion of this Agreement shall be subject to a satisfactory seatrial to be carried out after the survey, or at such other time and terms as are mutually agreeable to both Vendor and Purchaser and provided that such seatrial shall only operate so as to permit rejection of the vessel

(a) on grounds of Performance, Handling or Seaworthiness;
OR
(b) on grounds of matters which would not reasonably become apparent on inspection/survey.

If, as a result of the seatrial, the Purchaser wishes to reject the vessel, he shall within 48 hours from completion of such seatrial notify the Vendor and/or the Vendor’s Broker in writing of the grounds on which he wishes to reject the vessel and the Agreement shall be rescinded.

Happy boat buying all. I'm back off to the rag and stick threads

 

[Stork_III]

It really isn't a problem, and certainly not one warranting 18 pages of intense debate and anti broker bile.

It doesn't seem so bad if you set your user preference to 30 post/page !

 

[ari]

Isn't that a bit hypocritical ? You've consistently been against anyone taking a trial under those conditions, now you expect them when you're buying a boat.

No I haven't at all!!!!

Right the way through I've stated that placing a 10% deposit sub to satisfactory sea trial and/or survey is the normal correct process and that is precisely what my father is doing.

No, it isn't. It's what happens in the real World for normal, sensible, genuine buyers when they are dealing with sensible brokers. Not all brokers apply those same standards.

Then use one that does!

Don't be so rude as to suggest that just because you got the opportunity to take a sea trial without being totally commited to buy that those of us who haven't always been so fortunate are in some way not "normal, sensible or genuine".

My point about being normal sensible genuine buyers is that this is exactly what my father is, not someone who wants a ride out on a boat and objects to having to show a commitment toward purchasing it.

Again, it isn't a problem for you, in this instance. You have been offered a sea trial that gives you the chance to reject the boat if you don't like the noise/handling/ etc. Yet, throughout the thread and even within this post, you ridicule anyne else who's suggested a need for such a sea trial.

We weren't "offered it", we queried the position and made sure that this was the case. We specifically confirmed that the sea trial is subject to OUR satisfaction, not proof of material defect for example.

Again, anyone can do the same, it's simply about being normal and reasonable, not trying to find issues that don't exist everywhere.

And it wasn't a problem to the broker because it is a normal reasonable request.

 

[ari]

Sorry, ari, I think this post is a bit disingenious. You have never admitted it AFAIK but I have always believed that you are in the marine business and a nod and a wink arrangement between 2 mates in the industry is not quite the same as a normal buyer/broker relationship. In your case, the broker has agreed to allow you to back out of the sale in case you simply dont like the way the boat goes but the terms and conditions of a standard RYA sales contract simply do not provide for that. Contractually, a buyer only has the right to back out of a contract if a material defect with the boat is found on sea trial. There is nothing in a standard sales contract which allows a buyer to back out if he finds the exhaust a bit noisy during the sea trial or it slams a bit in a F4.
Yes a buyer, seller and broker might verbally agree something else up front but thats very risky for the buyer if the broker or the seller decide after the sea trial that they dont agree with the circumstances of the buyer backing out and decide to enforce the contract. I still think there should be some contractual mechanism for allowing a prospective buyer a pre offer seatrial

Absolutely no nodding and winking going on, just a normal sensible boat purchase, I think it's probably about the tenth boat my father has bought over a thirty year boating career, most (but not all) of which have been through brokers. I've had a couple of boats myself, although not got one at the moment, sadly (maybe dad will let me play with his).

Look, sod the contract (or get it written in if you're particularly paranoid), all you need to do is confirm the position with the broker. "Can you confirm that the sea trial is to my satisfaction, if I do not like the boat I do not have to proceed, yes?"

In this case my father has done his research, narrowed down exactly the type of boat that he wants, we've looked at a few, and he's chosen one, made and offer and agreed a deal subject to survey and sea trial. But he's never been out on an example of the type of boat he's buying so clearly he wants to make sure that (say) if the exausts boom like hell at anything over 4 knots he can decide against the purchase, even if there is nothing wrong "they all do that sir".

Seller has a (will have a) sensible serious statement of intent by the way of a signed contract and deposit (held by the broker), my father knows the boat won't get sold from under him, and we can all proceed happily forward as above.

Seriously, where's the issue? It really isn't difficult and never has been.

 

[ari]

It doesn't seem so bad if you set your user preference to 30 post/page !

I think I'm just going to give up instead!

Some people will always find problems whether real or imagined.

There is nothing really I can add beyond the fact that, co-incidentally, we're going through exactly the process described for real, and in reality (away from the armchair experts of doom) it is extraordinarily easy to make sure that the above issues are completely resolvable.

 

[PaulGooch]

As the broker further up the thread explained "subject to satisfactory sea trial".

If you weren't satisfied you would be perfectly entitled to back out.

If you read his subsequent posts, it isn't as clear as you were led to believe. He went on to say in later posts that "satisfactory" doesn't include you being satisfied about things like noise, ride, handling etc.

No I haven't at all!!!!

Right the way through I've stated that placing a 10% deposit sub to satisfactory sea trial and/or survey is the normal correct process and that is precisely what my father is doing.

Again, it isn't NORMAL to be able to back out if you don't like the noise etc. Standard contracts don't allow that. Sure, some brokers will allow it, as you've found and as Jonic has said he does. But it is NOT the norm.

Some of us have been debating the system and saying that it SHOULD be the norm.

My point about being normal sensible genuine buyers is that this is exactly what my father is, not someone who wants a ride out on a boat and objects to having to show a commitment toward purchasing it.

There are some brokers that won't even let you start the engine, without an offer being accepted and a deposit paid. That doesn't help anyone. It certainly didn't help the seller of a boat i looked at that was still for sale 18 months later, at a lower price. A broker should be required to pass on all offers and all requests for a sea trial. If the seller refuses, it's his boat, his choice and his potential loss.

We weren't "offered it", we queried the position and made sure that this was the case. We specifically confirmed that the sea trial is subject to OUR satisfaction, not proof of material defect for example.

Again, anyone can do the same, it's simply about being normal and reasonable, not trying to find issues that don't exist everywhere.

And it wasn't a problem to the broker because it is a normal reasonable request.

You still miss the point. It isn't normal. Normal is the exact opposite. If what you say above was normal, this thread wouldn't exist. What you claim to be normal is exactly what we are discussing.

I'm simply saying that how you father in law is proceeding is the way it should be. You have already said that's how you'd expect it to be, it's just that you're under the mistaken opinion that it's how it is already.

 

[DAKA]

Sorry DAKA, I or no Broker I know would dream of "Borrowing money" from a client account. ITS NOT OURS!!!!

When I replied to you I was not aware you were a Broker or I would have posted gently,

Members of ABYA must follow the rules about client accounts, if we don't we get thrown out.

well thats the problem, they are not rules/regulations , they are just suggestions.
With all due respect if I lost £100k , knowing a Broker got kicked out the ABYA and or Noddy Fan club isnt really much conciliation for me.

I would be more than happy if there was a specific law against it,
Reputable Brokers would benefit from regulation.

but It's currently covered by the law of Theft and Fraud.
It is incredibly hard to prove the Broker took the money with no intention to pay it back so the CPS havent so far prosecuted .


"Theft" from client accounts just does not go on to anywhere near the degree this thread would imply. Peters were doing wrong and it was wrong, every Broker who is not dishonest knows that.
Technically they werent doing anything wrong, Tranona is among others who are happy the way they conducted themselves, its just the perception of joe public who feel it was morally wrong, but joe public also perceive this as a victimless practice as they perceive only stinking rich capitalists share out their money, surprisingly even some wealthy and educated forum members take the attitude that if someone is stupid enough to trust cash with a yacht broker they deserve to loose it.

There are hundreds and hundreds of Brokers who would and do utterly condemn them.
Agreed but most will be unaware just how little protection is offered by bodged up clients accounts and there will also be some others that are also using clients funds to reduce Mortgages and overdrafts as their local Bank managers have recommended to them.
I am not sure if you saw this but it may help protect your clients account.

.
I have only used red as it stands out against a quoted background, sorry I dont know how to multi quote another way.
Its meant to be helpful and not meant to sound angry.
cheers
Pete

 

[jonic]

Daka

I take your points

But I am concerned that to the uninformed casual browser of this forum this thread is giving the impression that yacht brokers are regularly stealing from written in trust client accounts. They are not.

So in interests of balance this is how I as an ABYA broker operate.


I have a 2 page document from ABYA going into great detail into how I should run my client account.

I have a client account written in trust at Lloyds TSB. It is signed by me and a banking official from Lloyds. I have one copy the other is with the bank.

When I administer the sale and purchase contract I sign the document to contract that the deposit money and final payment money will go into my client account. In addition I give the purchaser a copy of the written in trust bank letter complete with the bank details.

The transactions take place exactly like that. The funds are always in the client account. The client account is just that. The client account.


.....and if they don't like the boat at sea trial the deposit is returned and the contract rescinded

 

[Deleted User YDKXO]

jonic, its good to have a broker contributing to this thread. The point is not that brokers do dip into client accounts for their own benefit just that they can and being thrown out of the ABYA is not really much of a deterrent, is it? As for being sued, well yes if you're using your house to guarantee your company's debts, then yes you could lose your house but, in my experience and I do have unfortunate experience of this in other industries, company directors who bleed their companies dry and then walk away are generally clever enough not to put any of their personal assets in their own name, so any court victory is a phyrric one only.
One characteristic of the boat market is that boats cost a very large amount of money so loss of that money through misappropriation of client account funds by a broker will lead to a major loss for the individuals concerned, perhaps even their life savings, so its absolutely necessary that the risk of selling or buying through a broker is reduced to a minimum. For me, allowing a broker to handle several hundreds of thousands of pounds in the course of selling my boat, even if the broker is as honest as the day is long and even if he uses a client account, is a risk I really dont want to take. I dont want to be that 1% of your 99% that is unlucky. SO IMHO, having a client account is slightly better than having no client account but in no way is it a risk free way of buying or selling a boat, as brokers and dealers tend to suggest.
Btw, I may be wrong but I dont think that Peters was a problem with client account money being misused but that money that should have been placed in a client account, wasn't. If I'm wrong somebody correct me on that. Either way, a few customers lost substantial sums of money. Are there any Peters' directors in jail? I dont think so.

 

[Deleted User YDKXO]

I have a 2 page document from ABYA going into great detail into how I should run my client account.

I have a client account written in trust at Lloyds TSB. It is signed by me and a banking official from Lloyds. I have one copy the other is with the bank.

When I administer the sale and purchase contract I sign the document to contract that the deposit money and final payment money will go into my client account. In addition I give the purchaser a copy of the written in trust bank letter complete with the bank details.

The transactions take place exactly like that. The funds are always in the client account. The client account is just that. The client account.

Thats all fine and dandy, jonic, but the fact still remains that you, and you only, can shift money in and out of that client account so, whilst the way the client account is operated is set out on pretty bits of paper, money can be taken out of the client account by you at will, should you choose to do so.
I'm not in any way suggesting that you would do that as I'm sure you are very honest, only pointing out that it would be possible for an unscrupulous broker to do so and therefore, really, client accounts are marketing hype designed to give punters a (false) sense of security.
As I see it, the only way that client accounts could operate without risk to any of the parties involved would be for individual client accounts to be set up for each transaction and the signatories on that account to be the seller and the buyer as well as the broker

 

[Renegade_Master]

Thats all fine and dandy, jonic, but the fact still remains that you, and you only, can shift money in and out of that client account so, whilst the way the client account is operated is set out on pretty bits of paper, money can be taken out of the client account by you at will, should you choose to do so.
I'm not in any way suggesting that you would do that as I'm sure you are very honest, only pointing out that it would be possible for an unscrupulous broker to do so and therefore, really, client accounts are marketing hype designed to give punters a (false) sense of security.
As I see it, the only way that client accounts could operate without risk to any of the parties involved would be for individual client accounts to be set up for each transaction and the signatories on that account to be the seller and the buyer as well as the broker

Mike so if the deposit does not go into a client account where should it go?

 

[jonic]

Thats all fine and dandy, jonic, but the fact still remains that you, and you only, can shift money in and out of that client account so, whilst the way the client account is operated is set out on pretty bits of paper, money can be taken out of the client account by you at will, should you choose to do so.
I'm not in any way suggesting that you would do that as I'm sure you are very honest, only pointing out that it would be possible for an unscrupulous broker to do so and therefore, really, client accounts are marketing hype designed to give punters a (false) sense of security.
As I see it, the only way that client accounts could operate without risk to any of the parties involved would be for individual client accounts to be set up for each transaction and the signatories on that account to be the seller and the buyer as well as the broker

I give up.

Solicitors can and do steal from their client accounts.

Accountants can and do steal from their client accounts.

Stock brokers do too.

Even banks do.


So don't buy a house or send your accountant any money?

Don't put any money in a bank and don't buy shares?

If you think the broker is going to steal the money do not but a boat either?

If someone were really that concerned I would say get their solicitor to transfer the money....but who's to say he won't steal it?


I am afraid that there is nothing else I can say. I do all I can but the problem being discussed here really is outright Theft/Fraud.

 

[Tranona]

Btw, I may be wrong but I dont think that Peters was a problem with client account money being misused but that money that should have been placed in a client account, wasn't. If I'm wrong somebody correct me on that. Either way, a few customers lost substantial sums of money. Are there any Peters' directors in jail? I dont think so.

No, you are not wrong. As has been stated over and over again the issue in Peters was that not all deposits went into the client account. All the money in the client account was properly accounted for and returned to its rightful owners.

When people lose money in failures of boat businesses it is because they have paid money to the business WITHOUT ANY SECURITY so that if the business goes bust they are unsecured creditors. Just as happens on almost an everyday basis in other retail businesses.

 

[jonic]

No, you are not wrong. As has been stated over and over again the issue in Peters was that not all deposits went into the client account. All the money in the client account was properly accounted for and returned to its rightful owners.

So all the client account money was ok?

How long ago was it that Peters went bust?

 

[ari]

If you read his subsequent posts, it isn't as clear as you were led to believe. He went on to say in later posts that "satisfactory" doesn't include you being satisfied about things like noise, ride, handling etc.



Again, it isn't NORMAL to be able to back out if you don't like the noise etc. Standard contracts don't allow that. Sure, some brokers will allow it, as you've found and as Jonic has said he does. But it is NOT the norm.

Some of us have been debating the system and saying that it SHOULD be the norm.



There are some brokers that won't even let you start the engine, without an offer being accepted and a deposit paid. That doesn't help anyone. It certainly didn't help the seller of a boat i looked at that was still for sale 18 months later, at a lower price. A broker should be required to pass on all offers and all requests for a sea trial. If the seller refuses, it's his boat, his choice and his potential loss.



You still miss the point. It isn't normal. Normal is the exact opposite. If what you say above was normal, this thread wouldn't exist. What you claim to be normal is exactly what we are discussing.

I'm simply saying that how you father in law is proceeding is the way it should be. You have already said that's how you'd expect it to be, it's just that you're under the mistaken opinion that it's how it is already.

I'm sorry but that simply is not the case.

Not one single person has yet said that they have been forced to buy a boat against their will, or that they have been forced to lose their 10% deposit.

There really is no point debating this further, as I've said (and indeed done in the real world) ALL that needs to happen is a simple confirmation (in writing if it makes you more comfortable, it's what we did partly because of this thread) that the sea trial is subject to the buyers satisfaction (which, reading the wording in the brokers example of his contract above is pretty much the case anyway).

That's it. Not complicated.

 

[Nautical]

Apologies for not having read through all the posts and posting my slant (which someone may have done already) but as far as securing monies in client accounts etc the best way and most secure is through and Escrow account with a reputable law firm. They manage the in and out if the money and if every i and t is not dotted and crossed no one gets any money until it is correct. I as a builder can not touch the money until the client and the lawyers agree all is in order. They have various milestones, checks and balances to undergo before any money is released to either the broker or the builder. A little bit more expensive than a bankers letter and bank client account....but, my business could go to hell in a hand cart and sink for millions but the escrow account can never be used as an asset or security or be challenged by a liquidator, it is for a very specific purpose and very clearly defined milestones, if they are not reached no money changes hands.

Another belt and braces bolt on would be to draw up a Quist Close trust between the builder (if new) and the buyer, the monies can only ever used for a very specific purpose (to build and complete the boat), if the purpose the money was provided for is not fulfilled then a trust will exist over the monies used/misappropriated and can be claimed back through the courts, a Quist Close trust would come far and above any other creditors of the company.

 

[Tranona]

So all the client account money was ok?

How long ago was it that Peters went bust?

Yes, (and no) the administrators were called in on 14 August 2007. The court case was various customers who had made deposits and other payments claiming against the client account. The issue was which payments had a legitimate claim on the account. The decision was that the claimants had to show that a trust existed, which meant that there had to be evidence that the money was paid direct into the account (in the way that you describe). Not all were as Peters paid some into their general (overdrawn) account and subsequently tried to transfer funds from the (still overdawn) account to the client account at a later date. It was held that no trust had been created for those funds under the normal test of a trust (that is the funds are specifically identifiable). So if the funds had been paid in correctly, the claimant got their money, but if not they were unsecured creditors of the failed company.

The revised guidance on the structure of client account specifically reflects the clarification in this ruling.

 

[PaulGooch]

I'm sorry but that simply is not the case.

Not one single person has yet said that they have been forced to buy a boat against their will, or that they have been forced to lose their 10% deposit.

There really is no point debating this further, as I've said (and indeed done in the real world) ALL that needs to happen is a simple confirmation (in writing if it makes you more comfortable, it's what we did partly because of this thread) that the sea trial is subject to the buyers satisfaction (which, reading the wording in the brokers example of his contract above is pretty much the case anyway).

That's it. Not complicated.

If you are unable to grasp the simple fact that the industry standard contract DOES NOT allow you to reject a boat because you don't like it during the sea trial and the contract you have (the same as the one Jonic uses) are NOT standard, then i really don't know what to say to you.

It's not that complicated.