Buying from a broker, what's at risk ?

[DAKA]

Could you clarify exactly what the process is to check that a client account is a "proper client account"?

Also, if a broker takes money out of a proper client account, which is theft, how would the client go about getting his money back? What protection is there for the client's money if this happens?

There isnt actually such thing as 'proper client account' for a yacht broker.
Any account the Broker puts together doesnt actually have any more legal protection that if the Broker puts it in his business account.

The Broker has to go out his way to voluntary create a trust, which is incredibly difficult to do.

If the Broker takes the money then it is theft.
if the broker only borrows it then it is not theft.(even if he cant afford to pay it back after he has spent it)

That is why Tranona can be so sure of himself when he states you dont have any cases to quote.

Insurance Brokers also used to leg it with the clients funds and a specific law was introduced in 2004 ?? to outlaw the practice (considered against public interests as people were been left driving uninsured, but you loosing £100k on a boat is a victimless mishap).

it is now illegal for an insurance broker to borrow cash from the clients account but perfectly legal for a yacht Broker to borrow the cash, therefore you will not find any proof of such illegal activity as its not actually illegal.

The really great news is since I started the multi post battles with Tranona one of the Yacht Brokers associations has enhanced its recommendations to their members and just about adopted my suggested wording from this post.

You just have to be careful which Yacht Broker you use and who he is registered with if any.

Tranona, please note I have said my bit and you are free to rubbish it as much as you like but all the information is readily available for anyone to read, just ask your chosen Broker for sight of his client account details and a letter from his bank .

Copy from BMF code of conduct

APPENDIX A
The BMF will require confirmation from the broker’s bank that a separate
client account is in existence from time to time as the BMF may decide.
Below is suggested wording that will be accepted by BMF from the
broker’s bank. It is suggested that members forward this wording to the
bank when requesting confirmation:
" In respect of the money standing to the credit of the account held by the
account holder the Bank is not entitled to combine any account with any other
account or to exercise any right of set-off or counter claim against money in
that account in respect of any sum owed to it by any other account of the
account holder and that the title of the account sufficiently distinguishes that
account from any account containing money that belongs to the account
holder, and is in the form requested by the account holder. "


and now the ABYA code

3.2 The Member shall set up a Client Account, designated as such, and identified at the Bank as such, where he shall hold all client monies, as these monies are held on behalf of the client and are not to be used for company purposes.

 

[Tranona]

Could you clarify exactly what the process is to check that a client account is a "proper client account"?

Also, if a broker takes money out of a proper client account, which is theft, how would the client go about getting his money back? What protection is there for the client's money if this happens?

Look at the Code of Practice on www.abya.co.uk for the definition. A client account is a trust account where the broker is holding the funds for the client and they do not form part of his private or business assets.

If he steals it he has broken the "trust" and you sue him for the return of your property. The money is always legally yours.

This is different from paying a deposit to a dealer, where your money becomes part of his assets with you as an unsecured creditor - unless of course you have a contract with him that does secure your money against assets.

 

[PaulGooch]

Look at the Code of Practice on www.abya.co.uk for the definition. A client account is a trust account where the broker is holding the funds for the client and they do not form part of his private or business assets.

If he steals it he has broken the "trust" and you sue him for the return of your property. The money is always legally yours.

This is different from paying a deposit to a dealer, where your money becomes part of his assets with you as an unsecured creditor - unless of course you have a contract with him that does secure your money against assets.

I hope we don't get too bogged down with another client account argument, but i'm curious about a couple of things.

When i bought my current boat, we were sent a copy of a letter from the brokers bank telling us it was a client account. Can't remember the exact wording and i can't find the letter, may have only been an email. We paid the deposit and the final payment directly into the account.

Assuming it was a "proper" client account, is it then possible for the broker to withdraw that money from the client account ?

You mention suing him for return of the money, but if he's spent it and has gone bankrupt, i can't see how one would get it back from him.

 

[ColdFusion]

The issue is whether the current system sytematically favours one party over another and it does not.

Yes it does. It favours the broker/seller because the buyer isn't allowed to use his definition of "satisfactory" when judging noise/handling/etc characteristics.

It is not easy to word a condition that defines satsfactory sea trials that will cover all areas of satisfaction - simply because (as many have said) "satisfaction" is subjective.

Whether a buyer likes a boat or not is entirely subjective. That is the whole basis on which ANY item is sold - usually, but for some bizarre reason some people think this should not apply to purchasing a boat and that purchasers should be hooked into buying a boat if they discover during a sea trial that the boat is not satisfactory for them! The point is that the buyer is not allowed to use his definition of "satisfactory" as a reason for withdrawing from the purchase without losing his deposit. That is not fair, equal or unbiased and to be honest has a hint of some kind of scam money making scheme.

So it is better to limit the condition to things that are concrete and not subjective things such as noise and rough ride etc as they are bound to lead to dispute.

Rubbish! See my comments, above.

So it is hardly surprising that sellers try to get those things out of the way

Actually, sellers don't. The brokers may but let's face it, in reality most brokers are too keen to get the buyer to sign a contract and pay a deposit to be worried about little trivialities such as subjectiveness and definitions of satisfactory. That only comes later if the buyer wants his deposit back.

There really isn't a simple and foolproof way of resolving this to everybody's satisfaction

I beg to differ. The process suggested in post #90 is a damn sight more balanced and fair than the current process that you always seem so keen to defend.

 

[Tranona]

I hope we don't get too bogged down with another client account argument, but i'm curious about a couple of things.

When i bought my current boat, we were sent a copy of a letter from the brokers bank telling us it was a client account. Can't remember the exact wording and i can't find the letter, may have only been an email. We paid the deposit and the final payment directly into the account.

Assuming it was a "proper" client account, is it then possible for the broker to withdraw that money from the client account ?

You mention suing him for return of the money, but if he's spent it and has gone bankrupt, i can't see how one would get it back from him.

Yes, it is possible for him to withdraw the money because he is signatory, but as a trustee he his limited to using the money on behalf of the beneficial owner - in other words in relation to the purchase or sale of the boat. This is just the same as, for example you were holding money in trust for the benefit of your children and you used it to buy your boat (depending of course on the terms of the trust!)

You can work out the answer to the last point. If he doesn't have the money then you will only get it back under the terms of his bankruptcy. You would have a higher claim than an unsecured creditor.

As I said earlier the major difference with mney in a client account is that it is always legally yours. Cold comfort in extremes, but for most practical purposes significantly better than the alternative.

 

[Tranona]

Yes it does. It favours the broker/seller because the buyer isn't allowed to use his definition of "satisfactory" when judging noise/handling/etc characteristics.


I beg to differ. The process suggested in post #90 is a damn sight more balanced and fair than the current process that you always seem so keen to defend.

Which is why it is so difficult to establish a neutral condition that covers this. It is not a question of what is "allowed" and what is not. It is what can be reasonably used to resolve a dispute or set a criterion, and you can't do that when it is subjective and therefore open to interpretation.

If you and the seller want to get into such an arrangement then fine, but recognise that it is outside the normal contract terms and conditions.

The only difference with your "simplification" and the existing system is that it is more complicated and adds an additional and unnecessary step that happens to satisfy your personal objection. As I have said over and over again, the current framework is designed to govern the sale and purchase of private property. All it assumes is that the seller is honest about what he is offering and the buyer has to assume the responsibility that it will suit his needs and is as described. If you want more (to try a boat because you are not sure whether you want it or not) then you have to ask the owner, and if he says no, you have to respect his position.

 

[ColdFusion]

Which is why it is so difficult to establish a neutral condition that covers this.

I think my suggested way forward is more neutral than the present way of doing things.

It is not a question of what is "allowed" and what is not. It is what can be reasonably used to resolve a dispute or set a criterion, and you can't do that when it is subjective and therefore open to interpretation.

It would be more reasonable to have a process which enables a buyer to commit to purchasing once he has had a sea trial and is therefore more informed about the suitability of the boat for his needs. Subjective issues or definitions of 'satisfactory' would then not arise and the buyer would then be entering into a contract with eyes wide open, unlike the present system.

If you and the seller want to get into such an arrangement then fine, but recognise that it is outside the normal contract terms and conditions.

"Normal" contract terms as laid down by a broker, who acts on behalf of a seller and has no real interest of what is the right boat for a buyer other than if he has the means to buy the boat so the broker gets his fee.

The only difference with your "simplification" and the existing system is that it is more complicated and adds an additional and unnecessary step that happens to satisfy your personal objection.

The existing system is flawed because it is biased towards the broker/seller, to the detriment of the buyer.

As I have said over and over again, the current framework is designed to govern the sale and purchase of private property. All it assumes is that the seller is honest about what he is offering and the buyer has to assume the responsibility that it will suit his needs and is as described.

And how does a buyer assume the responsibility that a boat will suit his needs without trying the boat on the water first?

If you want more (to try a boat because you are not sure whether you want it or not) then you have to ask the owner, and if he says no, you have to respect his position.

From what I understand, requests for a sea trial often don't get any further than the broker unless there's a signed contract and 10% deposit. There is evidence of that in this thread.

If the attitude of some on here is representative of the industry then I am not at all surprised by the growing number of private sales and the websites to support them. If I were a broker I'd be looking to up my game to make my fee worth paying. At the moment some of them are missing sales opportunities out of laziness, an inflexible and unhelpful attitude and a belief that there's always another buyer just around the corner. What will they do when there isn't another seller around the corner because they think they can do a better job of selling their own boat?

 

[PaulGooch]

<snip>

If the attitude of some on here is representative of the industry then I am not at all surprised by the growing number of private sales and the websites to support them. If I were a broker I'd be looking to up my game to make my fee worth paying. At the moment some of them are missing sales opportunities out of laziness, an inflexible and unhelpful attitude and a belief that there's always another buyer just around the corner. What will they do when there isn't another seller around the corner because they think they can do a better job of selling their own boat?

I'll most definitely NOT be using a broker to sell a boat, ever. I'm perfectly capable of constructing a web page with lots of pics, just like DAKA has done. I can easily promote that web page, for next to nothing. I'll be quite happy to show prospective buyers around the boat. The boat will be immaculate (like it always is) and i will be totally familiar with it and able to answer any questions the buyer has. I'll also be more than happy to take him for a trial, without a deposit or worrying about a few litres of fuel. If he doesn't buy it, so what.

I'll need to do an awful lot of wasted sea trials on a boat that uses 25 litres of fuel an hour to be exceeding the brokers commission charges, plus, i'll consider it a day out.

With respect to the good brokers out there, i don't need a sloth like broker "selling" a boat for me, who will obstinately refuse to let a prospective buyer even hear the engine running, without telling me.

 

[Tranona]

I
From what I understand, requests for a sea trial often don't get any further than the broker unless there's a signed contract and 10% deposit. There is evidence of that in this thread.

If the attitude of some on here is representative of the industry then I am not at all surprised by the growing number of private sales and the websites to support them. If I were a broker I'd be looking to up my game to make my fee worth paying. At the moment some of them are missing sales opportunities out of laziness, an inflexible and unhelpful attitude and a belief that there's always another buyer just around the corner. What will they do when there isn't another seller around the corner because they think they can do a better job of selling their own boat?

You are just making a fuss about nothing. I don't know why you get so worked up about this - it is hardly an earth shattering issue. Just because there isn't have an automatic right to a no commitment trial of somebody's private property clearly does not stop thousands of boats changing hands satisfactorily every year.

If you don't like the system don't buy a boat. Sellers are not complaiong they can't sell their boat because they are not "allowed" to give a no commitment trial - they can if they want to. They clearly don't in general think it is a good idea, and not just on the say so of a broker. Sellers are consenting, independent adults who make their own decision.

So I just fail to see what your problem is.

 

[PaulGooch]

I still find it odd that people think it's a balanced system. To me, it clearly isn't.

The system of the buyer paying 10% up front, only refundable in the event of defects that a resolution can't be reached about still seems clearly stacked in favour of the broker and seller.

1) Let's say the boat has umpteen faults and i decide that with so many faults, the boat has clearly been neglected. I still can't get my deposit back if the seller offer to "fix" them.

2) Towards the conclusion of the sale, the seller discovers he cannot find some of the paperwork. Can you pull out now ? Will you get your deposit back ? What about the lift out and survey costs ?

2) You drive 250 miles (4 hours) to look at a boat, having arranged the viewing almost a week before. When you get there, the batteries are flat. Neither the broker (who has keys to the boat) or the owner have bothered to check it will start. The broker is based in a marina an hour or so away and has no means of starting the boat. Who pays for the wasted journey, or the night in a hotel while they sort batteries and jump leads out for the following morning ?

3) How about brokers offering to sell you a boat that they have not seen since they supplied it new ? My current boat was advertised for sale by the supplying dealer, who was based 150 miles away and had not seen the boat since they sold it 5 years earlier. They had no keys to the boat and used brochure pictures for the ad's.

Odd that no-one ever directly answered the questions in my first post.

 

[vertford]

Broker bashing day?

Before I turn in, and with no disrespect to anyone, I had a look at DAKA's fine vessel and photos but couldn't see the sale price. Okay, it's late and I might have missed it, but is that not something that should be visible for a prospective purchaser?

There are many fine private/brokers websites showing properly presented boats, my favorite one at the moment is the Western Horizion one. And DAKA's of course..

 

[jonic]

This thread is getting hysterical.

I know of no broker who would or who has retained a deposit after a seatrial.

The deposit is there to KEEP the boat off the market for the seatrialer and to protect the seller from joyriders and give him some financial security if the boat is damaged.

Client accounts are to separate the monies from the business. If the broker steal it it is theft......just like any other business that has clients money before goods are delivered, except most of them do not even have a client account. The client account is a GOOD THING.

This is the ABYA guidance for the client account.

Setting up a Client Account
To set up a Client Account you will need to work with your Bank and set up a Bank Mandate. Ensure the Bank understands what the account is for and ask them to write a letter confirming they have set up the account, that it is capable of reconciliation at any time and that the funds are not an asset of the company funds – that they will not be available in the case of the company going out of business, e.g. through administration or liquidation. When the account is set up, record this in your Board minutes.

 

[PaulGooch]

<snip>

If you don't like the system don't buy a boat. Sellers are not complaiong they can't sell their boat because they are not "allowed" to give a no commitment trial - they can if they want to. They clearly don't in general think it is a good idea, and not just on the say so of a broker. Sellers are consenting, independent adults who make their own decision.

So I just fail to see what your problem is.

The option should be there and there should be an obligation that the broker passes on all offers and requests for sea trial to the seller. Not just deciding that he doesn't think it's a good idea and dismissing it out of hand.

You might not see a problem, but some clearly do.

What is your specific objection to the idea of their being an option for a buyer to pull out because he doesn't like a boat during the sea trial (providing the costs are retained from his deposit) ?

 

[PaulGooch]

Before I turn in, and with no disrespect to anyone, I had a look at DAKA's fine vessel and photos but couldn't see the sale price. Okay, it's late and I might have missed it, but is that not something that should be visible for a prospective purchaser?

There are many fine private/brokers websites showing properly presented boats, my favorite one at the moment is the Western Horizion one. And DAKA's of course..

There isn't a price because the boat isn't for sale.

I think DAKA is just gathering some interest, ready for when he does want to sell it

 

[PaulGooch]

This thread is getting hysterical.

I know of no broker who would or who has retained a deposit after a seatrial.

<snip>

The post isn't about client accounts, so i'll not go there.

I read your post (#38) and see you already offer what's been discussed here. So some brokers clearly can offer a better service than others and are willing to be flexible and sensible. I think you option to allow a potential buyer the opportunity to ensure the boat meets his expectations is excellent and hope you get a few extra sales from it, well done. I do of course understand the need to try and keep the fender kickers at bay too.

The thread isn't about bashing all brokers, it's maybe about bashing the bad ones, but it's more about debating the current "system" and asking if there is a better way of doing some things. Post #38 clearly demonstrates that there is a better way.

 

[boatmaster]

But this isnt your boat; it belongs to someone else- the seller. I assume you mean you would discuss with the owner and see if he was receptive to your taking out a prospective buyer who does not wish to make any commitment at this stage?
If you as a dealer own the boat.. well that is different altogether, as this is now in the course of your business, and is not a private transaction.

entirely

 

[Renegade_Master]

entirely

All of which I stressed to em on page 2 or 3 probably, anyway it was a long time ago.

Dealer boats one thing its their choice, listed broker boat privately owned completely different.

 

[DAKA]

Client accounts are to separate the monies from the business. If the broker steal it it is theft......

Yes but if the Broker says he only borrowed it and meant to pay it back , then it isnt theft.
just like any other business that has clients money
No, thats wrong, Insurance Brokers are breaking the Law if they 'borrow' from the clients account because a law was introduced when the Insurance Brokers became regulated, many feel Yacht Brokers should also be either regulated or stop holding money that isnt theirs.


This is the ABYA guidance for the client account.
Thats part of the problem, it is guidance, needs to be a regulation and the guidance is wholly inadequate, written by someone who either doesnt understand the problems with creating trusts or prefers to bury their head in the sand while gathering members fees..........how many fish and chip shops do you go in that claims to be the best 'Batter, best chips, best fish, best all rounder etc , you just pay £250 become a member and someone prints you a cert off. , dont want to make it too hard to become a member or you would put some £250 off.

Setting up a Client Account
To set up a Client Account you will need to work with your Bank and set up a Bank Mandate. Ensure the Bank understands what the account is for and ask them to write a letter confirming they have set up the account, that it is capable of reconciliation at any time and that the funds are not an asset of the company funds – that they will not be available in the case of the company going out of business, e.g. through administration or liquidation. When the account is set up, record this in your Board minutes.
It appears they dont even bother to check this has been done, but is inadequate anyway.

The red is my response

 

[DAKA]

Before I turn in, and with no disrespect to anyone, I had a look at DAKA's fine vessel and photos but couldn't see the sale price.

I put my boat for sale and spent a lot of time on the website with a great deal of help.

I had two offers good offers but they were at the time of the Banking collapse and I decided it was best invested in GRP than Barclays.

I would like to change but the current system is just too risky, I still enjoy my boat and dont feel the benefits of upgrading are worth the risks.

My last boat was for sale with BP Peters
I insisted that the sale was completed privately outside of BP Peters.
several years later BP Peters went bust and I consider that a close shave.
Since BP Peters have gone bust and it was found clients money was being misused , instead of the industry seeing it as a wake up call and getting their house in order they just hide behind smoke screens of misleading statements.
ABYA in particular appear not to have addressed the problem.
BMF have recently made attempts to partially resolve the issue.

 

[ari]

This thread is getting hysterical.

I know of no broker who would or who has retained a deposit after a seatrial.

The deposit is there to KEEP the boat off the market for the seatrialer and to protect the seller from joyriders and give him some financial security if the boat is damaged.

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.