Deposit Security

RichardTaylor

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I am looking to make a major marine purchase which involves a deposit of several thousand pounds with the balance being paid by a finance company on arrival of the product in this country.

How do I secure the deposit so it is 100% safe, should the UK agent or the overseas manufacturer go bust?

If I pay the deposit on Credit Card (partial or full) does this cover me in any way?

Any advice on how best to make sure I do not loose thousands if the worst was to happen?

Many thanks
Richard
 

Sailfree

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When I bought my Jeanneau 43 I paid the deposit by credit card. My understanding is that under Section 75 of the Consumer Credit Act then CC Co is then jointly reponsible for any breach of contract.

You still have a problem with a small risk window (1-2 wks) though of paying the final payment. Most companies will not deliver the boat before receiving the final payment. No cash no splash!

There are a couple of ways round this. For a fee a bank will give you a bank guarantee effectively underwritting the contract. I believe another of this parish arranged the whole transaction with the boat builder, (necessary then to pay in their local currancy) and let the boat builder pay the UK distributor for commissioning etc. This reduces the risk but even boat builders can go bust! Now where is that westerly I bought!!

One purchaser I knew discovered when the boat was due its final payment that it was nowhere near complete and that he had been mislead on the completion date by the foreign builder.
 

oldsaltoz

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You put the deposit into a trust, this means neither you or the vendor can access the the funds without the others consent.

So no one can draw in it without you giving permission.

This often used when putting a deposit on boats through agents or dealers. I have used it many times.

Good luck.:)
 

dt4134

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Also think carefully about the size of the deposit. It doesn't have to be 5 or 10% just enough to cover any damage your surveyor might do. Bear in mind that if you should pick a surveyor with professional idemnity insurance anyway.

When I made an offer I just said how much they would get as a deposit and had no argument about it.
 

DownWest

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You put the deposit into a trust, this means neither you or the vendor can access the the funds without the others consent.

So no one can draw in it without you giving permission.

This often used when putting a deposit on boats through agents or dealers. I have used it many times.

Good luck.:)

OSO, this is normally called 'in escrow' possibly held by a soliciter until both parties agree to release it.
A
 

Phideaux

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Also think carefully about the size of the deposit. It doesn't have to be 5 or 10% just enough to cover any damage your surveyor might do.

I suspect the deposit is more to demonstrate good faith and an intention to complete the purchase, especially if it is a new boat from the builders. They will want to ensure that if for any reason the sale isn't completed, that they could sell the boat elsewhere at a discount to recover their initial outlay.
 

Tranona

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The simplest way is to ensure that the dealer places the deposit in a "client account". Details of how this works is on the ABYA site. However, you will probably find the dealer reluctant to do this as he has to pay a deposit to the builder and almost certainly have to pay for the boat when it leaves the factory before it gets transferred to you. Traditionally dealers cover this by borrowing money from a finance house to support their stock and boats in the pipeline.

You need to do due diligence on the dealer - although not always easy as most are private limited companies and there is limited information available. As already suggested you can ask him to provide a bank guarantee, but again this costs and banks may not be keen. There are alternative ways - as suggested putting the funds into an escrow account or using a solicitor as stakeholder.

I would think now dealers are desparate for sales so they should be more accommodating over the size of the deposit. The key thing from your perspective is to ensure the deposit is kept separate from his working business account so that you don't become an unsecured creditor if he goes bust.

It all sounds risky, but in reality the vast majority of transactions go smoothly. You just need to be aware of where the risk lies.
 

Colvic Watson

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I agree most transactions go smoothly but when they go wrong they can go spectacularly wrong. Peters/Opal is a classic case, so it may be more hassle but when dealing with a broker I would insist on seeing the bank details to prove it is a client account (should have the words "client account" printed on the statement/cheques.) For a builder I would insist on a solicitor, I would for a house after all!
 

Tranona

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I agree most transactions go smoothly but when they go wrong they can go spectacularly wrong. Peters/Opal is a classic case, so it may be more hassle but when dealing with a broker I would insist on seeing the bank details to prove it is a client account (should have the words "client account" printed on the statement/cheques.) For a builder I would insist on a solicitor, I would for a house after all!

If only it were as simple as that! Many boat dealers operate in a similar way to car dealers. If you want to order an £80k Porsche you have to place a deposit and just like (some) transactions in Opal there is no security and if the dealer goes bust you could lose your deposit. However, unlike the boat business the car makers will probably honour the contract.

Most boat dealers (and builders) just do not have the financial capacity to deal with this. So, if you deal direct with the builder you can negotiate a contract such as the standard BMF one that secures your payments against the boat in stages. This is not ideal as many have found when the builder goes, although they own a part complete boat it does not guarantee getting a finished boat at the price originally agreed. Buying from a dealer has some advantages because in theory he is bound by UK consumer law, but in reality most do not have the capital to withstand problems such as the buyer (having paid maybe only 10% deposit) defaulting on the final payment. He has some confidence if the balance is from a finance company on behalf of the purchaser, but the whole affair can be just as risky for him as for the buyer - particularly if the boat is a special build.

So each purchaser has to weigh up the risks involved in the transaction and negotiate a contract and payment terms that minimises his risk. There is no magic answer that is absolutely foolproof. When I bought my boat new I took an enormous risk as I did not get clear title for nearly 7 years after I paid for it. However, I knew that right from the start and the benefits I gained offset the risk and I protected myself as much as I could. It also helped that I could "afford" to lose it all in the sense that, although a substantial sum, as a proportion of my wealth it was relatively small. Would never have got into it if failure would have a major impact on my finances.
 

oldsaltoz

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You put the deposit into a trust, this means neither you or the vendor can access the the funds without the others consent.

So no one can draw in it without you giving permission.

This often used when putting a deposit on boats through agents or dealers. I have used it many times.

Good luck.:)

Sorry this should read 'Trust Account' and I will add no lawyers required.
 

Tranona

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>You put the deposit into a trust

Not a Trust, an Escrow account, sometimes called a client account.

Not quite the same thing. With a client account the broker or dealer acts as a stakeholder keeping the money on behalf of the client (in trust) so it always remains the clients property. Normally used where broker is acting as an agent for a private vendor. Less commonly used by dealers trading on their own account, for reasons I explained earlier.

An Escrow account specifically holds for example the keys and documents to be delivered to the purchaser on confirmation that the vendor has received his funds. More direct as the funds don't go through the client account.
 
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