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

[grumpy_o_g]

G-O-G

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.

I think that's the problem - the broker is acting for his principal, not the the chap paying him the money and, because the Broker is acting for seller, there's a huge conflict of interest.

There's a big difference in the regulatory aspects and level of legal knowledge as well. The solicitor's client accounts are subject to far greater controls and restrictions and their fees are totally independent of the transaction. I know solicitors aren't angels but they are very risk-averse and have to jump through all sorts of hoops to qualify and practice and they are regulated in a far more thorough fashion than brokers, albeit it's still not perfect.

What contact I've had with brokers suggests that most are very good at their jobs when it comes to selling, advice on what you really want (as opposed to the dream you have), etc. and also fundamentally honest. With any contractual negotiations you have to assume the worst is going to happen though. I suspect most broker's legal knowledge is somewhat limited though but the one unacceptable fact is that they act on behalf of the seller.

The buyer doesn't let the broker do the survey because of the obvious conflict - the broker shouldn't be handling any other aspect of the sale for the buyer (including conveyancing) for the same reason.

If it's a comparatively low value then treat it like a car sale, if it's higher then treat it like a house sale. That could also solve other aspects as it wouldn't take long for the solicitors to come up with the equivalent of a search to check for liens, finance, etc.

It's not really a criticism of brokers beyond they fact that they're doing something that doesn't fit and they should let go of it. In the long run I think everyone would be better off.

 

[gjgm]

I have some sympathy with Mike's view (if I have it partially right) that lawyers too often seem to think it wont happen because its against the law, or laws are there to prevent it. Crikey, surely you dont even have to have left the school playground before you realise such a view isnt the case.
That said, I do agree that there are legal means and ways of being pretty sure that your money is safe. Yes, sure, you can always come up with a what/if scenario that skirts that, but unfortunately a clever crook might always find a way, and somewhere along the line integrity becomes a key.

 

[Observer]

I think that's the problem - the broker is acting for his principal, not the the chap paying him the money and, because the Broker is acting for seller, there's a huge conflict of interest.

Buyers and sellers have conflicting ("competing" is perhaps better) interests in all sale and purchase transactions and this is no different. However, there is a degree of counter-tension in boat broking because brokers rely on the existence of a pool of satisfied buyers as well as sellers. So, a broker is commercially motivated to assist the buyer and ensure the transaction works for him as well the person (the seller) on whose behalf he is acting (and who is paying him).

However, in terms of risk (of losing money to a bad faith broker), it is often the seller who takes the major risk, not the buyer, as has been explained above. The buyer will typically pay a deposit (a relatively small part of the agreed sale price) to the broker who will keep it (should be in a segregated 'client' account) as stakeholder (sometimes as the seller's agent, but this is less satisfactory for the buyer). This is the amount that the buyer has at risk.

When the balance of the purchase price comes to be paid, then (usually) title will transfer to the buyer (typically on a bill of sale) at the time the balance is paid. If the broker is handling the transfer of funds, that balance will be received by the broker as the seller's agent and transfer of title won't be affected if the price doesn't actually reach the seller because of misappropriation by the broker. So, the seller carries the greater risk and the 'buyer/seller' conflict of interest has not really had any influence.

The above scenario becomes more complicated where (as quite frequently happens) there is outstanding finance secured by a mortgage. Here, the buyer is taking a risk on the mortgage redemption element because, if the finance settlement doesn't reach the lender, his security will not be dicharged and the buyer will not receive unencumbered title.

If one or both parties are unhappy about these risks, the answer (for the seller anyway) is to insist on the sale price being paid directly by the buyer to the seller. Of course the buyer may object because he is then taking a risk on the seller. However, that can be overcome by either (at a cost) using an independent party as an 'escrow agent' or by arranging for the debt redemption element to be paid by the buyer directly to the lender. [edited to substitute "lender"]

 

[ari]

Wow, not been on for a few days, but this seems to have wandered way off topic into a rant about brokers!

The original question was:

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

Nothing there about brokers at all (although I can see the link).

The answer to the original question is still:

You can to some degree/you can't, there is no absolutely mechanism for reliably doing so.

Do we agree?

 

[Deleted User YDKXO]

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.

Thats it then? Thats your answer finally? Well you've told me nothing I didn't know already for the hundreds of condescending words you've expended on this thread. As I've already said, any broker who dips into a client account is very likely to have ordered his personal life so as not to have any personal assets that can be seized so they won't be worth suing for breach of trust or whatever.
Fundamentally, the Law gives no practical protection to a buyer or seller which is what I said in the first place
Still no profile I see.

 

[Tranona]

Thats it then? Thats your answer finally? Well you've told me nothing I didn't know already for the hundreds of condescending words you've expended on this thread. As I've already said, any broker who dips into a client account is very likely to have ordered his personal life so as not to have any personal assets that can be seized so they won't be worth suing for breach of trust or whatever.
Fundamentally, the Law gives no practical protection to a buyer or seller which is what I said in the first place
Still no profile I see.

Why are you so blind? You did not know that some builders offer bank guarantees. You seem constantly confused about the difference between a dealer and a broker, and which law applies in which situation. You did not know about how trusts work. You did not know about personal liability when a person breaks trust. You did not know about compensation schemes. You did not know that a client account can be operated by a third party.You did not know that a standard Bill of Sale passes title free of lien. In fact for somebody who has clearly made a lot of money in order to afford the kind of boat you own, you seem remarkably ignorant in these matters. But of course like most people there is no real need for you to know all this because in everyday life these things happen automatically - and if you don't understand them you seek expert help.

I could go on, but all you seem to want to see is rogues trying to steal other peoples' money and do a runner. Maybe it is the world that you live in, but it is not the world that the majority of people live in. If you want any more practical advice than pursuing an individual for the return of money he has stolen by using the law then maybe a baseball bat is more your style.

Now you can see why deciding how to run the exhaust for my new engine is more rewarding than trying to explain simple facts to people who don't want to listen.

 

[ari]

You did not know that a standard Bill of Sale passes title free of lien.

Eh!!?

No it doesn't, that's the whole issue!

 

[Tranona]

Eh!!?

No it doesn't, that's the whole issue!

Well, I have just reminded myself by looking up the MCA BofS on their site and it says about the shares being sold

"and that they are free of encumbrances save as appears by the registry of the above ship"

So the vendor(s) are signing that there are no charges against this ship apart from those registered (if any).

Seems pretty clear to me unless I am missing something!

If I am wrong in my reading I am happy to withdraw my observation.

 

[ari]

Yes. what you're missing the fact that there is no way to ensure that this is the case!! A pretty fundemental issue I'd have thought.

By the way, I own Tower Bridge, happy to sell it to you for £100,000, I'll give you a Bill of Sale for it of course!

 

[Tranona]

Yes. what you're missing the fact that there is no way to ensure that this is the case!! A pretty fundemental issue I'd have thought.

By the way, I own Tower Bridge, happy to sell it to you for £100,000, I'll give you a Bill of Sale for it of course!

Now, suggest you rewind a bit.

The comment was made because Mike had said that when he bought one boat with a possibly suspect history he asked for the vendor too specifically make such a declaration. All I was doing was pointing out that it was nothing unusual as the standard Bill of Sale has it - which indeed it does.

Your point is that it does not necessarily mean there are not outstanding charges. Of course that might be the case if the vendor lies. How are you going to prevent him from lying? Put him on the rack? Use cattle prods?

We have to assume he is telling the truth and that his declaration is sufficient to give you clear title. The Registry seem happy with it as they are prepared to register your title on the strength of the declaration. According to Mike the declaration in his transaction did protect him from a subsequent claim.

I would imagine that the robustness of the declaration has been tested in the courts - probably at a time when ship owners still wore stove pipe hats and muttonchop whiskers. It has beeen part of the process of buying and selling boats for a long time, and it is needed because there is no compulsion to register a charge.

 

[DAKA]

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.

You and Troana clearly know the legalities of the situation, I agree with Ari and Mike, the practicalities are different and potential buyers and sellers can only be assured of a worthless 'Empiric Victory'.

I have already explained in detail the serious issues I had when I tried to arrange a clients account, the main high street banks (counter staff and local Branch management) failed to set an account up that complies with the Financial Services Authority standards.
I obviously realize they do not have a connection with Yacht brokers however i quote them as they spent several years consulting experts on clients account protection including PWC before having new laws passed by parliament 'Statutory Trusts' which do afford automatic client account protection for Insurance Brokers account but only for money collected for Insurance premiums, if an Insurance broker was to take £300 k for a boat sale and put it in his clients account there would be no protection what so ever for the £300k as the law didnt include cash for boats.
I therefore fail to understand your statement that clients funds for a boat sale have automatic trust protection (not saying you are wrong, just that so far I havnt seen anything to support it in practice and if it is right why were new laws required for Insurance cash.).
Surely a non statutory Trust account has to be formed, this is not that easy in practice to arrange, there will be many segregated bank accounts including the word 'clients' that have not got a satisfactory trust status, if the account isnt legally set up correctly then the administrators will be obliged to take them and the owner of the cash will have to get in line with other creditors.
The FSA also state commissions should not be retained in the clients account (why would they state that if it doesnt cause a problem anyway) .

To add further concern and also to explain why I have serious concerns that trust status is not automatic for Yacht brokers
*The next bit is in relation to separate accounts for each individual person.*
FSA state .... in the event of a short fall even a separate dedicated clients account holding a clearly identified clients funds will be added to the rest of the clients funds and shared out, now if there is an automatic trust status then the FSA could not make that statement, they go on to say that the individuals cash must be taken out of the dedicated account and added to the pot as there is no legal requirement to have separate accounts. (hence no automatic statutory trust exists).

I asked a senior member of ABYA for clarity on several issues we are debating here last week but have so far not received a response.
4 simple questions you would have expected an office junior to manage yes/no replies including

1
Are all Brokers now compelled to register with ABYA by law or are there some Brokers who have failed to be authorised but still can operate legally.
2
Does the ABYA check that the clients accounts are correctly operated or is it up to each member to self declare compliance.
3
If an ABYA member fails is there any compensation scheme for any private individuals that may have lost money that should have been protected in the clients account.
4
Would you recommend the use of a Solicitor to handle sums of money in excess of £50 000 or do you guarantee unlimited safety of funds held by ABYA members.

 

[Tranona]

You and Troana clearly know the legalities of the situation, I agree with Ari and Mike, the practicalities are different and potential buyers and sellers can only be assured of a worthless 'Empiric Victory'.


I asked a senior member of ABYA for clarity on several issues we are debating here last week but have so far not received a response.
4 simple questions you would have expected an office junior to manage yes/no replies including

1
Are all Brokers now compelled to register with ABYA by law or are there some Brokers who have failed to be authorised but still can operate legally.
2
Does the ABYA check that the clients accounts are correctly operated or is it up to each member to self declare compliance.
3
If an ABYA member fails is there any compensation scheme for any private individuals that may have lost money that should have been protected in the clients account.
4
Would you recommend the use of a Solicitor to handle sums of money in excess of £50 000 or do you guarantee unlimited safety of funds held by ABYA members.

Think that there are two points here.

First as I said in response to Mike you seem to be starting from the view that all brokers are rogues and that running off with your money is normal and you need to find protection from it. Nothing could be further from the truth. As I constantly point out the norm is that the structures within which boat sales take place are very robust and thousands or transactions take place every year without any of the problems you foresee.

Of course there are always exceptions, but I have difficulty in recalling any cases like you and Mike describe happening in the 30 years or so I have been involved in the marine trade. Does not mean there have not been failures of businesses and people have not lost money. Nor that from time to time amendments to law and good practice do not happen. However, our laws are very robust in first preventing wrong doing and secondly in helping sort out the mess when things do go wrong.

Put yourself in the position of a broker who might be tempted to empty his client account and do a runner. Firstly there is unlikely to be sums there at any one time sufficient to make it worth doing. Secondly he would have great difficulty in actually doing it without somebody knowing (client, fellow worker, bank etc.) and he would know that he is personally liable, so could never escape that liability. On the other hand there might be mismanagement through ignorance or "borrowing" from the account - but again that is illegal so it is difficult to legislate further against that.

Audits or compensation schemes may have their place, but you need to have evidence that there is a problem sufficiently large to make those sort of things worthwhile. As I have already pointed out lawyers have more stringent controls because the risk is greater and there is more opportunity for hiding wrongdoing.

I admire your persitence in trying to find out more on the subject and hope that you will post the answers to the question asked of ABYA.

 

[volvopaul]

All very interesting reading...... it would be nice if someone from Ward and mckenzie could sort the abya answers to all this doubt, or is there someone here already????????????

 

[Observer]

You're confusing and conflating the issues again and failing to recognise that general trust law will apply to sums held on trust regardless of any additional or specific industry scheme, whether statutory, mandated by a regulator or professional body (such as the FSA or the Law Society), or voluntary.

1. Whether or not a particular sum of money held by any person is held 'on trust' (i.e. does not belong to him but is held on behalf of another person); or belongs to that person but is subject to a preferred claim because of an enforceable security interest or lien; or belongs to that person as of right without preferred claims, are questions of ascertainable fact, to be settled in law if not agreed. Such sums do not become "trust funds" merely because they are held in a trust (client) account but could legally be held to be 'trust funds' (so secure against claims by other creditors) even if they are not held in a trust (client) account. However, if merged with 'own money', there is a risk (but not a certainty) they will 'cease to exist'. That is what happened to some BA Peters clients/customers.

2. I'm don't see why an insurance broker would be holding the proceeds of a boat sale but, if he was, and he deposited it in the client account established for his insurance business, then, if the funds are, in fact, subject to a trust, they would be protected against creditors of the broker, not because they are held in the client account (although that may help to signal their trust status) but because they are, as a matter of fact, held on trust. If there is (I don't know there is but there may well be) an industry established scheme that protects insurance brokers client funds against misppropriation and other losses, they would not be protected against misappropriation by the broker.

3. The principle of segregation of trust (client) funds from own funds means that sums 'belonging to' the broker (e.g. commissions) are better not held in the client account, and I accept your statement that the FSA has stipulated they should not. However, if such a sum is held in a client account because of some administrative oversight or error, that will not affect the status of the client account generally. There is no reason for a broker not to withdraw from the client account commissions properly due to him, so client funds and own funds will not routinely be mixed.

4. Your comments about the "satisfactory trust status" of client accounts shows you do not really understand the legal nature of what you're commenting upon. A trust is not created by the establishment of a bank account. It is created (expressly or by implication) as a result of the relationship of one person (trustee) to another (beneficiary). A specific bank account (or other means of holding assets) may then be established for the purposes of an actual existing trust(s) or in anticipation of unspecified future trusts. You are simply wrong to say that an administrator will be obliged to take money from a client account that is not properly set up and apply it for the benefit of all creditors. He will be obliged to respect the ownership of ALL assets in the possession/control of the company (including cash) regardless of where they are held. If ANY specific asset (such as a sum of money) is shown to be held on trust, he cannot apply it for the benefit of creditors generally. Obviously there is room for dispute about whether any specific sum of money (or part of a pool) is or is not held on trust. The existence of a separate trust (client) account makes it easier to resolve that question but, as in the Peters case, there may be difficulties that can only be resolved by the court.

 

[DAKA]

Think that there are two points here.

First as I said in response to Mike you seem to be starting from the view that all brokers are rogues and that running off with your money is normal and you need to find protection from it.



I admire your persitence in trying to find out more on the subject and hope that you will post the answers to the question asked of ABYA.

Despite the appalling treatment I received from a Yacht Broker (who was later found to be a dealer), I do not consider that all Yacht Brokers are rouges, my prime concern especially due to the @current climate@ is where the Broker fails and calls in administrators, my fear is that any clients account not correctly formatted will be used by the administrators, if the administrators notice that the bank has not agreed in writing to waive the right to offset charges and other account balances then the words clients account, trust account will be meaningless as the administrator runs the working capital account into further deficit and demands the bank uses the so called client account to balance the working capital account.

Remember my experience in trying to set up a client account written in trust, three well known high st banks failed to offer the correct account, it was only my persistence that allowed me to succeed.

Now the good news, ABYA have responded to my request for clarity.

This was to an email I sent them, I feel before I post it here I should ask their permission as I am uncertain of the law of confidentiality in this respect. (happy to send you and Observer a copy by pm should you so desire, cant think many more are still reading this anyway).
Unfortunately the replies have not done anything at all for my confidence and have thrown another huge great spanner in the works making the situation far worse than I thought.

My persistence is very selfish, I have been wanting to change my boat for the last two years but I am very uncomfortable about risking such a large amount of money.

@current climate@ insolences up 30% last quarter, thats 35 000 in 3 months !
thats just the tip of the Iceberg as 700 000 are in debt management many of these will boost the figures over the next year.

 

[Observer]

1
Are all Brokers now compelled to register with ABYA by law or are there some Brokers who have failed to be authorised but still can operate legally.
2
Does the ABYA check that the clients accounts are correctly operated or is it up to each member to self declare compliance.
3
If an ABYA member fails is there any compensation scheme for any private individuals that may have lost money that should have been protected in the clients account.
4
Would you recommend the use of a Solicitor to handle sums of money in excess of £50 000 or do you guarantee unlimited safety of funds held by ABYA members.

Separate answer regarding the above.

1. We know there is no compulsion for yacht brokers to be members of the ABYA.

2. AIUI, there is a code of practice that ABYA members are required to follow. The code includes establishment and operation of a separate client account for client monies. The only way in which the ABYA could check that they are, in fact, operated correctly would be by signing off on every transaction, which is clearly impractical. Periodic audit is a possibility but still high cost and could easily be defeated by a broker intent on misuse of client funds.

3. We know that there is no such compensation scheme and it is hard to see any possibility of one coming into being. According to their website, the ABYA has (I think I read) 150 members - nowhere near enough to make such a scheme viable.

4. We know that the ABYA does not guarantee the security anything. How could it? Even if it did purport to, it's unlikely the guarantee would be worth very much. Regarding use of a solicitor, that's up to individuals to decide.

 

[DAKA]

4. Your comments about the "satisfactory trust status" of client accounts shows you do not really understand the legal nature of what you're commenting upon.

Just for clarity, I am more than happy to agree that you and Troana both have far greater legal understanding than I do.

In fact with your agreement perhaps my best solution is to find a boat and send you a pm in the hope either you or Troana will allow me to employ you or your company to arrange the exchange.

I should have contacted you earlier in the year for a little help but blundered through it on my own, my boating season has been far from smooth this year but appears resolved .

 

[Deleted User YDKXO]

Why are you so blind? You did not know that some builders offer bank guarantees. You seem constantly confused about the difference between a dealer and a broker, and which law applies in which situation. You did not know about how trusts work. You did not know about personal liability when a person breaks trust. You did not know about compensation schemes. You did not know that a client account can be operated by a third party.You did not know that a standard Bill of Sale passes title free of lien. In fact for somebody who has clearly made a lot of money in order to afford the kind of boat you own, you seem remarkably ignorant in these matters. But of course like most people there is no real need for you to know all this because in everyday life these things happen automatically - and if you don't understand them you seek expert help.

I could go on, but all you seem to want to see is rogues trying to steal other peoples' money and do a runner. Maybe it is the world that you live in, but it is not the world that the majority of people live in. If you want any more practical advice than pursuing an individual for the return of money he has stolen by using the law then maybe a baseball bat is more your style.

Now you can see why deciding how to run the exhaust for my new engine is more rewarding than trying to explain simple facts to people who don't want to listen.

Tranona, please do not resort to name calling as it's childish. I am perfectly well aware of the distinction between a broker/commission agent and a dealer. FWIW, I have owned a business for more than 20 years which sells large expensive lumps of machinery and in that business, the sales are made either as a commission agent or as a dealer so, yes, I do know the difference. Also as a result of running that business and others, I am all too aware of what happens when businesses go bust leaving unpaid creditors. Perhaps that very real experience and losing money as a result has taught me to look for the risks in any commercial situation, including the process of buying and selling a boat. Now, you and others can pontificate about the semantics of client accounts but the fact is that when a business goes bust, it's going to be because there's no money left in it so when a broker goes bust, it is very possible that the client account has been emptied. Yes, a creditor may then have the option to sue the broker personally for breach of trust but, as anyone who has been in business knows, people who own businesses that are about to go bust generally order their personal affairs in order not to lose personal assets should they get personally sued. In other words, any victory in court is likely to be phyrric and enrich only the lawyors.
Nothing in this thread has made me change my mind on this subject and I'm getting bored with it so I'm signing off now

 

[gjgm]

My persistence is very selfish, I have been wanting to change my boat for the last two years but I am very uncomfortable about risking such a large amount of money.
********
And that of course it up to you, though, given the extensive information as to how the law functions in the above thread, I m not at all clear why you feel so uncomfortable.
It is perfectly practical to alleviate most risks, and have legal recourse under others. If you really think the seller might be a crook,the buyer might be a crook, the broker might be a crook, the dealer might be a crook,the solicitor might be a crook, the mortgage house might lie to you,the bank will run off with your money,any client account will be pillaged,well,.. I can see why you dont change boat. But why you should be at risk to all of this, and thousands of boat transactions go through satifactorily, well.. you must be a very unlucky, or possibly paranoid fellow.

 

[Tranona]

Tranona, please do not resort to name calling as it's childish.

Nothing in this thread has made me change my mind on this subject and I'm getting bored with it so I'm signing off now

I don't recall calling anybody "names". Sorry you see fit not to take note of what other people are saying and that you wish to retain your somewhat cynical views. Perhaps it is the world you inhabit that is different from others and leads you to think in that way.