Buying through a Broker.

[Resolution]

If a buyer can rely on what a broker says about the condition of the paperwork, why can /she not rely on what the broker says about the condition of the hull?

Have a look at the laws on misrepresentation. There is a key difference between statements of fact and statements of opinion. A buyer is entitled to rely on statements of fact ("the vessel is VAT paid") but not necessarily on statements of opinion ("sails like a dream"). Misrepresentation of facts can leave the agent and his seller client liable for damages or to have the contract cancelled. So well-trained brokers will be careful in what they say and particularly careful to pass the buck on osmosis-type matters to a surveyor.
Of course there are lots of salesmen who either don't know the law or rely on the customer not knowing the law.

 

[theoldsalt]

How can brokers owe a duty of care to someone other than their client?............

I believe "duty of care" and "due diligence" can apply in any activity even without payment or contract.

An example is if you visit any premises, you expect to be safe and not put in danger, and yet there is no contract, no payment and no client.

 

[JumbleDuck]

Because the broker is performing a service of checking the paperwork on behalf of the buyer.

Oh yes? How much is the buyer paying for this service? What contract is there between buyer and broker? What legal redress does the buyer have against the broker if it's wrongly done?

I've bought through a broker. It was a smooth, painless experience but I never deluded myself for an instant into thinking that the broker was doing anything on my behalf or that he owed me anything.

 

[Resolution]

Oh yes? How much is the buyer paying for this service? What contract is there between buyer and broker? What legal redress does the buyer have against the broker if it's wrongly done?

.

See my post above about misrepresentation. If the broker says the boat is VAT paid, or is free of any mortgage or liens, then these are statements of fact on which the buyer may rely. If wrong, the buyer can seek damages from the seller.

 

[ip485]

Well unfortunately even that proposition is undermined by cases like Collins where it was held that if the sales particulars contain an exclusion clause (the vendor does not make or give etc.) and because these clauses have not been held to be unreasonable no one is to blame other than the buyer. Since most clued up brokers use these clauses you may have a job getting any redress.

I agree with Jumbleduck - do not think the broker is doing anything for you the seller and you will not go far wrong. It is up to you to test ownership, any charges or liens on the vessel, the condition and the accuracy of the sales particulars. It is also up to you to make sure the terms of the contract are acceptable TO YOU and that any monies you pay are as safe as you wish them to be - simples really.

The broker is doing a job for the seller - and often a very good job, but he does not act for the buyer. That is as it should be because otherwise he would have a conflict of interest, the trouble is sometimes brokers can lead buyers into believing they also have their interests at heart - this is wrong and dangerous, and dont be taken in by it.

In contrast if you employ a solicitor or surveyor you should sign an engagement letter with him and subject to the terms of engagement you are entited to rely on what he has to say.

I know some one very well who purchased a yacht through a broker for £80K. Unfortunately he didnt have a survery and relied on the broker telling him he knew the yacht well and it had been very well looked after, an extremelly good design with which he had never had any problems in the past. Possibly all true. Unfortunately the remedial work subsequently required came to £25K none of which the buyer expected so there are disaster stories.

 

[JumbleDuck]

See my post above about misrepresentation. If the broker says the boat is VAT paid, or is free of any mortgage or liens, then these are statements of fact on which the buyer may rely. If wrong, the buyer can seek damages from the seller.

Not from the broker, then?

 

[theoldsalt]

..........I know some one very well who purchased a yacht through a broker for £80K. Unfortunately he didnt have a survery and relied on the broker telling him he knew the yacht well and it had been very well looked after, an extremelly good design with which he had never had any problems in the past. Possibly all true. Unfortunately the remedial work subsequently required came to £25K none of which the buyer expected so there are disaster stories.

I don't see that has anything to do with buying through a broker or whether to employ a solicitor. It has everything to do with a foolish buyer not employing a surveyor.

 

[JumbleDuck]

So well-trained brokers will be careful in what they say and particularly careful to pass the buck on osmosis-type matters to a surveyor.

A surveyor who must be paid by the buyer. Surveys obtained by the seller, or a third party, are of limited because the surveyor owes a duty of care only to his/her client, just like a broker.

 

[Tranona]

Not from the broker, then?

But also from the broker if it is the broker that has made a mistake. That is why the broker carries professional liability insurance against claims that result from his errors. If the VAT receipt was false and the buyer lost as a result he has redress against whoever supplied the receipt, probably the seller. I am sure you could construct a scenario where the broker was liable for an error, but pretty sure there are very few cases in reality simply because there is very little that he does that a buyer has to rely on.

 

[Tranona]

I think there is a difference. A broker can do as he will with funds on deposit - trust account or not, in the same way as a solicitor can do as he will with his client account. If either signs the cheque or authorises the online transfer the bank will honour the payment as long as it is in line with the mandate. If the solicitor steals the money then you are correct the first recourse is to the solicitor and then to his partners (if he has any), BUT if all else fails the Law Society will pay out. If the solicitor or broker spends the money and declares bankcruptcy or absconds to Spain you may as well whistle in the wind to recover your funds from him or his Receiver.

A bank can agree to ring fence funds but this only protects the depositor from bankcruptcy, not fraud.

A solicitor must be "audited" annually by a qualified accountant who especially "examines" conduct of client account funds. This can serve to identify earlier the solicitor that has already been tempted to teem and laddle funds whereas no such audit takes place on other businesses these days so there is very little regulation.

I suspect we are getting beyond the scope of the original question and how real the risk is I have no idea. I doubt anyone will come unstuck using a reputable broker any more or less than any reputable business person.

Personally if it was a sum of money I really couldnt afford to put at risk, and especially if I didnt know the broker well, I would use a solicitor's escrow account, but that is jsut me. Failing that I would prefer a broker with a few directors or partners - it is more oftent he case where others are involved fraud is much less likely.

It has been an interesting discussion and hopefully between us has identified some of the risks and some of the advantages of using a broker and or a solicitor.

Unfortunately that system is ineffective. If it were good then Kimberley Bridge who was jailed last week for defrauding clients over a period of SIX YEARS to the tune of nearly £1m (and her sister who was a conveyancing clerk found guilty of another £142k). Doubt that any of those victims will have received much in compensation from the fund as it only pays out as a last resort - that is after the defrauder has been convicted and/or been made bankrupt. it is not an insurance like Direct Line for your car which promises to deal with your claim immediately.

The system exists for 3 reasons. First is that the legal profession has protected status which means for certain activities you are forced to use them. Second to cover partners from the professional failings of colleagues and only last to offer some form of redress for individuals who have suffered from the wrongdoings of members.

As we have seen there is a regular stream of cases of incompetent and fraudulent solicitors (and accountants) so such schemes are essential. In the case of brokers (and surveyors), they will carry professional liability insurance for professional errors but would be impossible to get insurance against fraud. This is partly because there is no evidence of fraud which makes it difficult to price the risk. However there have been proposals in the past for a fund to compensate losers, but they have never got very far simply because there is no evidence that there is a problem.

 

[Tranona]

A surveyor who must be paid by the buyer. Surveys obtained by the seller, or a third party, are of limited because the surveyor owes a duty of care only to his/her client, just like a broker.

This gets back to understanding the roles of the parties. There is nothing unusual in law about who is responsible for what and well covered either by the laws of contract and trust plus any relevant statutes and criminal law that applies to us all.

 

[ip485]

As we have seen there is a regular stream of cases of incompetent and fraudulent solicitors (and accountants) so such schemes are essential. In the case of brokers (and surveyors), they will carry professional liability insurance for professional errors but would be impossible to get insurance against fraud. This is partly because there is no evidence of fraud which makes it difficult to price the risk. However there have been proposals in the past for a fund to compensate losers, but they have never got very far simply because there is no evidence that there is a problem.

With respect I am not sure that logic follows. If there isnt a problem then by that reasoning it isnt difficult to price the risk.

However in reality insurers will never insure against an illegal act - or at least I have never seen a policy that insures against fraud which is probably why the Law Society deal with it themselves as you say partly to keep confidence in their members and profession. . In cases of fraud you will get paid - it may take some time, but I am not aware of a case where the Law Society did not provide redress.

Is there a problem with Brokers - frankly I have no idea? Have there been any cases? It would surprise me if there hasnt been a few - but perhaps I am just cynical.

Which takes us again full circle.

So if it was a relatively inexpensive yacht I would employ a surveyor, do some careful checks on the seller (assuming you can find out who they are early on), do some similiar checks on the broker, including if they are a limited company have a look at their accounts free from Companies House and get on with it.

If it was an expensive yacht I dont think the "standard" contract covers what is involved, so unless I felt comfortable doing so I would get a solicitor to settle the contract and agree that the solicitor act as the escrow agent. I would employ and surveyor and do the other checks mentioned above, excluding those relating to the broker who now has no real part in the transaction other than that as a facilitator.

In short for most buying a house is a serious committment which is why most people still employ a solicitor (as well as because they are required to do so if they are borrowing money, because the lenders dont trust anyone else). So ask yourself the question if you could buy a house just using the services of an estate agent acting for the seller - would you do so? If the answer is yes, the go ahead with the broker.

I think what this thread does illustrate is as with many legal matters most of us dont understand the law and dont understand the role of a broker. If you understand their role and are aware of the risks then at least you are prepared.

Brokers can have a role to play but for me I would always want to meet and deal with the seller. This enables me to get a feel for the person, their background reasons for selling, how long they have owned the yacht and whether they are known locally. For example if there is a long history of paying their berthing fees, taking part in club cruises, entering the ARC in their name etc (you get the pciture) I am half way to being satisfied that it is theirs to sell with good title and that they know somehting about the boat and have loved it. If it is Part 1 registered so much the better. If they can produce all the documentation (it has been serviced, maintained over the years hasnt it) this is all part of the provenance. I can do all of this myself with the seller. Moreover the seller can get a feel for the buyer. Personally if I liked a buyer and believed them serious and knew I was selling a good yacht I wouldnt worry at all at having the yacht lifted at their expensive and gone over by a surveyor without any exchange of money or maybe a token deposit as long as I could have a copy of the survey. After all anything the survey picks up is now to my benefit. That done and seller and buyer are now in a position to negotiate, settle the price, sign the contract and exchange payment - simples - a refreshingly straight forward way of doing business if both parties are willing. It seems to me it is usually quite a committment to pay the lifting fees and surveyor anyway and if someone wants to walk away after, that is their loss. Naturally if I didnt like the cut of their Gib then that would be that.

 

[JumbleDuck]

But also from the broker if it is the broker that has made a mistake.

On what bassis? What contractual arrangement do you think exists between broker and buyer.

In the case of brokers (and surveyors), they will carry professional liability insurance for professional errors

Well, they might. The good ones certainly will, but since yacht broking (brokering?) is an entirely unregulated profession, there is no need for them to have any insurance. I know that the Good Guys, like jonic, are very keen to see this change, and good luck to them.

This gets back to understanding the roles of the parties. There is nothing unusual in law about who is responsible for what and well covered either by the laws of contract and trust plus any relevant statutes and criminal law that applies to us all.

Could you then explain, as per above, under which of these legal provisions an agent paid by and acting for the seller has any liability to the buyer?

 

[[3889]]

First is that the legal profession has protected status which means for certain activities you are forced to use them. .

Out of interest, which activities?

 

[Tranona]

On what bassis? What contractual arrangement do you think exists between broker and buyer.



Well, they might. The good ones certainly will, but since yacht broking (brokering?) is an entirely unregulated profession, there is no need for them to have any insurance. I know that the Good Guys, like jonic, are very keen to see this change, and good luck to them.



Could you then explain, as per above, under which of these legal provisions an agent paid by and acting for the seller has any liability to the buyer?

Simple example. If a broker claimed that a boat was within trailerable limits and the buyer relied on that, but it proved not to be true a case could be brought for misrepresentation. Exactly the reason why a broker does not make such claims, but clearly states that the information is provided by the seller and it is up to the buyer to carry out his own checks.

It is a requirement of both the YDSA and BMF that brokers carry professional liability insurance (same as surveyors). It would be surprising in non member brokers did not do the same given the exposure.

There is a whole raft of law that governs the relationships between individuals or covering business in general that potentially apply to brokers, just as they apply to any others. There is little that is special such that it requires legislation specific to brokering activity. Fraud and misrepresentation are the most obvious and there are certainly cases of the former, both defrauding clients and HMRC.

 

[Sea Devil]

Anecdotal of course, but when I purchased Paw Paw, via a very important and reputable Brokerage Company in the UK, there were some serious issues between the 'contractual list of items included in the sale and what was on board at the moment of purchase. A new inventory list had been 'created' which differed from the inventory list attached to the contract to buy. Total problem around £4-5,000

I only realised that there were issues after I had taken possession of the boat and sailed it home to La Rochelle. In addition the owner/vendor had replaced the almost new Avon & outboard, with very very old ones of almost no value but to be fair, the inventory list did only say Avon dinghy & Mercury outboard so I accept I had no claim on those just a nasty taste in my mouth and amazement that civilised people would cheat in that way..

The brokerage company response the missing item about which I complained was:
We are acting for the Vendor not for you, so tough.
You have no legal claim, so tough!
Take it up with the vendor (who has of course moved to the USA) Not our problem.
They got their lawyer or someone similar who clearly was pretty ignorant about the boating industry, to write a lot of nonsense and be somewhat rude.

The one advantage of having a web site that gets hundreds of visitors a day, is that when I make a fuss on the site and contact everybody in the professional boating industry with my complaint, it has some impact on the reputation of the Broker. The brokers CEO contacted me and after some months of negotiation they made me a present of a valuable RIB. They admitted that things had not been handled correctly and apologised.

The lesson I learned was:
Brokers are not interested in protecting the buyers rights. Why should they be? They are acting for and paid by the vendor. The brokers are not your friend!

Having said that most brokers want to be in business long term and have a good reputation (well certainly not a bad reputation) and therefore will try to make the deal run smoothly - but in the end - not your friend!

Michael

 

[RichardS]

Anecdotal of course, but when I purchased Paw Paw, via a very important and reputable Brokerage Company in the UK, there were some serious issues between the 'contractual list of items included in the sale and what was on board at the moment of purchase. A new inventory list had been 'created' which differed from the inventory list attached to the contract to buy. Total problem around £4-5,000

I only realised that there were issues after I had taken possession of the boat and sailed it home to La Rochelle. In addition the owner/vendor had replaced the almost new Avon & outboard, with very very old ones of almost no value but to be fair, the inventory list did only say Avon dinghy & Mercury outboard so I accept I had no claim on those just a nasty taste in my mouth and amazement that civilised people would cheat in that way..

The brokerage company response the missing item about which I complained was:
We are acting for the Vendor not for you, so tough.
You have no legal claim, so tough!
Take it up with the vendor (who has of course moved to the USA) Not our problem.
They got their lawyer or someone similar who clearly was pretty ignorant about the boating industry, to write a lot of nonsense and be somewhat rude.

The one advantage of having a web site that gets hundreds of visitors a day, is that when I make a fuss on the site and contact everybody in the professional boating industry with my complaint, it has some impact on the reputation of the Broker. The brokers CEO contacted me and after some months of negotiation they made me a present of a valuable RIB. They admitted that things had not been handled correctly and apologised.

The lesson I learned was:
Brokers are not interested in protecting the buyers rights. Why should they be? They are acting for and paid by the vendor. The brokers are not your friend!

Having said that most brokers want to be in business long term and have a good reputation (well certainly not a bad reputation) and therefore will try to make the deal run smoothly - but in the end - not your friend!

Michael

Had that dinghy and motor swap happened after you had seen the original dinghy and outboard and no-one had stated that those items were going to be swapped for inferior items then I have no doubt that you would have won a case for misreprentation in the County Court. You could have cited both the owner and the broker. Neither of them would have turned up for the hearing and the judge would have found in your favour and would have given you £25 costs plus damages, i.e. whatever you felt was a reasonable sum based on a few adverts which you would have taken to the hearing.

Upon application the Judge would probably have issued the settlement order against the broker if the seller was no longer in the UK.

Richard

 

[Tranona]

The lesson I learned was:
Brokers are not interested in protecting the buyers rights. Why should they be? They are acting for and paid by the vendor. The brokers are not your friend!

Having said that most brokers want to be in business long term and have a good reputation (well certainly not a bad reputation) and therefore will try to make the deal run smoothly - but in the end - not your friend!

Michael

The problem with your "rights" when buying a private boat either through a broker or direct from the owner is that the only rights you have are those in the contract. You do not have any rights that you might expect if you are buying as a consumer and the seller is selling by way of trade.

It is therefore your responsibility to ensure that what is delivered to you is exactly what you contracted to buy. That is why it is best to engage a surveyor and have a detailed inventory as part of the contract. Once you sign the acceptance and the transfer of title is made the only recourse you have is to sue for the missing items under the contract.

This seems a straightforward case of a dishonest seller and it is difficult for a broker to guard against such things happening. Once the contract is complete it is also difficult to then get the seller to do the right thing.

So the broker is right in that he has no legal obligation towards you as your contract was with the seller, but one would expect him first to explain the limitations he has and then do his best to persuade the seller to put things right.

 

[Sea Devil]

It is therefore your responsibility to ensure that what is delivered to you is exactly what you contracted to buy. That is why it is best to engage a surveyor and have a detailed inventory as part of the contract. Once you sign the acceptance and the transfer of title is made the only recourse you have is to sue for the missing items under the contract.
.

I did not engage a surveyor as I am happy to 'survey' myself but I did have the detailed inventory added to the contract.

Trouble was that arriving in Plymouth from La Rochelle with my previous boat, and then renting a car and driving to Lymington with charts etc for the voyage back, I was tired and the quantity of 'things' in Paw Paw - a big boat by my standards was too extensive to check. I doubt a surveyor would have done the handover and inventory check as part of the deal. We set sail for La Rochelle two days later and it was during the next weeks that gradually I discovered I had been rolled!

To be fair to Brokers I have purchased 8 cruising boats in my big boat sailing lifetime, all through brokers and in every case they looked after me the buyer properly and were fair. It was only this last purchase that left me feeling I had been made a fool of. Basically my fault - I should have checked out everything, every last detail but instead just trusted.

Interestingly things like the connection between the two chart plotter displays and some of the wind instruments did not work... These problems were apparently 'engineered by the person who was doing the fittings for the previous owner. He had just swooped or failed to connect certain wires - connections. Took me two minutes to put right once I looked at the problem but I did wonder if the stories I heard later about suppliers/fitters not being paid were true and someone was making sure things did not work before the final payment was made.........

Life is a learning curve

 

[Tranona]

Life is a learning curve

Indeed and it is a valuable lesson for others to be aware of the importance of checking the inventory, particularly when there are valuable non attached bits included in the sale. With a valuable dinghy and outboard it would be sensible to have them specifically included in the contract and identified by their serial numbers.

With regard to surveyors, while you may not need them for the condition of the boat, the fact remains that you have no comeback once you have accepted the boat so it is useful with expensive and complicated boats to have an independent person to check over everything in the contract. one would like to think that buying and selling yachts should be a friendly activity but the reality is that it is a business transaction often involving very large sums or sums of money that are significant for both parties. So best to ensure that all precautions are taken and procedures followed.