How Do I Check Who Owns It/Is There Any Other Finance Interests

[DAKA]

. You are wrong, it is illegal to take money out of a clients account.
The failure of Peters was a business failure. The issue with the client account where deposits were held is not money being taken out, but never being put in, or put in indirectly.

I think we are just going round in circles now.
I agree with much of what you are writing however I feel you have taken a simplistic view and are focused on how it should work rather than how brokers are actually free to operate.

It is illegal for a Solicitor to withdraw funds from a correctly designated clients account.
However in my example above where a Yacht Broker attempts to segregate clients funds but doesnt follow the complex technicalities correctly ( Peters make a fine example of this) then it would not be illegal for the yacht broker to 'Borrow' the funds unless you could prove it was not his intention at that point to pay it back. Further if the account is not correctly formatted then the administrators will be compelled to utilise the funds for other purposes, there could be circumstances where it would be illegal for them not to dip in !

At this point in time I still maintain that I would not pay my hard earned cash to an unsecured debtor however I have listened to you and you have raised many valid points and I agree to consider it next time I buy a boat.

 

[benjenbav]

As Tranona says, the Peters point was money not going in to a client account rather than being abused after it had gone in. This was a very important distinction for creditors because, if the relevant case had been decided otherwise, they would have been able to "trace" the money to where it had gone.

I am wary about the likening of brokers' client accounts to solicitors' client accounts.

I have a vested interest here, in that I am a solicitor. If I were to take money from a client account and abscond with it a number of things would happen. First of all, my firm would pay the money back. If they didn't they would be severely compomised in being able to continue in business. I am aware of one case where the solicitor in question was convicted of various criminal charges as a result of stealing something like £2m from client account and his firm paid the money back without a murmur. But if that were not possible there are further background protections to ensure that the money would be repaid. I and others pay for these through our practising certificates.

I am not convinced that the same degree of protection exists in respect of other businesses' client accounts.

 

[Observer]

The discussion above is hopelessly mired in myths and ignorance about the true legal nature and effect of the various contractual and other legal relationships that arise in the contexts of a variety of boat sale and purchase situations. I admire Tranona's patience and persistence in trying to unravel some of tne tangle but it seems a pretty hopeless task when the other debaters are not reading what he writes and trying to comprehend what are, in essence, straightforward commercial and legal principles.

Of course there are pitfalls and risks involved in buying a boat. But it's not expecially difficult to mitigate, eliminate or completely avoid them by application of common sense and a reasonably well-developed understanding of simple contract law. If you don't have that, then hire someone (a solicitor) who (hopefully) does. The marine industry doesn't need a special body of law or an insurance scheme that it would almost certainly be impossible to establish anyway.

 

[Tranona]

I am not convinced that the same degree of protection exists in respect of other businesses' client accounts.

You are right in one sense in that the same sanctions cannot be imposed on, say brokers because they do not "enjoy" the same privileges as you do in that you need to to have a licence to practise and this can be withdrawn - just as in the case I quoted.

However, as you know, the legal principle for a properly set up client account is the same whether it be a broker or a solicitor.

 

[Tranona]

I think we are just going round in circles now.
I agree with much of what you are writing however I feel you have taken a simplistic view and are focused on how it should work rather than how brokers are actually free to operate.

.

Pete, you really need to clear your head of some of your misunderstandings.

Suggest you goto www.abya.co.uk which says what I say in clear terms - plus a lot more information on what a broker is expected to do.

No connection!

 

[benjenbav]

You are right in one sense in that the same sanctions cannot be imposed on, say brokers because they do not "enjoy" the same privileges as you do in that you need to to have a licence to practise and this can be withdrawn - just as in the case I quoted.

However, as you know, the legal principle for a properly set up client account is the same whether it be a broker or a solicitor.

Yes, the point I was making was just in respect of the mechanisms to put right a wrong.

 

[DAKA]

Pete, you really need to clear your head of some of your misunderstandings.

Suggest you goto www.abya.co.uk which says what I say in clear terms - plus a lot more information on what a broker is expected to do.

No connection!

We have been talking at cross purposes, and I am encouraged by your last post.

You assume all yacht brokers will act as the abya has suggested to them, I assumed that some Brokers would not act strictly as recommended because legally they didnt have to, I didnt even know they were compelled legally to register never mind be checked for compliance.

I have operated a clients account for well over 10 years and I have first hand experience of knowing how difficult it is to set one up, the main high st banks struggle with the complexities, had I taken advice from them my clients would not be correctly protected.
It is that experience that made me aware that there could be some brokers operating under the misconception that they have a clients account when all they have is an account which holds segregated funds from their working capital account, that doesnt keep it safe from an administrator but from what Observer says that isnt an issue either.


I agree all should be fine if everyone acts properly.
It was use of phrases like should and expected which allowed me to perceive a bit of a dangerous gap .


I have already agreed that I need to rethink my next purchase strategy and I am particularly interested in Observers method to mitigate risk , I was previously attempting to delete risk altogether.

If a broker goes bust or 'retires to the sun' and fails to hand over my £300 000 to the boat owner I presume the ABYA or someone else compensates me for my loss , in which case all I need to do is make sure the broker has not recently been struck off the ABYA and my cash is safe.

I believe that is a fair summary of how this thread has evolved, anyone care to endorse it, as I still have a few reservations if I am absolutely honest.

 

[Tranona]

We have been talking at cross purposes, and I am encouraged by your last post.


If a broker goes bust or 'retires to the sun' and fails to hand over my £300 000 to the boat owner I presume the ABYA or someone else compensates me for my loss , in which case all I need to do is make sure the broker has not recently been struck off the ABYA and my cash is safe.

I believe that is a fair summary of how this thread has evolved, anyone care to endorse it, as I still have a few reservations if I am absolutely honest.

Glad we are getting somewhere - until your last point. You, as a buyer get title to the boat from the Bill of Sale from the owner, not the broker. He only signs it when he is satisfied that he will get his money - but that is no concern of yours if title has passed. The only thing that might happen is that the broker fails to pass the proceeds (less his sexpenses) to the vendor. If this happens the vendor can sue because of breach of contract. You have lost nothing so no compensation is due to you.

As far as I know the ABYA does not operate a bonding or insurance scheme in the same way as the Law Society does, probably because there is no need, or the cost of operating it exceeds any potential benefits.

You are right to be wary of the various different types of transactions related to buying and selling boats, but there is nothing magic or complicated about them. As Observer has noted, if you are uncomfortable about your understanding of the law, engage a professional advisor. After all large sums of money are at stake.

As you will have gathered, I feel pretty comfortable with my understanding of the law, and with my ability to check out that I am right if I need to. However, not sure that I would buy a really expensive boat of the type that started this thread without professional advice - and certainly not from a private owner whom I had never met before!

 

[russ]

Well as a future first time purchaser of used boat you have made me a little worried.
I am not a business man and ignorant when it comes legalities and paper work.
Where do i start to protect my investment all be it a small one compared to the numbers you have mentioned but a large amount for me.
I am finding it difficult enough to even chose the right boat and learn pros & cons for each model let alone who actually really owns it.

 

[Deleted User YDKXO]

Would be interested sometime in your views about what such an insurance scheme would povide insurance against and how it would work.

Well I don't want to bore myself or everyone else by listing the risks of loss that exist in a brokerage sale or a dealer sale. We've already chewed those to death. I don't see why an industry body such as the RYA or YBDSA/ABYA cannot arrange an insurance scheme that their member companies can buy into and those companies that do buy into the scheme can advertise the fact that they have done so.
I guess the insurance would work something like a performance bond which is common in the construction industry and which contractors often have to issue to a client to guarantee that they will fulfil the terms of their contract. The performance bond is usually guaranteed by an insurance co and the cost is somewhere between 1% and 5% of the contract value. I'm no expert in this field but possibly it could work in one of 2 ways. Either the broker buys a blanket performance bond insurance up to a certain max value per contract or the bond insurance is offered on an individual contract basis to buyers and sellers, obviously at extra cost. This could also work for a new build contract between buyer and dealer or buyer and builder in that the buyer has the option to pay extra for the broker or dealer to provide a performance bond. I'm just throwing this in as an idea and if anyone has any better ideas lets hear them

 

[Tranona]

Well, all of your suggestions already exist in both the boat business and elsewhere. There are some builders that already offer bank backed performance bonds - HR for one. These are of course not costless and you might argue that if a bank will commit itself then the risk is not high anyway. Such bonds are included in the firms borrowing capacity so they may be self defeating in limiting the amount of working capital available.

An insurance company will want to assess the level of risk - would be brave underwriter that would do that given the small number of failures and the random nature. So how do you determine premiums and decide who pays them? Why for example should you ask a small company like Swallow Boats to pay into any scheme to protect buyers against the failure of a firm liike Sunseeker? How are you going to determine the share of premiums equably?

I have already discussed compensation schemes for brokers. There really is little need as no buyers funds except possibly the deposit is ever at risk - and that risk is already covered by trust law. As I pointed out, the only risk is the broker failing to pass money to the seller - which is well covered by existing laws.

So when you look at it there is no magic panacea that will stop business failures (which most of them are) and which is effective and workable. Each transaction with boats is at an individual level and the methods available to mitigate the risk must also be at an individual level - and a wide range of these has been discussed here.

 

[Tranona]

Well as a future first time purchaser of used boat you have made me a little worried.
I am not a business man and ignorant when it comes legalities and paper work.
Where do i start to protect my investment all be it a small one compared to the numbers you have mentioned but a large amount for me.
I am finding it difficult enough to even chose the right boat and learn pros & cons for each model let alone who actually really owns it.

I can understand your concerns, but they are largely groundless. Discussions here are mainly theoretical and at the margins. Thousands of boats change hands every year without any of the dramas described here.

Suggest you buy the RYA guide to buying and selling boats. It covers every aspect of the process including pointing out where the potential risks lie. Given that sellers are also at some point buyers they know what documentation is required to ensure title passes. If a boat does not have the documentation walk away. You will find if you buy through a broker that the documentation will normally be there because part of his role is to ensure that it is. You just need to use the same checklist if you are buying privately.

Enjoy your search - and the boat when you find it!

 

[Deleted User YDKXO]

Well, all of your suggestions already exist in both the boat business and elsewhere. There are some builders that already offer bank backed performance bonds - HR for one. These are of course not costless and you might argue that if a bank will commit itself then the risk is not high anyway. Such bonds are included in the firms borrowing capacity so they may be self defeating in limiting the amount of working capital available.

An insurance company will want to assess the level of risk - would be brave underwriter that would do that given the small number of failures and the random nature. So how do you determine premiums and decide who pays them? Why for example should you ask a small company like Swallow Boats to pay into any scheme to protect buyers against the failure of a firm liike Sunseeker? How are you going to determine the share of premiums equably?

I have already discussed compensation schemes for brokers. There really is little need as no buyers funds except possibly the deposit is ever at risk - and that risk is already covered by trust law. As I pointed out, the only risk is the broker failing to pass money to the seller - which is well covered by existing laws.

So when you look at it there is no magic panacea that will stop business failures (which most of them are) and which is effective and workable. Each transaction with boats is at an individual level and the methods available to mitigate the risk must also be at an individual level - and a wide range of these has been discussed here.

I see your answer for everything is to go to the law. I chuckle when I see some responses on this forum because you can tell who the lawyors are instantly because the answer to every problem is invariably go pay some money to a lawyor. The trouble with engaging lawyors is that you often spend a load of money with the only satisfied party at the end of it being the lawyor. Been there, done that and got the t shirt on that particular one. You say that the issue of a broker failing to pass money to the seller is covered by existing law, well no **** Sherlock, even I know that. By the time a seller goes to the law, the broker will have long gone and so will the seller's money. The point is to avoid having to go to law in the first place and for the seller to throw more good money after bad
Well I don't know how an insurance co would assess premiums for companies as diverse as Swallow and Sunseeker but that is an issue that is solvable. If, as you say, the number of failures are small, then you would think that insurance cos would be falling over themselves to get into a potentially lucrative market. As for the random nature of the failures, well, hey, none of us would bother paying for insurance if our losses were predictable, would we?
I was not aware that HR offered a performance bond scheme. Well that proves me right and the real question is why the industry hasn't rolled it out across the board. Of course it's not costless, insurance never is but I for one would rather deal with a builder who is offering me a performance bond at extra cost than one who isn't

 

[Deleted User YDKXO]

Well as a future first time purchaser of used boat you have made me a little worried.
I am not a business man and ignorant when it comes legalities and paper work.
Where do i start to protect my investment all be it a small one compared to the numbers you have mentioned but a large amount for me.
I am finding it difficult enough to even chose the right boat and learn pros & cons for each model let alone who actually really owns it.

Firstly this forum is a good source of advice although sometimes it is conflicting advice so keep asking questions! As a buyer the best advice I can give you is to pay as small a deposit as possible, say 5% or £1000 whichever is smaller, not 10% as often demanded by brokers. Get the boat surveyed and the engines and other oily bits tested by a respected mechanic. Ensure you have an extended seatrial and you take somebody with experience of boating with you. If/when you are ready to pay the balance for the boat, ensure you have seen with your own eyes the documentation to be handed over with the boat before you pay. Remove the boat from it's existing location the instant you hand over the draft or the money hits the seller's or broker's account and take it to a place where you know it is secure. It has been known for boats to disappear between the time that a buyer pays for a boat and the time he turns up to collect it or for a boat to be chained to the dock because the seller hasn't paid harbour dues or service charges

 

[Observer]

I see your answer for everything is to go to the law. I chuckle when I see some responses on this forum because you can tell who the lawyors are instantly because the answer to every problem is invariably go pay some money to a lawyor. The trouble with engaging lawyors is that you often spend a load of money with the only satisfied party at the end of it being the lawyor. Been there, done that and got the t shirt on that particular one. You say that the issue of a broker failing to pass money to the seller is covered by existing law, well no **** Sherlock, even I know that. By the time a seller goes to the law, the broker will have long gone and so will the seller's money. The point is to avoid having to go to law in the first place and for the seller to throw more good money after bad

You're missing the point.

If a brokerage buyer and/or seller are not happy with the protection provided by client account, it's open to them to agree an alternative. I can't imagine that any broker will refuse to facilitate that; the satisfactory (to all parties) completion of a sale is in his interests as well. So an insurance sceheme/new law is not needed.

Likewise, if a buyer is not comfortable to take the risk of a dealer or manufacturer going bust before completion, it's open to him to insist on some protection, or take his business elsewhere. Some dealers/manufacturers may be able to offer perfomance bonds. They will almost certainly be the larger ones. If a buyer is not happy to take the risk and the dealer/manufacturer will not/cannot provide alternative 'security', don't buy. Again, no new scheme or law is needed.

The only risk mentioned on this thread that is really difficult to eliminate is the possibility of an unregistered mortgage on a boat owned by a non-corporate entity. But that is (a) unlikely to arise (most lenders who take security will insist on Part I registration); or (b) can be avoided simply by declining to purchase a boat that is NOT Part I registered. That may reduce the field of available target purchases but that's the price of the additional peace of mind.

 

[DAKA]

I see your answer for everything is to go to the law. I chuckle when I see some responses on this forum because you can tell who the lawyors are instantly because the answer to every problem is invariably go pay some money to a lawyor.

I have given up the battle Mike, but your perseverance is commendable and your above comments had me chuckling too.

As already mentioned I was so incensed by the actions of a Broker I went down the legal route for compensation heres the summary

You are paying £200-£300 pounds an hour to be immediately advised not to use your boat, not only are you about to miss the summer season but the engine will seize and it will sink if left untended while the slow, slow wheels of justice turn.
You have to gamble a significant chunk of capital and dont forget most of us have just sunk our spare cash into the boat so chunks of capital are not readily available.

It really didn't make economical sense for me to pursuit the Broker but I felt compelled to make a stand and I won but in terms of time and lost boating pleasure it was very much an 'empiric victory'. The law wasn't really a satisfactory remedy which is why I continued the contact with his Bank manager , adjoining boat club and his divorcing wife, by the time I left the sleepy little town alone he had had a good kick in the rollocks, I was young and the whole saga had made me act totally out of character, I have matured somewhat since .


The significant fact I take away from this thread is the idea that once I pay my cash to a Broker the boat is mine, I had previously thought the boat was not mine until the owner received the cash.

I still think the best way to buy a boat is to get hold of the owners details
Ask to view the service history or see photo copies of title documents, then contact the owner to agree the sale and proceed through a solicitor who has a legally regulated clients account.

 

[Observer]

Well as a future first time purchaser of used boat you have made me a little worried.
I am not a business man and ignorant when it comes legalities and paper work.
Where do i start to protect my investment all be it a small one compared to the numbers you have mentioned but a large amount for me.
I am finding it difficult enough to even chose the right boat and learn pros & cons for each model let alone who actually really owns it.

Russ,

If buying a used boat, it's not hard to follow a number of practical steps that will mitigate if not entirely eliminate the risks that have been discussed above. There are several posters on here who are either legally trained or have direct, professional experience of these types of transactions. However, because all posters are (to a large extent) anonymous, you have to decide for yourself whose advice makes sense and whose appears to be incomplete or flaky.

I can't (and nobody should try to) give a complete rundown in advance of these "practical steps" because they will necessarily vary with the facts of any particular proposed purchase. However, if you have identified a target purchase and wish to post again with a summary of the facts, it is likely you will be offered good advice that will very probably be as good as that you will get from a solicitor. You may or may not want go into more detail through private messages, that can be decided later. If, after hearing the advice and the answers to any questions, you're still not comfortable, then you should seek a second opinion from a solicitor you instruct directly. By then, you will have learned a lot yourself and you should be able to limit the number of outstanding issues, so the legal brief will be shorter and narrower.

 

[benjenbav]

chuckle when I see some responses on this forum because you can tell who the lawyors are instantly because the answer to every problem is invariably go pay some money to a lawyor.

Mike, you big tease...I think you'd have to look very hard at my postings to find that I'd ever said that. Whaddya mean, I'm doing it subliminally. Hell yes, they taught me how to mess up people's heads in law school. I think it was just after the staring at goats section

 

[Deleted User YDKXO]

You're missing the point.

If a brokerage buyer and/or seller are not happy with the protection provided by client account, it's open to them to agree an alternative. I can't imagine that any broker will refuse to facilitate that; the satisfactory (to all parties) completion of a sale is in his interests as well. So an insurance sceheme/new law is not needed.

Likewise, if a buyer is not comfortable to take the risk of a dealer or manufacturer going bust before completion, it's open to him to insist on some protection, or take his business elsewhere. Some dealers/manufacturers may be able to offer perfomance bonds. They will almost certainly be the larger ones. If a buyer is not happy to take the risk and the dealer/manufacturer will not/cannot provide alternative 'security', don't buy. Again, no new scheme or law is needed.

The only risk mentioned on this thread that is really difficult to eliminate is the possibility of an unregistered mortgage on a boat owned by a non-corporate entity. But that is (a) unlikely to arise (most lenders who take security will insist on Part I registration); or (b) can be avoided simply by declining to purchase a boat that is NOT Part I registered. That may reduce the field of available target purchases but that's the price of the additional peace of mind.

Thats all fine and dandy but it assumes that all buyers and sellers are aware of the risks which, as I've been saying until I'm blue in the face, is neither fair nor realistic. The fact is that most buyers/sellers are not aware of the risks and, indeed, why should they be? This is a mature retail industry that should have taken steps well before now to reduce or eliminate those risks if only to enhance the industry's reputation and attract more buyers to spend their money in the industry. Yes people like us might well be able to make individual arrangements to reduce our perceived risks but we are the anoraks of the boating world, not the average punter
I can tell you from my own experience that Part 1 registry is no protection against having an unregistered loan secured on a boat. I once bought a finance co repossessed Part 1 reg boat that the finance co had taken back because the owner had failed to make his mortgage payments. It turned out afterwards that the boat had also been used as collateral for an unregistered business loan. Luckily for me, and on the advice of a marine lawyor, I made the finance co sign an agreement prior to the sale confirming the boat had been sold to me free of liens and debts. But plenty of punters would have walked blindly into this situation safe in the knowledge that the boat was being sold by a reputable finance co thru a reputable broker and then found that their pride and joy wasn't theirs

 

[Deleted User YDKXO]

The significant fact I take away from this thread is the idea that once I pay my cash to a Broker the boat is mine, I had previously thought the boat was not mine until the owner received the cash.

.

Yes that is correct. The broker is acting as the seller's agent and as such, once the buyer's money hits the broker's account, title to the boat passes to the buyer. This obviously puts the seller at huge risk because during the period that the broker has the buyer's money, the seller neither owns his boat any more nor has his money. I once had a very close shave with a certain apparently reputable broker who used to be based not a million miles from Windsor. I sold a boat through them and, as usual, I expected the money to come through from the broker in 2-3 days. When it didnt, I started phoning them and got the usual excuses about their computer system being down and then the director who signs the cheques being away on holiday. Anybody in business recognises these excuses as indicating a company which is having cashflow difficulties so I started to worry. I made appointments to visit them to collect the cheque but twice the cheque wasn't ready for me and the directors nowhere to be seen. Finally I got a solicitor to write a threatening letter after which I got paid out. 2 weeks later the broker filed for administration. Possibly had I not pushed so hard, I would never have got my money and you can bet that no amount of legal action after the broker had gone bust would have got it either