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

[DAKA]

ABYA response

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.

, well.. you must be a very unlucky, or possibly paranoid fellow.

I think thats a little unfair, I have only dealt with one broker and he was dishonest, but I am not accusing any brokers of being generally dishonest.

I have suggested dealing with the owner is more likely to have better results in find out the boats history as the owner knows all about the boat, no surveyor will tell you how many times the boat has broker down in the last year.

I have been looking for a way to protect my money if the Broker goes bust.

You call me paranoid..........., but don't forget I bought a boat from B Peters but handed my cash direct to the owner and refused to pay B Peters any money, I expect some B Peters clients who lost out wish they had been as careful as I am !
I am not sure if Peters were ABYA approved or not.

Although this thread and ABYA have helped reassure me I am disappointed that I am unable to use a Solicitor to hold the funds as they have a compensation scheme available.






The response from Jane Gentry CEO, Association of Brokers & Yacht Agents & The Yacht Designers & Surveyors' Association

quote
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All our members are required, and have been for many years, to have a Client Account which is specifically set up with their bank as separate to their own business accounts. This account must only be used to hold client monies to maintain its integrity.

There is no legislation covering yacht brokers and dealers, but we do underline the importance of this account to our members.

There is no compensation scheme or scheme like ABTA for travel agents - we did look into it some years ago but insurers were not interested in what is a small area of business to them.

Solicitors will not hold monies that they are not involved with otherwise. Again, this has been asked fairly often in recent years.

All our members are listed on our website so you know they will have a Client Account and Professional Indemnity insurance, which is also mandatory for our members.

Not all brokers and dealers have to be members so do check they are. Don't be afraid to ask to see their bank letter regarding their Client Account. If they have one, there should be no reason why they would not let you see it. Our members sign an Undertaking each year to say they hold a Client Account and PI insurance.

The main thing is to talk to the broker - they understand that you have concerns and will do all they can to help you. Try and get the completion date set for a short time ahead so your deposit is in the account for the shortest time possible. Some boat buyers use their credit card to pay their deposit as that is insured. Doing the same for the completion can be difficult if it is over the card limit, but by then it is not your problem as you will have the boat! Electronic transmission is the best way to ensure a short time frame.

The Peters situation was complicated and did involve the Client Account, but also some other factors too.

I am glad I have been able to help ease your mind - the integrity of the company is important - don't be afraid to ask them questions!
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quote

 

[Observer]

I am disappointed that I am unable to use a Solicitor to hold the funds as they have a compensation scheme available.

A solicitor won't just act as a stakeholder. However, if you instruct a solicitor to handle the sale/purchase, they will deal with the transfer of funds between buyer and seller (and broker and lender, if applicable) in the same way as they would on a house purchase. Of course that has ramifications in terms of costs.

Alternatively, you could use an escrow agent but that could be more expensive because you will have to pay their fees and (probably) legal costs on setting up the escrow agreement.

 

[DAKA]

A solicitor won't just act as a stakeholder. However, if you instruct a solicitor to handle the sale/purchase, they will deal with the transfer of funds between buyer and seller (and broker and lender, if applicable) in the same way as they would on a house purchase.

Thats good enough for me, thanks so no need to complicate with start trying to explain an escrow.

 

[ari]

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.

I'm beginning to think that you're not actually reading replies. The answer has already been suggested in a MBM article, indeed by an actual broker! I posted it up at the beginning of this very discussion!

I remember an article by a broker in MBM (Secret Salesman I think) who suggested there should be a central finance register that records not just the (easily changed) name but hull number, engine serial numbers, gearbox serial numbers etc. He reckoned it should be a fully cross reference-able list that finance companies have to register their interest against in order to have a lien, with all the serial numbers. That way any buyer would be able to perform the equivalent of an HPI check.


Very very simple.

However for as long as people like yourself are happy to do six or seven figure deals on the basis of "fingers crossed, it'll probably be alright" then I guess there'll be no call for change.

 

[Tranona]

Very very simple.

However for as long as people like yourself are happy to do six or seven figure deals on the basis of "fingers crossed, it'll probably be alright" then I guess there'll be no call for change.

I do read - everything!

Yes, it is simple - but the point is that there IS no central register, nor any obligation to register a charge with the Registrar.

It is pointless to talk about a desired state of affairs unless you are proposing a mechanism for bringing such a thing into being. Have you ever wondered why there is not such a thing? After all the finance houses themselves have potentially the most to lose and I don't see them clamouring for one.

Therefore in the absence of any other pressing case you have to deal with what is rather than what you might want it to be. The current system of registered charges and a personal declaration seems to work very well and if it does fail then the law provides remedies for those that lose.

Of course if you can give documented specific examples to demonstrate that this type of fraud is endemic then people might listen. Failing that, one can only conclude that your concerns are in your mind and not rooted in reality.

 

[Observer]

I remember an article by a broker in MBM (Secret Salesman I think) who suggested there should be a central finance register that records not just the (easily changed) name but hull number, engine serial numbers, gearbox serial numbers etc. He reckoned it should be a fully cross reference-able list that finance companies have to register their interest against in order to have a lien, with all the serial numbers. That way any buyer would be able to perform the equivalent of an HPI check.

A finance company that requires specific security (a mortgage) to secure a loan on a pleasure vessel WILL require Part I registration and WILL ensure the mortgage is registered.

A broader system of registering interests in goods, on the lines of the US Uniform Commercial Code, may be "nice to have" but it simply doesn't exist in the UK, and there is very little evidence, in the context of pleasure vessel finance, to show that it is actually needed.

Further, if a borrower (mortgagor) is a limited company (and a dealer will usually be incorporated), there IS an obligation to register a charge at Companies House. So a dealer who grants a mortgage to a lender (to obtain stocking finance, for example) is obliged to register that mortgage on the Companies House mortgage register, which is open to public inspection. If it is NOT registered, the charge will be unenforceable against other claims to title/security.

 

[gjgm]

twas meant in good humour...
Of course one bitten twice shy, but if you are suggesting that you are so apprehensive about financial risks that you darent/cant sell your boat, then I do think you have the risks out of proportion.
My personal opinion is that the process is far too lax, and people are ignorant of the risks. I would agree that given the sums of money, too often its down to a handshake and trust, and while that does seem to work the vast majority of the time, it is inadequate.
But, given more knowledge (as articulated in this thread), it is possible to reduce or eliminate the bulk of the risks, to an extent that people should sleep easy. Yes, something could go wrong, but in the end, whatever processes you put in place, a clever guy can find a way to circumvent them, and then you would be back to resorting to the law. Which is actually where we are anyway.
So, I would again suggest that you view the risks out of proportion to reality.

 

[DAKA]

I do read - everything!


It is pointless to talk about a desired state of affairs unless you are proposing a mechanism for bringing such a thing into being. Have you ever wondered why there is not such a thing? After all the finance houses themselves have potentially the most to lose and I don't see them clamouring for one.

.

I thought the mortgage company had an agreement to get paid and it would be the new owner that lost out, I had no idea the finance company would let him off the mortgage if an outstanding charge was later found.

I was actually under the impression the finance company would expect full settlement over night if they lost security of the boat.

I dont know how many others had the same impression but all these misconceptions cant be helping boat sales.

 

[doug748]

A finance company that requires specific security (a mortgage) to secure a loan on a pleasure vessel WILL require Part I registration and WILL ensure the mortgage is registered.

A broader system of registering interests in goods, on the lines of the US Uniform Commercial Code, may be "nice to have" but it simply doesn't exist in the UK, and there is very little evidence, in the context of pleasure vessel finance, to show that it is actually needed.

Further, if a borrower (mortgagor) is a limited company (and a dealer will usually be incorporated), there IS an obligation to register a charge at Companies House. So a dealer who grants a mortgage to a lender (to obtain stocking finance, for example) is obliged to register that mortgage on the Companies House mortgage register, which is open to public inspection. If it is NOT registered, the charge will be unenforceable against other claims to title/security.

Grand, so we come back to the sensible advice, seems like 2 1/2 years ago since it was first given, Look for part 1 registration and take it from there. Essential for a boat at this price point.

 

[ari]

I do read - everything!

Yes, it is simple - but the point is that there IS no central register, nor any obligation to register a charge with the Registrar.

It is pointless to talk about a desired state of affairs unless you are proposing a mechanism for bringing such a thing into being. Have you ever wondered why there is not such a thing? After all the finance houses themselves have potentially the most to lose and I don't see them clamouring for one.

Therefore in the absence of any other pressing case you have to deal with what is rather than what you might want it to be. The current system of registered charges and a personal declaration seems to work very well and if it does fail then the law provides remedies for those that lose.

Of course if you can give documented specific examples to demonstrate that this type of fraud is endemic then people might listen. Failing that, one can only conclude that your concerns are in your mind and not rooted in reality.

You think a discussion about the possibility of losing ten, hundreds even, of thousands of pounds is pointless?? Wow, you must be a very wealthy man indeed!

And how exactly does the law "provide remedies for those who lose"? There is no compensation scheme that I am aware of.

Finally, how exactly do finance companies "have the most to lose"? They'll still want (and get) the money they loaned you back if the boat purchased turns out to have a previous charge on it.

The simple fact is, there's no safe or effective way of checking that any boat bought has no financial encumbrance, and there exists a very simple way of remedying that position with a simple change to the law.

With respect, there's only one of us "not rooted in reality" here!

 

[ari]

A finance company that requires specific security (a mortgage) to secure a loan on a pleasure vessel WILL require Part I registration and WILL ensure the mortgage is registered.

.

And the man who wishes to sell you his boat without your realising it has a mortgae WILL change the name and remove the C&M plate and you WILL have no way of knowing right up until the point that you WILL find a writ on your patio doors at which point you WILL be liable for the debt as the new owner.

And as a point of marine law, a finance company has a charge over the boat whether they registered it or not.

 

[ari]

Grand, so we come back to the sensible advice, seems like 2 1/2 years ago since it was first given, Look for part 1 registration and take it from there. Essential for a boat at this price point.

And fingers crossed the owner is an honest chap and tells you it's part one registered eh? :S

Lot of finger crossing going on in boat buying, see the very first post in this thread for details...

 

[ari]

I thought the mortgage company had an agreement to get paid and it would be the new owner that lost out, I had no idea the finance company would let him off the mortgage if an outstanding charge was later found.

I was actually under the impression the finance company would expect full settlement over night if they lost security of the boat.

I dont know how many others had the same impression but all these misconceptions cant be helping boat sales.

Not a misconception sadly, you're absolutely right. In reality your finance company would expect you to settle the outstanding previous debt (the one to the prior owner). If you didn't then the first finance company would repossess the boat, sell it, give you whatever (if anything) was left and then you'd have to immediately settle your loan as your finance company would no longer have an asset to secure against.

Which might be tricky given that the fact you financed the boat probably meant you couldn't lay your hands on that much ready capital easily...

Still, fingers crossed eh?

 

[Observer]

The simple fact is, there's no safe or effective way of checking that any boat bought has no financial encumbrance, and there exists a very simple way of remedying that position with a simple change to the law.

What would that be, then?

 

[DAKA]

Can anyone see any loop holes in this approach ?

Find the boat of your dreams.
Ask to see full service history
Ask to see copy tittle documents
Use these documents to contact the owner
Advise the owner that you both are at risk if the Broker legs it with the cash or fails to protect your funds in a clients trust account
suggest he takes the boat out the brokers hands and allows your Solicitor to arrange the transaction.


Buyer benefits from a Solicitors Indemnity policy, if there is any outstanding debt the Solicitor is responsible.

Buyers deposit is safe in a solicitors clients account.

Seller benifits

From possible reduced brokers commission, perhaps 2-3% finders fee can be agreed ?
From a protected clients trust account and a compensation scheme.

It would be helpful if anyone selling a boat through a broker leaves a service history available and ensures their boat is advertised elsewhere on the web, boats and planes for example with a contact details, there will be buyers out there like me who will not hand money to a Yacht broker because we have already been bitten once.

Of course my preference would be to see a Regulated Industry where it is compulsory to register for all Yacht Brokers, a code of conduct with teeth and perhaps the ABYA could have a central clients account charging 1% toward a compensation scheme, once a fund is accumulated the 1% charge could drop to .1%

 

[ari]

Originally Posted by ari
The simple fact is, there's no safe or effective way of checking that any boat bought has no financial encumbrance, and there exists a very simple way of remedying that position with a simple change to the law.

What would that be, then?

Scroll up a couple of posts...!

 

[Observer]

Can anyone see any loop holes in this approach ?

<snip>

Buyer benefits from a Solicitors Indemnity policy, if there is any outstanding debt the Solicitor is responsible.

Several.

The solicitor will not be "responsible" if there is outstanding debt/security unless negligence on his part can be shown. Obviously he would be expected to discover a registered mortgage on a Part I registerd boat but you can do that for yourself easily enough. He will not be liable if there is an unregistered charge. However, if a boat is Part I registered and there is an unregistered charge, to what exetent is it enforceable against a good faith buyer anyway (I'm not sure of the answer and think there is no relevant authority).

If there is a title defect on an unregistered/SSR registered boat, again the solicitor will not be responsible unless he is negligent. The due diligence enquiries he may make (that the buyer will pay for) will be no different to those the buyer could take himself; quite possibly the buyer's own investigations will be more effective because he has knowledge that a non-specialist solicitor doesn't and is highly motivated.

Buyers deposit is safe in a solicitors clients account.

Agreed. More importantly, a solicitor will handle the completion transfers. However, it is likely that both buyers and sellers will have to appoint a solicitor. Would all be willing to accept that cost?

Of course my preference would be to see a Regulated Industry where it is compulsory to register for all Yacht Brokers, a code of conduct with teeth and perhaps the ABYA could have a central clients account charging 1% toward a compensation scheme, once a fund is accumulated the 1% charge could drop to .1%

The concept is appealing but almost certainly impractical. These are some questions/objections but there are numerous others.

1. I suspect there will be many buyers or sellers who would not want to pay additional 1% 'insurance premium' on a transaction which they can 'de-risk' satisfactorily for themselves.

2. What would happen to this pool of cash if it was not used. What would happen if claims exceeded reserves?

3. Is the pool of transactions large enough to build an adequate fund anyway? Do you have any idea of the number/value of transactions that may form the pool?

 

[ari]

Can anyone see any loop holes in this approach ?



Find the boat of your dreams.
Ask to see full service history
Ask to see copy tittle documents
Use these documents to contact the owner
Advise the owner that you both are at risk if the Broker legs it with the cash or fails to protect your funds in a clients trust account
suggest he takes the boat out the brokers hands and allows your Solicitor to arrange the transaction.


Buyer benefits from a Solicitors Indemnity policy, if there is any outstanding debt the Solicitor is responsible.

Buyers deposit is safe in a solicitors clients account.

Seller benifits

From possible reduced brokers commission, perhaps 2-3% finders fee can be agreed ?
From a protected clients trust account and a compensation scheme.

It would be helpful if anyone selling a boat through a broker leaves a service history available and ensures their boat is advertised elsewhere on the web, boats and planes for example with a contact details, there will be buyers out there like me who will not hand money to a Yacht broker because we have already been bitten once.

Of course my preference would be to see a Regulated Industry where it is compulsory to register for all Yacht Brokers, a code of conduct with teeth and perhaps the ABYA could have a central clients account charging 1% toward a compensation scheme, once a fund is accumulated the 1% charge could drop to .1%

Apart from all the ramifications of trying to weasel the broker out of the deal (who, lets not forget, will almost certainly have a signed contract from the seller) and the basic fact that the seller is paying the broker to handle the sale for him (which, after all, is what they do) so why should he want to pay the broker and then deal with the sale himself...

The big flaw there seems to be that you expect a solicitors indemnity insurance to cover you for any previous financial encumbrance that later come to light. Why should it? If the solicitor has applied due diligence and can demonstrate so, why will his insurance pay out? It won't.

You're back to exactly the same problem, the nub of the point, the question asked in the title of the thread. How can a buyer ensure that a boat is free from financial encumbrance?

He can't. A solicitor can't. A finance company can't. A broker can't.

So ultimately (the way marine law works, ie financial encumbrance "following" the boat, not the previous owner) the responsibility falls squarely on you, the buyer.

Yes, as has been pointed out by Tranona you have legal recourse against the seller who (if you've done it properly) will have sold you the boat with the contract showing it to be free from encumbrance. But as we all know full well, that's not worth a candle if the seller is a "man of straw", ie has no financial substance. Getting judgement is one thing, getting the funds back quite another.

It's a resolvable situation, but there seems to be no will to resolve it so every single boat buyer must take on the risk themselves.

And the vast vast majority will be fine.

So keep those fingers crossed...

 

[gjgm]

Have we concluded that for a UK boat, in the UK, you would be able to trace a mortgage?
Or have we concluded that you cant do that?
If yes, then we are concerned with some other finance where the loan is secured against the boat? Who offers such finance?

 

[Observer]

Scroll up a couple of posts...!

Do you mean?

I remember an article by a broker in MBM (Secret Salesman I think) who suggested there should be a central finance register that records not just the (easily changed) name but hull number, engine serial numbers, gearbox serial numbers etc. He reckoned it should be a fully cross reference-able list that finance companies have to register their interest against in order to have a lien, with all the serial numbers. That way any buyer would be able to perform the equivalent of an HPI check.

In other words the marine equivalent of HPI? (Actually HPI can be used to register interest in boats, although I have no idea how widely it's used for that purpose.)

That needs no change of law. The motor vehicle HPI operates on a commercial basis. Also, it is not mandatory for finance companies to register an interest or ownership, so a marine equivalent would not be guaranteed "safe and effective". I see HPI actually gives a guarantee (capped at £30,000) of correct information in relation to motor vehicles. In order to do that, I assume they are very confident that ALL UK finance houses register vehicles in which they have an interest. However, there is a pool of 7 million finance agreements so the costs of registration and of liability under the guarantee scheme are spread very thinly. What would be the size of the pool of marine finance agreements? Certainly not large enough for the register operator to underwrite loss to any meaningful extent.

Anyway, why would finance companies (who, IIRC, were instrumental in setting up HPI) have the need to set up a marine equivalent when Part I registration is already available and is used by them to register and protect their interests?