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

[ari]

You asked for an example, that's one example (even the article cites there are many more).

You asked for how "my" scheme would help. I've explained how it'd have helped.

The original question was "How do I confirm the boat I want to buy is free from financial encumbrance".

You, presumably, feel that the answer is: "You can't, but it'll probably be fine".

Well, that's one viewpoint.

The fact of the matter remains, when anyone buys a boat there is no reliable way of ensuring it is free from financial encumbrance for which you, as the new owner, will be liable.

I would suggest that is a bad thing.

Your mileage may vary.

 

[Observer]

ari,

I don't know where the information about the outcome of the Haddock case came from so I'll take it that liability was split three ways as you described. That rather suggests, does it not, that all three parties were judged (or agreed) to bear partial responsibility. We could guess that the buyer was at fault because he did not make adequate enquiries, the broker was at fault for breach of some obligation owed to the buyer and the finance company was at fault for failing to take steps available to it to register its interest. £61k in 1990 is the equivalent of £165k+ today (assuming 5% pa inflation), a large enough sum to justify the cost of Part I registration.

This single example from 20 years ago, even allowing for the reference to another half a dozen cases between £20,000 and £50,000, is simply not enough to justify the case for a new registration system, which would have to be backed by new law to mandate its use. I said earlier that I was 99.99% sure that the major finance houses now always require Part I registration if they take security (nobody has disputed this). If that had been the case in 1990, the previous owner of Haddock's boat may not have been able to complete a sale without settling the debt.

I can see the argument that a secured lender who does not avail himself of the mortgage registration facility in Part I should not be able to enforce his security against a subsequent good faith purchaser who shows he made the appropriate searches/enquiries. From what jfm said about "equitable relief", that may be the way a case would be decided anyway (if there was a case to be tested).

Your proposed solution of new law plus a new 'super' registration system is superficially appealing but it's totally unrealistic to imagine that some special case would be made for a narrow class of personal goods, particularly when (a) there is little evidence that a major problem exists; and (b) there is an existing, largely effective (albeit not perfect) way of securing the desired end.

 

[ari]

I'm repeating myself yet again here, but Part One is fundementally flawed (probably because it was never set up with loan security in mind, it was intended to legally divide ownership, hence the 64/64ths).

It is flawed for this purpose because it relies absolutely on the name on the back of the boat being correct and the owner irretrievably and openly marking the boat. In fact in the "olden days" the carving and marking notice was literally carved into the main bulkhead of the boat where it could easily be seen and could not be removed.

So your assertion that Haddocks purchase would have been safe had Part One registration been in use is simply not true. The seller of the boat clearly wished not to disclose the mortgage, so had the vessel been part one registered it would have been the work of a moment to change (or even just remove) the name and remove the C&N notice.

Part One is Not Good Enough.

So we're all buying and selling boats for often hundreds of thousands of pounds (well, you lot are, I'm not in that league, which is perhaps why I'm less able to cheerfully shrug off an undisclosed loan on a boat I've bought) on the wing and the prayer that the seller is honest.

And, at the risk of repeating myself yet again, a workable and much safer alternative is easily created.

But clearly it won't ever be and at least now I understand why. I guess it is because most boat owners are sufficiently wealthy that they're quite happy to take a chance.

 

[volvopaul]

Well done ari for taking the time to google just 1 case that looked like had a sensible outcome, its ashame the info wasnt there on the yachtbroker that clearly didnt do his homework for the thousands he must have taken in commission, personally he didnt do his job properly which is what this long thread roots back to, especially in dakas eyes TRUST!!.

In my eyes the finance houses do a lot before lending.

9 years ago I had the not so nice job of selling my late father princess 388, it was sold 2 years after his death to a friend of mine who had to raise 80k finance on it, sellling agreed price was 110k, I had clear title from the previous owner, we bought it privately, i had a broker do all the searches, the owner even showed me a photocopy of the cheque(and your going to laugh) to tarquin! he had had the boat for 5 years so anything would have shown up, the owner even proved where the funds came from.

Every piece of paper was there, vat invoice, original bill from marine secol etc, and all proper bills of sale regarding the 2 previous owners.

Where we came unstuck with the finance house was what we thought after 2 years of my father passing away should not have been a problem was,
His will, 32/64 in my mother name and the same in his, when his will went to probate and his will stated the usual, everything passed to my mother, the problem was that my mothers solicitor held the deeds, will etc and the building was burnt to the ground, so no will for the finance house to see and take record.

Hence the only way the boat could be sold with clear title, and they also wanted his death cert, was to go to probate again!!! so heres another spanner in the work.

All very upsetting for myself and family at the time, and yet as per this thread its seems its so easy to pull the wool elsewhere.

 

[gjgm]

But clearly it won't ever be and at least now I understand why. I guess it is because most boat owners are sufficiently wealthy that they're quite happy to take a chance.
*
Well that simply isnt the case. It isnt happening bcz the frequency of what you describe is so low that the costs in setting up and maintaining a register, and making it a legal requirement, far outweigh the overall benefit. If it was rife, I guess it would be set up.
Anyone buying a boat surely takes steps to reduce as many risks as he can, and if he feels uncomfortable, does not proceed.
What I do think is important is that folk are aware of the potential risks, and they probably are not. But in these days of media frenzy, many dont seem able to get the risks into perspective.
So, lets just say the incidence rate is once in 20 years. Personally, I think I ahve alot bigger risks in life than that.

 

[DAKA]

What I do think is important is that folk are aware of the potential risks, and they probably are not. But in these days of media frenzy, many dont seem able to get the risks into perspective.
So, lets just say the incidence rate is once in 20 years. Personally, I think I ahve alot bigger risks in life than that.

Wasn't the last recession about 20 years ago ?



Last quarter 35 000 went bust , 700 000 are currently in debt management , that sa lot worse than 20 years ago,
Best wait until the end of this little recession before we dismiss the risk as nil me thinks !

 

[jfm]

Ari
All points read and noted, and thanks, but

1. I haven't read the detial of Haddock but I expect the judge found Haddock was partly to blame, and his claim (which would have been in equity) shouldn't therefore be allowed to succeed in full. That's perfectly right. Anyone buying a £165k boat (in today's money, using Observer's calc) that is unregistered must be made to accept the fact that there is some risk of there being a mortagage and of the seller being a crook. Anyone buying from a member of the public must be made to accept the risk that they could be dealing with a crook. That's perfectly right. It's not everyone else's job to bail them out. Life isn't that easy.

2. In contrast, if the boat had been part 1 reg and the lender had failed to reg the mortgage, you can be pretty sure in general that Haddock's share of the loss would have been lower and the finance co's share higher. But it wasn't Part 1 reg, and Haddock knew that, and proceeded in knowledge of that. As I say he shouldn't be bailed out on his share of "blame" attributable to his taking that risk. Folks buying a 165k boat might be well advised only to buy buy part 1 reg boats, as many of use here would, and those who don't need to carry their own can

3. Now, if the crook problem were widespread it would be worthwhile spend a few million quid of taxpayer's money to sort it out, perhaps with a register. But the crooks problem is tiny, so this isn't justified

4. As for a super register that records say HIN, engine serial #, gearbox serial#, be careful. all those items can be changed for a few quid. Crooks are determined and they generally just get smarter to get around any hurdles put up in their way. For sure, putting serial numbers and HINs on the register is a very low hurdle for a crook out to make a few hundred grand. Serial number plates can be made up for nowt and rivetted on. Real serial numbers for the same engine series can be got from overseas boats that wont be on the super UK register. HIN numbers can be retrofitted into GRP in a couple of hours. So you could spend all that money on the super register, and people can still "re-identity" a registered boat, part 3 it, and sell it claiming there is no mortgage.

I've actually seen a new HIN put on a boat by the way - my own current boat. A Fairline moulder must have not put enough release agent on the HIN piece of the mould, and when the hull was lifted out of the mould the gelcoat stuck to the mould ripping that bit f gelcoat from the hull. So the hull had only half its correct HIN. It went to the Southampton boat show like that, before I bought it. Prior to delivery I asked them to put the HIN in correctly. So they cut out the little bit of busted gelcoat, made a new mould for the HIN, gobbed it all in, removed the tiny mould, polished it, and hey presto a retro-fitted HIN and you can't tell!

 

[Tranona]

Just a relatively minor point in this wide ranging debate. I have already raised my concern about buying (particularly high value) boats direct from a private individual - as Pete seems to prefer.

If one buys through a broker, he will have PI insurance. If he has been responsible for the failure through negligence then the claim could be met by his insurance. I don't know, but it may be that PI also covers against him doing a runner with clients money (as Mike seems to think they do). I don't know the cover for a broker - my PI does not cover such things because I don't handle money, only provide professional services.

 

[jfm]

Just a relatively minor point in this wide ranging debate. I have already raised my concern about buying (particularly high value) boats direct from a private individual - as Pete seems to prefer.

If one buys through a broker, he will have PI insurance. If he has been responsible for the failure through negligence then the claim could be met by his insurance. I don't know, but it may be that PI also covers against him doing a runner with clients money (as Mike seems to think they do). I don't know the cover for a broker - my PI does not cover such things because I don't handle money, only provide professional services.

All agreed, though there would first need to be a duty of care owed contractually by broker to buyer, or a valid claim by buyer against the broker in tort, and a well-run brokerage might well organise its affairs to make sure neither of those things happen. I think I would, if I were a broker. Certainly there is no written contract under which broker undertakes duties to buyer. I don't know, never having bought a boat thru a broker, so I'm guessing a bit, but my point is that it is dangerous for buyers to assume that brokers are on the hook to buyers, in general.

 

[DAKA]

A week ago I would have certainly argued it was safer to buy privately, however I would be silly not to take any notice of the vast knowledge that has been shared with us on this thread.

I would without doubt still 'interrogate' the previous owner, there is just so much essential information available which the broker couldn't answer, some information may need to be added to the sale agreement.

I wouldn't expect the PI insurance to pay if the Broker legs it with your cash, there may be some help if the Broker negligently fails to protect your cash in a clients account and the administrators use it.

In all honesty this thread has not encouraged me to change my boat, while I have a boat that does all I want it to, I really don't see the sense in risking my capital that has taken me a life time of hard work to accumulate , no matter how small the risk is , I can avoid it so I will ( I may feel differently as summer approaches and I reserve the right to change my mind).

 

[Tranona]

All agreed, though there would first need to be a duty of care owed contractually by broker to buyer, or a valid claim by buyer against the broker in tort, and a well-run brokerage might well organise its affairs to make sure neither of those things happen. I think I would, if I were a broker. Certainly there is no written contract under which broker undertakes duties to buyer. I don't know, never having bought a boat thru a broker, so I'm guessing a bit, but my point is that it is dangerous for buyers to assume that brokers are on the hook to buyers, in general.

You probably haven't read all of the posts, but a major part of the thread was concern that the broker would empty the client account which would (or could) contain at any one time a mixture of deposits made by buyers and final settlements paid by buyers but not yet forwarded to sellers.

Nobody has yet come up with an example of this actually happening, nor therefore any clear view about how the issue was resolved - or not! The view seems to be that you pursue the broker personally, so that begs the question of whether PI would cover the risk.

 

[jfm]

You probably haven't read all of the posts, but a major part of the thread was concern that the broker would empty the client account which would (or could) contain at any one time a mixture of deposits made by buyers and final settlements paid by buyers but not yet forwarded to sellers.

Nobody has yet come up with an example of this actually happening, nor therefore any clear view about how the issue was resolved - or not! The view seems to be that you pursue the broker personally, so that begs the question of whether PI would cover the risk.

No, I was clearly only referring to risks for buyer in that post. As a buyer you would (if you had any sense) make sure that the purchase price was paid to broker as agent of seller, on completion day, on which day you also take possession of the boat and its papers. The earlier deposit might have been paid to broker as stakeholder, but on the final payment you must make sure the final payment is to broker as agent, and that you release your claim on the deposit money so that also becomes held by broker as agent. Then you dont need to worry about the broker running off with the cash. The seller might worry about that, but that's a separate point from the point I was making

Ideally you could cut out the broker altogether for the final payment. Steps should be: (a) seller lodges boat's papers and keys into escrow with broker on terms that the escrow ends when money lands in sellers account; (b) buyer wires money; (c) money lands; (d) broker hands over papers and boat keys to the buyer

 

[Tranona]

Thanks for that - what I expected. However, would I be right in saying that if the broker did empty the client account, some of the funds would belong to buyers (deposits) and some to sellers (final payments not yet passed on) and that both could pursue the broker and/or insurer if covered by PI insurance.

It seems to me that the seller has an easier job ensuring that he gets his money in exchange for the title documents, whereas the buyer has his deposit at risk for a longer period of time - between making the offer and making the final payment.

 

[Observer]

Just a relatively minor point in this wide ranging debate. I have already raised my concern about buying (particularly high value) boats direct from a private individual - as Pete seems to prefer.

If one buys through a broker, he will have PI insurance. If he has been responsible for the failure through negligence then the claim could be met by his insurance. I don't know, but it may be that PI also covers against him doing a runner with clients money (as Mike seems to think they do). I don't know the cover for a broker - my PI does not cover such things because I don't handle money, only provide professional services.

A broker's PI insurance is there to protect him (not third parties) from loss as a result of a claim by a third party against the broker on the grounds of the broker's professional negligence. It cannot and will not protect him from his own dishonesty (otherwise a criminally minded broker would be held harmless against himself, which is obviously a nonsense). A large brokerage firm/company may have insurance against theft/embezzlement by employees, but that's not the same thing. Also, there is (absent special provision) no contractual nexus between an insurer and third party so an injured TP cannot claim against the insurer in any event.

 

[Tranona]

Thanks, guess that puts that issue to bed!

 

[Observer]

Thanks for that - what I expected. However, would I be right in saying that if the broker did empty the client account, some of the funds would belong to buyers (deposits) and some to sellers (final payments not yet passed on) and that both could pursue the broker and/or insurer if covered by PI insurance.

It seems to me that the seller has an easier job ensuring that he gets his money in exchange for the title documents, whereas the buyer has his deposit at risk for a longer period of time - between making the offer and making the final payment.

See my respons above wrt your first paragraph. On the second, yes agreed. Buyer is at risk for a longer period. However, if unwilling to trust broker's good faith management of client account, there are alternatives - for example open a special joint account in names of buyer and seller with two signatures required. Not perfect, and I know opening bank accounts can be painful with all the KYC gubbins, but it is an alternative.

 

[jfm]

would I be right in saying that if the broker did empty the client account, some of the funds would belong to buyers (deposits) and some to sellers (final payments not yet passed on) and that both could pursue the broker and/or insurer if covered by PI insurance

Yup, for some of the time the deposit money is held on trust for the buyer, for some of it the seller, and for some of it for either of them depending on the survey outcome. Each case depends on its contract. Normally, buyer signs a purchase agreement and pays the deposit. This contract is the usual "subject to survey". If the broker empties the account the same day as the deposit was paid in, then the buyer would typically be able to go thru with the survey and provided he accepted the boat's condition, pay the balance to seller and he'd get the boat. With help from courts if necessary. In that case it would be seller who suffers from the broker's crime. But if buyer rejects the boat on survey, he would become determined as the beneficiary of the deposit trust and so he would be the victim of the crime. In each case it depends on the contract.

As for pursuing insurers, very unlikely as Observer said. Insurance policy held by a broker will cover honest negligence in the course of his business, not 3rd party losses flowing from the insured's deliberate crimes, and the insurance company wont be pursuable by buyer due to lack of contractual nexus

 

[Tranona]

Thanks, Observer and JFM for clarifying.

Perhaps you could convey your views to Deleted User who still seems to see rogues and huge risks of dealing through brokers!

Think this thread has probably run its course, but no doubt the subject(s) will come up again in a few months time.

Still, one learns a little bit every time (or at least I do)

 

[Deleted User YDKXO]

Thanks, Observer and JFM for clarifying.

Perhaps you could convey your views to Deleted User who still seems to see rogues and huge risks of dealing through brokers!

Think this thread has probably run its course, but no doubt the subject(s) will come up again in a few months time.

Still, one learns a little bit every time (or at least I do)

I'd left this thread but I can't resist responding to this. No disrespect to jfm intended but by his own admission he has never bought or sold a used boat through a broker and, therefore, has never been in a position such as I have been, waiting weeks for a broker to pay me out as a seller and lying awake at night worrying whether that broker is going to pay me out before he goes bust. He has basically expanded on what I said ages ago in this thread. The broker is the agent of the seller and any monies given to the broker by the buyer in the form of a deposit or indeed the balance are legally as if the buyer had given those monies to the seller directly so title passes irrespective of whether the broker or the seller recieves the total purchase price agreed or a combination of both. That is fundamentally what jfm said in his last post and what I knew already before this thread started.
For all these fine words from my learned friends, the fact remains that there are risks in this process which many buyers and sellers do not appreciate and the only remedy that you seem to have come up with is going to law to sue somebody who is unlikely to have any assets to seize. The talk about PI insurance was always a red herring because no PI policy is going to cover fraudulent activity by the broker or losses of creditors due to the broker's co going bust.
I must admit that I am somewhat surprised that there is not more of a concensus on this issue and I hope that those who have expressed a view that they see little or no risk in the boat buying process do not have cause to regret their words in the future

 

[jfm]

No disrespect to jfm intended but by his own admission he has never bought or sold a used boat through a broker and, therefore, has never been in a position such as I have been, waiting weeks for a broker to pay me out as a seller and lying awake at night worrying whether that broker is going to pay me out before he goes bust.

Hang on. I said I hadn't BOUGHT a boat thru a broker. I have sold one, the last Sq58. In that case I didn't do as you say. I had the deposit (20k, which happened to be the broker's fee) given to broker as stakeholder. No worries there, I'm happy to gamble 20k to get a deal done. (Gamble is a strong word -and he was an excellent broker, utterly trustworthy imho, I would happily deal with him again). But I had the balance of the price (half a bar) wired directly from buyer's account to my account. It didn't go thru the broker. Out of respect to the buyer's concerns, prior to the payment I lodged with the broker as escrow agent all the ship's papers, the signed BoS and the boat's keys, and I wrote a letter saying that on the money landing in my account in cleared funs the escrow came to an end and the escrowed property (being the papers and the keys, not the boat) was to be released to buyer, and the buyer then could take possession of the boat as he saw fit, which of course he (sensibly) did straight away. All QED and i think Observer would approve

The broker is the agent of the seller and any monies given to the broker by the buyer in the form of a deposit or indeed the balance are legally as if the buyer had given those monies to the seller directly so title passes irrespective of whether the broker or the seller recieves the total purchase price agreed or a combination of both. That is fundamentally what jfm said in his last post and what I knew already before this thread started.

Yes all correct, up to the word "so". Please dont confuse title passing with payment of money. They're different things and the former doesn't happen automatically as a result of the latter. I think my escrow arrangement works better

the fact remains that there are risks in this process which many buyers and sellers do not appreciate and the only remedy that you seem to have come up with is going to law to sue somebody who is unlikely to have any assets to seize.

Fully agreed that suing someone is unlikely to be a good solution. Much better to make the transaction more fail safe to begin with. I have never bought thru a broker but the transaction I describe above seems uber low risk for buyer as well as seller. The buyer meets me in the morning at broker office. He sees the keys and the ships papers physically handed to broker in the morning, and a signed BoS to him, and the escrow letter. He sees the boat in the marina. He tells his bank to TT the money to me. We have a coffee. He comes on the boat and I show him how to do a few things on it. About 2pm the bank confirms to me the money has landed. I tell him the boat is his and leave him. He gets the keys and papers from the broker. What's not to like about that from a buyer or seller persepective?