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

[DAKA]

. I once had a very close shave with a certain apparently reputable broker who I got a solicitor to write a threatening letter after which I got paid out. 2 weeks later the broker filed for administration.

This is a little odd Mike, I only bought one boat from a broker and I needed to get legal help afterwards to sort the mess out, you have bought 12 ? boats and had 2 potential serious issues , thats over 20% of boat sales having problems, alright we might be a small selection but it can hardly be described as a perceived problem .

 

[Tranona]

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

Mike

This really takes the biscuit for confused thinking. How can you be so patronising to refer to the "average punter" who does not know about these things? when the average punter makes millions of purchases every day without problems.

Why is that I wonder? Well it might have something to do with a generally robust legal system that regulates relationships between parties. When I (and I think Observer) refer to using the law we do not mean running to a solicitor, we mean that the situation is covered by a law that resolves the problem. So if a broker is fraudulent and takes money from a clients account he is breaking the law. Therefore the vast majority (if not quite all) don't do it! It is the same with the contract when you are buying a boat from an individual (through a broker or direct) which has the force of law. The greatest thing with the law, particularly of contract is that it has "seen" just about everything so there is almost always a remedy without going to court. It is the same when you deal with a trader and have a dispute as Pete did (even if he continues to refer to him as a broker which he wasn't) you have the added protection of Consumer law.

Nobody is suggesting that disputes don't arise and they can be very painful, but the point is that they can be resolved within the existing legal framework. It is also true that the law is not fixed and needs constantly reviewing. This is done through legislation (such as consumer law) or through case law. The ruling in the Peters case was a fine example of this where a new situation arose where the law was not clear and the court heard the evidence and came to a decision which then set a precedent.

Sorry if it sounds like a lecture, but you seem to see the world (and particularly the marine industry) as full of rogues trying to do you. This is just not the case. Where there is a failure the law has a remedy which is why there is no need for specific new laws or informal schemes such as you suggest. There will always be people who "break the law" either through ignorance or deliberately. More laws is not going to stop that.

ps

I am glad that when you encountered a problem with one of your transactions it was resolved within the law!

 

[Adrianwool]

Hi people,
I have read all the posts on here with interest, the only conclusion I can draw is that whatever way you approach purchasing a craft there is no 100% watertight way that you can avoid the possibility of being potentially defrauded. Thus, and I am sure that I am going to be villified for this, you have to exercise a little trust, common sense, and investigation when purchasing, this adds another dimension to the 'legalise' when buying, call this additional 'risk management' if you like!

1). Is it too cheap for what it is?, there is nothing like an 'absolute bargain' to hook the unwary this is dishonest sellers appealing to the old bugbear of human greed.

2). Does the paperwork stack up?, this does not necessarily mean the expected documents such as for example the registration or bill of sale, but do the service records, maintenance invoices etc for tasks performed on the boat over time tally.

3). Has it been based where it lies for a reasonable period of time?, constant changes in berthing arrangements may be perfectly ok but should raise a question in the back of your mind, for which there should be a plausable answer.

4). Have you met the owner?, how does he seem to you , relaxed?, tense?, shifty?, judging the man is an important part of any financial transaction!. Incidentally most people are very good at sizing people up!.

5). Is the owner knowledgeable/proud of the craft he is selling?

6). Finally never forget the advice of Shelock Holmes, if you want to find out what is happening locally there is nothing like a visit to the nearest yacht club, bar, or pub to find out what is going on!

I wish you all good luck and fortune in accquiring your new purchase!

 

[Deleted User YDKXO]

Mike

This really takes the biscuit for confused thinking. How can you be so patronising to refer to the "average punter" who does not know about these things? when the average punter makes millions of purchases every day without problems.

Why is that I wonder? Well it might have something to do with a generally robust legal system that regulates relationships between parties. When I (and I think Observer) refer to using the law we do not mean running to a solicitor, we mean that the situation is covered by a law that resolves the problem. So if a broker is fraudulent and takes money from a clients account he is breaking the law. Therefore the vast majority (if not quite all) don't do it! It is the same with the contract when you are buying a boat from an individual (through a broker or direct) which has the force of law. The greatest thing with the law, particularly of contract is that it has "seen" just about everything so there is almost always a remedy without going to court. It is the same when you deal with a trader and have a dispute as Pete did (even if he continues to refer to him as a broker which he wasn't) you have the added protection of Consumer law.

Nobody is suggesting that disputes don't arise and they can be very painful, but the point is that they can be resolved within the existing legal framework. It is also true that the law is not fixed and needs constantly reviewing. This is done through legislation (such as consumer law) or through case law. The ruling in the Peters case was a fine example of this where a new situation arose where the law was not clear and the court heard the evidence and came to a decision which then set a precedent.

Sorry if it sounds like a lecture, but you seem to see the world (and particularly the marine industry) as full of rogues trying to do you. This is just not the case. Where there is a failure the law has a remedy which is why there is no need for specific new laws or informal schemes such as you suggest. There will always be people who "break the law" either through ignorance or deliberately. More laws is not going to stop that.

ps

I am glad that when you encountered a problem with one of your transactions it was resolved within the law!

Fine words as usual, tranona, but a touch short on specifics. Lets keep it really simple. Take the situation I outlined previously. A seller sells a boat through a broker, the buyer pays the broker and the broker goes into administration before the seller is paid out. The seller informs the administrator that he is a creditor of the failed company but the administrator tells the seller that the broker's client account is empty and there are insufficient funds in other accounts to pay him after paying out the secured creditors. How does the Law help the seller get his money back? Please explain. I obviously need to learn

 

[Deleted User YDKXO]

This is a little odd Mike, I only bought one boat from a broker and I needed to get legal help afterwards to sort the mess out, you have bought 12 ? boats and had 2 potential serious issues , thats over 20% of boat sales having problems, alright we might be a small selection but it can hardly be described as a perceived problem .

To be fair, they could have been issues but as it turned out and luckily for me, they weren't, so I don't think they can be counted. I just cited them to illustrate what can go wrong rather than what has

 

[Observer]

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

I wonder if the additional warranty was strictly necessary. Was the sale not regulated by a standard form contract that warranted unencumbered title so the additional warranty was "belt and braces"? Even if there was no agreement, unencumbered title would have been assured by Sale of Goods Act (if SoGA applies to a "sale by a mortgagee in possession", which I admit I'm not absolutely certain about although I think it must do. Jfm or benjenbav may be able to settle this question).

 

[DAKA]

The seller informs the administrator that he is a creditor of the failed company but the administrator tells the seller that the broker's client account is empty and there are insufficient funds in other accounts to pay him after paying out the secured creditors.

The situation is much worse than that, even if the client account isnt empty and your money is sat there the administrator may have to use it to pay others out first.

It is very difficult to set a client account up correctly.


Midland Bank (alright it is a few years ago)

Yes sir, I can write anything on the account you like, there you go

DAKA's Clients account

Anything else I can do for you ?

Yes please will you ask the Manager if he has time to see me as I need a client account that is held in trust.

Comes back with a message, alright I understand now, we have got other clients account with 'special facilities',
what are those I asked

Well you pay into the clients account and then we make you a loan on the security of the clients account, then you invest the loan with us or we can set up a flexible mortgage for you.



Time to try Nat west

I got a much better result but they still wanted to attach a interest bearing account to it with automatic transfers, the confirmation of an account written held in trust was wholly unsatisfactory.

Eventually I set up an account held in trust with my current bank that did understand what a client account is and how it should operate but it took half a dozen letters to eventually get the confirmation letter back from them which I had to write myself requesting them to sign.

I suggest that many clients accounts will not be written under trust correctly and the administrators will be compelled to use the funds for other creditors, once this is taken on board perhaps others will understand my comments regarding a yacht Broker not breaking the law if he dips into the honey pot.
Legally he doesnt have to have a client account.
He tries to set one up but it isnt properly done.
He spends £500 000 of it.
His lawyer just says he borrowed it and intended on paying it back.
He has not broken the law.

That is why there needs to be legislation to compel all yacht brokers to open clients accounts, and ABYA or someone needs to check they are compliant.

If a solicitor makes a mess of his clients account in the same way at least his clients will be entitled to compensation.

I am currently awaiting clarification on two points regarding ABYA brokers

Does anyone check the clients account is compliant or is it self certified.

Is there a compensation scheme set up to look after clients who loose money when handing cash to a yacht broker

 

[Observer]

Fine words as usual, tranona, but a touch short on specifics. Lets keep it really simple. Take the situation I outlined previously. A seller sells a boat through a broker, the buyer pays the broker and the broker goes into administration before the seller is paid out. The seller informs the administrator that he is a creditor of the failed company but the administrator tells the seller that the broker's client account is empty and there are insufficient funds in other accounts to pay him after paying out the secured creditors. How does the Law help the seller get his money back? Please explain. I obviously need to learn

Yes that could happen and, if the money has disappeared, or was never paid into a client account, the seller would become an unsecured creditor (the BA Peters case and appeal are authority for this). However, your example is based on the assumption that the broker will act dishonestly in his handling of money that he NEVER belonged to him in any way. That would give rise to personal liability.

It is open to the seller to insist on different arrangements if he does not want the broker to handle the funds transfers.

 

[Observer]

The situation is much worse than that, even if the client account isnt empty and your money is sat there the administrator may have to use it to pay others out first.

It is very difficult to set a client account up correctly.


Midland Bank (alright it is a few years ago)

Yes sir, I can write anything on the account you like, there you go

DAKA's Clients account

Anything else I can do for you ?

Yes please will you ask the Manager if he has time to see me as I need a client account that is held in trust.

Comes back with a message, alright I understand now, we have got other clients account with 'special facilities',
what are those I asked

Well you pay into the clients account and then we make you a loan on the security of the clients account, then you invest the loan with us or we can set up a flexible mortgage for you.



Time to try Nat west

I got a much better result but they still wanted to attach a interest bearing account to it with automatic transfers, the confirmation of an account written held in trust was wholly unsatisfactory.

Eventually I set up an account held in trust with my current bank that did understand what a client account is and how it should operate but it took half a dozen letters to eventually get the confirmation letter back from them which I had to write myself requesting them to sign.

I suggest that many clients accounts will not be written under trust correctly and the administrators will be compelled to use the funds for other creditors, once this is taken on board perhaps others will understand my comments regarding a yacht Broker not breaking the law if he dips into the honey pot.
Legally he doesnt have to have a client account.
He tries to set one up but it isnt properly done.
He spends £500 000 of it.
His lawyer just says he borrowed it and intended on paying it back.
He has not broken the law.

That is why there needs to be legislation to compel all yacht brokers to open clients accounts, and ABYA or someone needs to check they are compliant.

If a solicitor makes a mess of his clients account in the same way at least his clients will be entitled to compensation.

I am currently awaiting clarification on two points regarding ABYA brokers

Does anyone check the clients account is compliant or is it self certified.

Is there a compensation scheme set up to look after clients who loose money when handing cash to a yacht broker

You're conflating several different issues. If a broker (trustee) misappropriates monies actually held on trust (i.e. takes money that doesn't belong to him from the client account or a payment is actually paid into a non-client account), it doesn't matter how well or badly the client account was set up. (The latter was what happened in BA Peters case.)

From the pov of the administrator of a failed broker or dealer, it doesn't matter if the client account is "properly set up" or not. It's how the client money was managed that's important. If, as a matter of fact, the trust monies were segregated and the trust(s) are held to exist, then the administrator won't be able to touch them.

From the pov of a bank, it is important that the bank has recognised/acknowledged that a certain account is used ONLY for monies held on trust and not belonging to the account operator. If they have that knowledge, they will not be able to touch the funds or offset against other accounts or use them as security for loans. If they do, they would be liable to repay on a claim by the trust beneficiary(ies).

I believe the above is correct analysis but I'm open to correction.

 

[Tranona]

Fine words as usual, tranona, but a touch short on specifics. Lets keep it really simple. Take the situation I outlined previously. A seller sells a boat through a broker, the buyer pays the broker and the broker goes into administration before the seller is paid out. The seller informs the administrator that he is a creditor of the failed company but the administrator tells the seller that the broker's client account is empty and there are insufficient funds in other accounts to pay him after paying out the secured creditors. How does the Law help the seller get his money back? Please explain. I obviously need to learn

Monies in the client account are NOT part of the assets of the company. That is the whole point of client accounts. If the broker has illegally removed funds from the account then you sue the person for breach of trust. The seller is not a creditor of the company if the funds were correctly paid into the client account.

I thought we had cleared up this misunderstanding several posts ago when I explained the ruling in the Peters case. I also directed Peter to www.abya.co.uk which explains it in simple terms.

As I observed, I think you are seeing things that are just not there. There are obviously risks in buying boats but in most cases you can mitigate that risk. Clearly the risks rise the more you move away from the norm - so buying abroad may be more risky, larger value purchases bring extra risks, having a custom boat built brings potentially more risks and so on. As I described earlier I bought my boat new from Germany through a dealer in Greece with an agent in the UK and paid for it in DM. I was OK with that risk because I understood it. Others might not be. In your case you made sure you got your boat free of any lien - but the standard Bill of Sale gives you that anyway which is why it is the legal title.

To my mind the only key document is the Bill of Sale as it is only that which gives you title. As you have discovered Part 1 is not always clear title as boats can be used as security for loans without registration - either being financed while they are in stock before being registered or the lender not registering their interest even if the boat is on the register. However there would be warning signs that this might be a risk - unsold stock boat from dealer, re-possession etc which would indicate extra caution just as in your case.

So, as always an interesting debate which I hope has cleared up any misunderstandings so that we can stop worrying and enjoy our boats.

 

[Deleted User YDKXO]

Yes that could happen and, if the money has disappeared, or was never paid into a client account, the seller would become an unsecured creditor (the BA Peters case and appeal are authority for this). However, your example is based on the assumption that the broker will act dishonestly in his handling of money that he NEVER belonged to him in any way. That would give rise to personal liability.

It is open to the seller to insist on different arrangements if he does not want the broker to handle the funds transfers.

I must admit I thought I was going to learn something here. Obviously not. So the seller is in a no better situation that any other unsecured creditor and his only recourse is a civil action against the broker? The broker of course has put his house and other assets in the name of his spouse years ago so whilst the civil action may be successful, there's no money to take. A few weeks later the broker starts up a new company called Dodgy Broker (2009) Ltd. The Dti only act after he's done this about a dozen times and even so, the only sanction is being banned from being a co director for a few years which isn't a problem because the wife is named as co director.
Yup, the seller should sleep easy knowing that the full weight of the Law is protecting him. Not

 

[DAKA]

I must admit I thought I was going to learn something here. Obviously not. So the seller is in a no better situation that any other unsecured creditor and his only recourse is a civil action against the broker? The broker of course has put his house and other assets in the name of his spouse years ago so whilst the civil action may be successful, there's no money to take. A few weeks later the broker starts up a new company called Dodgy Broker (2009) Ltd. The Dti only act after he's done this about a dozen times and even so, the only sanction is being banned from being a co director for a few years which isn't a problem because the wife is named as co director.
Yup, the seller should sleep easy knowing that the full weight of the Law is protecting him. Not

Dnot worry Mike, you are forgetting the the punishment he will endure.

Solicitors and Insurance Brokers leg it with the cash on a regular basis.

One I can remember cleared off with an estimated £400 000.
After he had spent up he returned and was punished with a suspended sentence and 80 hours of community service.
( thats £5 k an hour to plant trees )

I bet he wishes he had acted properly now.

I am confident the main defence was he intended to pay the cash back and it was only intended as a loan, hence my above posts.

If I understand correctly from this thread it doesnt matter if there is a compliant clients account or not as long as it is separate from the working capital but I have my doubts as your £300 000 will include £15 000 commission of working capital which immediately places it on a parallel to the Peters account ( I think but could be wrong).

 

[Tranona]

I must admit I thought I was going to learn something here. Obviously not. So the seller is in a no better situation that any other unsecured creditor and his only recourse is a civil action against the broker? The broker of course has put his house and other assets in the name of his spouse years ago so whilst the civil action may be successful, there's no money to take. A few weeks later the broker starts up a new company called Dodgy Broker (2009) Ltd. The Dti only act after he's done this about a dozen times and even so, the only sanction is being banned from being a co director for a few years which isn't a problem because the wife is named as co director.
Yup, the seller should sleep easy knowing that the full weight of the Law is protecting him. Not

Sorry, Mike that you still do not seem to understand the difference. A client account where the money is held in trust belongs to the client - whether he be the buyer (placing a deposit) or the seller waiting for his funds. These moneys do not belong to the broker whether he be a sole trader or it is a company.

This is the fundamental difference that sets it apart. If the broker takes the money (just as the solicitor taking funds from a client as in the case I directed you to) he has broken trust. It is nothing to do with his company, or his business as a sole proprietor. The person is acting in an entirely different legal capacity.

It is exactly the same as when I was trustee for moneys from my mothers estate held on behalf of her legatees. Although I could use that money, I could not use it for myself - only for the benefit of the beneficiaries of the trust as laid down in the deed of trust. So I could sanction the purchase of a new viola for my daughter, but I could not use the money to buy a new spinnaker for my boat - because I would be in breach of trust.

If we did not have this legal mechanism that governs the relationship, we would, indeed have the potential anarchy you describe where one person could use money that belongs to others for their own benefit.

Just about the only thing you say that is correct is that the person who took your money may have spent it all. That is why the Law Society has a compensation fund. However although there is no reason why brokers can't set one up in the same way, funded by contributions from members, I guess they have decided that there is insufficient risk to warrant the cost of running one. As Observer suggested, if you don't like the idea of the broker operating the client account then suggest an alternative, for example, have it run by a third party such as a solicitor, which of course will incur additional costs.

So, if you accept what I say is right (and I believe it to be so) then you have learned something. If you don't, you have not.

 

[Tranona]

Yes, Pete you are wrong. Please read my post above.

 

[Observer]

If I understand correctly from this thread it doesnt matter if there is a compliant clients account or not as long as it is separate from the working capital but I have my doubts as your £300 000 will include £15 000 commission of working capital which immediately places it on a parallel to the Peters account ( I think but could be wrong).

No it doesn't. A client account that includes a sum that can properly be claimed by the trustee as agreed payment for services provided by him is still a client account.

 

[Deleted User YDKXO]

Sorry, Mike that you still do not seem to understand the difference. A client account where the money is held in trust belongs to the client - whether he be the buyer (placing a deposit) or the seller waiting for his funds. These moneys do not belong to the broker whether he be a sole trader or it is a company.

This is the fundamental difference that sets it apart. If the broker takes the money (just as the solicitor taking funds from a client as in the case I directed you to) he has broken trust. It is nothing to do with his company, or his business as a sole proprietor. The person is acting in an entirely different legal capacity.

It is exactly the same as when I was trustee for moneys from my mothers estate held on behalf of her legatees. Although I could use that money, I could not use it for myself - only for the benefit of the beneficiaries of the trust as laid down in the deed of trust. So I could sanction the purchase of a new viola for my daughter, but I could not use the money to buy a new spinnaker for my boat - because I would be in breach of trust.

If we did not have this legal mechanism that governs the relationship, we would, indeed have the potential anarchy you describe where one person could use money that belongs to others for their own benefit.

Just about the only thing you say that is correct is that the person who took your money may have spent it all. That is why the Law Society has a compensation fund. However although there is no reason why brokers can't set one up in the same way, funded by contributions from members, I guess they have decided that there is insufficient risk to warrant the cost of running one. As Observer suggested, if you don't like the idea of the broker operating the client account then suggest an alternative, for example, have it run by a third party such as a solicitor, which of course will incur additional costs.

So, if you accept what I say is right (and I believe it to be so) then you have learned something. If you don't, you have not.

Tranona, you're big on pontificating and well short on practical advice. Fairly typical of the breed in my experience. You still haven't actually answered my simple question. How is the seller to recover his money in the situation I have described? So a broker who dips into a client account is in breach of trust, so what? It doesn't help the seller very much to know that. All he's interested is how he's going to get his money back? You say the seller has a remedy in law. What is it?
Thank you for suggesting some kind of compensation fund similar to the Law Society. I very much doubt that brokers have decided that there is insufficient risk to warrant such a scheme far more likely that they prefer to play down the risk in the hope that stupid punters don't think too much about the risks when doing business with them

 

[David_Jersey]

I very much doubt that brokers have decided that there is insufficient risk to warrant such a scheme far more likely that they prefer to play down the risk in the hope that stupid punters don't think too much about the risks when doing business with them

I think that rather sums it up for me

 

[Tranona]

Tranona, you're big on pontificating and well short on practical advice. Fairly typical of the breed in my experience. You still haven't actually answered my simple question. How is the seller to recover his money in the situation I have described? So a broker who dips into a client account is in breach of trust, so what? It doesn't help the seller very much to know that. All he's interested is how he's going to get his money back? You say the seller has a remedy in law. What is it?
Thank you for suggesting some kind of compensation fund similar to the Law Society. I very much doubt that brokers have decided that there is insufficient risk to warrant such a scheme far more likely that they prefer to play down the risk in the hope that stupid punters don't think too much about the risks when doing business with them

Sorry you think I am pontificating. You clearly have no intention of learning anything as you reject everything I, and others say that shows you are wrong. You have received plenty of practical advice on ways of mitigating your risk and remedies for when things go wrong - if only you want to see them.

If you cannot accept that the law applies in different ways depending on the nature of the transaction and an individual can act in different legal capacities then you will never understand. Observer has already told you if an individual breaches trust by taking your money from a client account he is personally liable and you sue him to recover your money. That is the remedy.

If you pay a deposit to a dealer, not into a client account and the dealer goes bust you are an unsecured creditor. A very different position because you cannot sue for your money - you just stand in line.


This is a fundamental difference, which is why client accounts in trust are used. I cannot believe that you are unable to see the difference. A broker is an agent. He has no financial interest in the boat. The contract for sale and purchase is between the owner and the purchaser. The owner also has an agency contract with the broker to represent him. He can also act as a stakeholder by operating a client account to handle the funds that are transferred during the transaction, but at no point is any of the money his until the transaction is complete and he takes his disbursement (which his agency contract permits him to do) from the proceeds of the sale. Each of these three relationships are quite separate in law.

I think where you get confused is that one individual (the broker) can be a party to two of the relationships and there is potentially a temptation for him to take money that is not his. If you think that temptation is too great then have the client account operated by a third party.

You are an awful cynic if you believe that every broker is crooked and thinks punters are stupid - or as I suggested earlier you are just patronising. As I suggested I suspect the reason ABYA don't run a compensation scheme (and I am not sure if they do or not - they don't advertise it) it is because there is not a history of brokers doing what you claim they might do.

The reason why the Law Society has their scheme is two fold. Firstly their privileged position places them in a position of trust - often with very vulnerable people and secondly as the case I referred you to shows there is enormous temptation because of the sums that might be involved and the relative ease with which a clever person can access clients funds and hide the evidence. Most lawyers are in partnerships so it makes sense for them to protect themselves from the wrong doing of partners. Where a solicitor is operating on his own, the Law Society assumes responsibility for his wrong doing paid for out of a levy on all members.

You really have to show that brokers' abuse of client accounts is widespread to justify calling for a compensation scheme - and I have never seen any evidence of this. And if you are so concerned, now that you know what the legal position is, you can ask the ABYA for their position on the subject.

So, please sit down, pour yourself a glass of your favourite tipple and think through what you have learned.

The new engine for my boat has just arrived today and I now have to apply my mind as to how I am going to run the exhaust which is on the opposite side than my current engine. Should keep me busy for a while.

 

[grumpy_o_g]

The only way to be sure that money will not be accessed by one of the parties unless specific conditions are met is be Escrow and that's a real can of worms.

These are the rules for client accounts http://www.sra.org.uk/solicitors/code-of-conduct/accounts-rules/part-b-accounts-rules.page#p-b as they apply to Solicitors.

They are not regulated by law as I understand it but by the usual self-regulatory solicitors authority. The actual crime is the mis-use of someone else's money, not the act of dipping into the client account, which "merely" breaks the solicitors rules of conduct.

With a broker, dealer or builder the term "client account" is largely meaningless as there aren't even the solicitors sanctions against them. It serves purely to segregate funds - if I give a business £100K for the purchase of something and I have a contract with them for the supply of said item I have better standing as a creditor if I can clearly identify that that's my £100K - otherwise my £100K simply goes towards the general liabilities of the business.

What I don't understand is why buying an expensive boat should be any different to buying a house. The sums of money are generally similar, there are frequently financing arrangements involved, there are surveys required, there are brokers/estate agents involved and the asset is something that changes title rather than possession (i.e the asset is so big that, unlike say a camera where you can get a receipt take the thing away, the ownership needs to be proved by title deeds of some sort). We even have the stage payments scenarios of new builds.

If you remove the Brokers role as the seller's agent (which doesn't seem to add much value to the seller) and simply give them the role of the estate agent (i.e. sales, marketing and finder) and then let the solicitors do the legal side, surely the problem is hugely diminished.

The above is only my understanding but I can't see me ever handing over sums of money of that size without having a solicitor involved.

 

[Tranona]

G-O-G

Sort of right. However the key word in a client account is that it is operated "in trust" - not just that it is a separate account. Observer explains the implications better than me in one of his posts. In trust means that the funds belong to the client and it is clear that the funds are only used specifically for clients purposes. The bank providing the account should also be clear that it is a trust account. This means that if trust is held to exist and an individual, say the broker who is a signatory to the account, uses the funds for a different purpose, he is personally liable.

By all means as has been suggested several times, use a third party such as a solicitor to run the account - if this is acceptable to both parties - but it adds cost when a broker does it effectively for free as part of his service to his principal.