How do you know if a boat has outstanding finance ?

[ari]

The EN house analogy doesn’t work so well owing to the virtual certainty that the legal title will be as it appears on a central registry and so, if no charge is registered and money paid to the registered owner, title will pass to the buyer with any claim as to entitlement to the money being overreached so as to become an issue between the seller and the person claiming the benefit of an unregistered loan.

This body of EN law has built up as both cause and effect of the desire to use houses as a reliable security.

Exactly. The same with a car to a greater extent, there is a tried and tested method of checking for outstanding finance to avoid being left bereft. Might not be absolutely bulletproof, but it's obviously pretty workable.

I think expensive watches and other trinkets are a poor analogy too. If you spend £10,000 on a Rolex, chances are it's a spendable, losable amount. If it turned out to be hooky, well that would be very annoying but unlikely to be life changing for someone happy to splash out £10K on something when he could have chosen to buy something else that does exactly the same job equally well for £100.

I appreciate the same might be true of boats for a fortunate few, but for many of us it is a life changing life savings amount of money that we then protect by insuring and maintaining carefully in the reasonable expectation that at some stage we'll get most of it back on resale (or, worst case, total loss).

I wonder how many people are actually aware of the risk, and how many part with six figures through a broker just assuming that it must be safe because surely it can't just be down to crossing your fingers and hoping? (Spoiler alert - yes it can!)

 

[benjenbav]

Exactly. The same with a car to a greater extent, there is a tried and tested method of checking for outstanding finance to avoid being left bereft. Might not be absolutely bulletproof, but it's obviously pretty workable.

I think expensive watches and other trinkets are a poor analogy too. If you spend £10,000 on a Rolex, chances are it's a spendable, losable amount. If it turned out to be hooky, well that would be very annoying but unlikely to be life changing for someone happy to splash out £10K on something when he could have chosen to buy something else that does exactly the same job equally well for £100.

I appreciate the same might be true of boats for a fortunate few, but for many of us it is a life changing life savings amount of money that we then protect by insuring and maintaining carefully in the reasonable expectation that at some stage we'll get most of it back on resale (or, worst case, total loss).

I wonder how many people are actually aware of the risk, and how many part with six figures through a broker just assuming that it must be safe because surely it can't just be down to crossing your fingers and hoping? (Spoiler alert - yes it can!)

A friend was once offered a terracotta warrior. It was almost certainly not a fake. There was no way of doing due diligence, but he felt it unlikely that the purported seller had good title and that it was a racing certainty that bad things would happen if he chose not to walk, even run, away... :encouragement:

 

[ari]

I am guessing there is a lower price limit and age limit at which lenders will provide a loan secured on a boat ?
Is, say, a 10 year old boat for £100k unlikely to have outstanding finance
While a 5 year old boat for £200k may well be financed
Does that sound about right?
If so perhaps buying an older boat is the safer strategy.

Nope, afraid not. My last boat was 10 years old, under £100K and had a loan from one of the usual marine finance houses against it (which the broker cleared and I got confirmation of).

Bear in mind that these finance companies were offering 15 year marine mortgages at one point (maybe they still are, anyone know?). So someone could have owned a boat for 10 years and still owe about half what he borrowed (the principle gets paid off faster toward the end of the loan as the proportion of monthly payment that is interest rather than capital repayment reduces in line with the amount outstanding).

It's also far from unheard of for boats to be worth less than the amount owed (especially new boats early into the agreement). If circumstances have changed and the owner simply doesn't have the cash to make good the shortfall upon sale then he can't sell it and clear the loan. And if he doesn't have the cash to continue running the boat and paying the finance then he can't keep it either. Must be very tempting to deny the loan and think 'I'll just keep up the payments, no harm done' (and there isn't, as long as he does!)

 

[Piers]

When I was looking to see if there was an outstanding debt on a boat we once bought, I checked around the engineering firms in the marina to see if there was history of poor payment, but I always remember someone telling me, 'You only know if there's an outstanding debt when the bailiff comes knocking on your door!'

 

[jrudge]

Nope, afraid not. My last boat was 10 years old, under £100K and had a loan from one of the usual marine finance houses against it (which the broker cleared and I got confirmation of).

Bear in mind that these finance companies were offering 15 year marine mortgages at one point (maybe they still are, anyone know?). So someone could have owned a boat for 10 years and still owe about half what he borrowed (the principle gets paid off faster toward the end of the loan as the proportion of monthly payment that is interest rather than capital repayment reduces in line with the amount outstanding).

It's also far from unheard of for boats to be worth less than the amount owed (especially new boats early into the agreement). If circumstances have changed and the owner simply doesn't have the cash to make good the shortfall upon sale then he can't sell it and clear the loan. And if he doesn't have the cash to continue running the boat and paying the finance then he can't keep it either. Must be very tempting to deny the loan and think 'I'll just keep up the payments, no harm done' (and there isn't, as long as he does!)

The formula for future value to try to make sure the deal was not under water was the vat year 1 (20%) and 10% of its value thereafter.

I did run it a while ago on my boat and I can’t remember the result. It was only a rule of thumb to try and help keep the numbers positive in case the punter did not pay ( which was rare to be fair - most losses were stock financing)

 

[jfm]

Mmm...
I'm missing the reason why you are now drifting towards a debate about which governing law is favored for the most speculative transactions known to mankind, which btw are arguably among the culprits behind the worst world crisis in living memory - and I wouldn't be surprised if that would still be true for the next. Rest assured that I'm not envious of EN law leadership in this respect - not one bit.

I am not drifting towards debate. You made negative remark about UK legal system in last sentence of #6; I said the RoW disagrees because UK legal system is by far the one borrowers and lenders choose where there is choice. That's all.

Otoh, I can't help thinking that if there's a moral of the whole story is that it's legally safer to buy an IT flagged boat AND neither move her outside IT waters nor change her registration, if you see what I mean...

Yep, if you're happy to keep her in Italy and if you're happy that IT law doesn't also interfere with the freedom of private citizens to contract as they wish in some other respect that disadvantages you.

As an aside (bearing in mind that as I already said I'm more intrigued by the strictly legal aspects, as opposed to "ethical" ones, which are somewhat subjective), based on this very thread it's crystal clear that what is being debated is indeed a common concern among Brit boaters - something totally unheard of, down here. So much for a "rock solid fair" legal system, methink…

I totally see your point, but there is a bigger philosophical point here. The Uk legal system allows parties freedom to contract virtually as they wish, whereas IT system works on a system of "the state knows better" and interferes with private law transactions more. In this case IT law says "I don't care that borrower and lender have agreed that the boat is pledged to cover the debt. The pledge will not be respected unless the following steps are taken. Because we care that some other guy's (a future buyer of the boat) bottom is fully wiped". That's fine - you can choose your own poison. But this IT poison, at a macroeconomic level, creates economic friction and very few other developed countries have chosen to make the same law. Private law in UK (and New York, and derivatives like Hong Kong) has philosophically chosen a different poison (=make your own handcart then go where it takes you; the state aint wiping your bottom) and fwiw the world's international transactors (Italians included) choose these laws wherever they can.

 

[MapisM]

I am not drifting...

LOL, are you not? Reading the rest of your post, either I'm misunderstanding it completely, or you couldn't resist drifting regardless!

No matter, anyway.
I decided to work and live where I used to work and I'm still living for reasons that have bugger all to see with law or business (let alone fiscal optimization), even if I did have opportunities elsewhere which were attractive in these respects.
Life's too short to allow these considerations to weasel their way in our most crucial choices, imho. :encouragement:

 

[hullabaloo]

I appreciate the same might be true of boats for a fortunate few, but for many of us it is a life changing life savings amount of money that we then protect by insuring and maintaining carefully in the reasonable expectation that at some stage we'll get most of it back on resale (or, worst case, total loss).

I wonder how many people are actually aware of the risk, and how many part with six figures through a broker just assuming that it must be safe because surely it can't just be down to crossing your fingers and hoping? (Spoiler alert - yes it can!)

YES,
Thats the point and the question was about;
"can you protect yourself when spending 200 grand on a boat in the UK ?", (not alot to some, but it is to me).
Solicitor ?
Finance it ?
Pray ?
suggestions ?



Sorry Mr jfm, i can see you have the bit between your teeth. i could try the question on a new post whilst you put everyone straight here . :highly_amused: :encouragement:

 

[jfm]

Yup you did ask for advice so fwiw these are my thoughts on that question (in UK). To be clear: there is no 100% certain method to be sure when buying in a private sale that there is no lender hidden from you who has a claim on the boat for a debt that the seller has lied about. Brokers/solicitors/prayers cannot give such a guarantee.

1. Consider buying new - it takes much of the problem away, depending on the details.
2. Do the basic diligence on the boat: is it part 1 with a debt registered on it?
3. Is it SSR, and if so has it changed its name even slightly (verified from marina bills, engine service history, whatever)
4. Is there a boat on part 1 with same name as the boat now carries or that the service bills indicate? If yes get a transcript. Mars database is useful here.
5. Get to see originals of boat papers before exchanging contracts. You can't retain them of course but you can see them. This gives early warning of "logbook loans" scenarios. Then make delivery of them in original to the broker (as stakeholder) on completion a precise contractual term (prior to wiring the money) with the deliverable papers attached to the contract in photocopy. Do not simply have a contractual clause saying that on completion of the deal the seller will hand over a list of papers (though do, if you're smart on legalese and want to create some leverage on completion in relation to documents that are unlikely to be delivered, but that's the "advanced" module of this post).
6. Make sure the contract provides that broker holds deposit money and completion deliverables as stakeholder not agent of seller.
6a Be present on the boat immediately before completion and make sure it is not in the possession of someone else unless they confirm directly to you that they have no actual or potential lien.
7. Make sure that seller represents in the purchase contract that boat is debt free. This is important because if seller is lying, that is a fraudulent misrepresentation which means you can rescind the contract if you want, not just sue for damages. It also turns bad seller's actions into a crime. DO NOT EVER rely only on the "debt free" status of the boat as printed on the standard MCA bill of sale: that is seriously defective legally because it is a representation given AFTER you entered into the contract. You want the misrepresentation, if there is one, to be in the actual contract. (The bill of sale isn't a contract).
8. Next, pause to remember that if the boat has debt on it what you want from seller is money. So turn your diligence attention onto seller not boat.
9. Who is seller? Googlable? LinkedIn? Can you see some history? Does house show up on land registry as mortgaged? Is the house big/valuable? Financials of the company seller owns? Etc. Basically, is seller reasonably secure financially, personally. And firmly established in your country (kids at school, house, business, whatever) which imho is more important than location of boat. All doable online
10. Is seller in a world where he/she couldn't tolerate a criminal conviction? Aged 40s, earning decent money in financial services for example (where a conviction destroys career). In other words, does seller look like he/she has disincentive to lie about debt on boat?
11. Has boat been on sale for a while? So isn't a sale to pay off an urgent pressing debt. Or is it a bargain and only listed for sale last week with seller hurrying for completion?
12. You could ask seller to give you a bank ref. Plenty of banks will do this (in the form of "Mr X has been a customer for xxx years and in our dealings with him he has paid all amounts due to us. This letter is given without liability on the writer or the Bank". You could even ask seller to take out iPhone and show you instantaneous bank balance on an account of his/her choosing. A strong figure indicates absence of a pressing debt situation.

Al the above are indicators not provers but if you get the right answer on 75% of them and the wrong answer on none of them you're in good shape. Follow your gut a bit. All imho.

This is all off the cuff. Can probably think of some more and some refinements. BJB is good on this stuff and he might chip in.

 

[ph321]

This is quite interesting and I'm surprised there isn't a more organised register of interests available. In Australia we have the PPSR (Personal Properties Security Register) which allows you to search using the HIN & Engine Numbers. It's quite specific that "if you complete a search and the search confirms that there are no outstanding debt or finance and you completed your search the day before or the day of the purchase you will take the watercraft free of encumbrance.". The same applies to motor vehicles.

The idea that you could spend a significant amount of money on something like a boat or car with no real way of guaranteeing no third party has an interest is scary.

Paul

 

[jfm]

This is quite interesting and I'm surprised there isn't a more organised register of interests available. In Australia we have the PPSR (Personal Properties Security Register) which allows you to search using the HIN & Engine Numbers. It's quite specific that "if you complete a search and the search confirms that there are no outstanding debt or finance and you completed your search the day before or the day of the purchase you will take the watercraft free of encumbrance.". The same applies to motor vehicles.

The idea that you could spend a significant amount of money on something like a boat or car with no real way of guaranteeing no third party has an interest is scary.

Paul

But please be careful in assuming that the state has totally solved the problem. If the seller has cheated on the HIN and engine numbers you are not covered. And if the claim against you comes from someone who can enforce their claim in a country other than Australia that adds a new factor too. I'm not saying PPSR doesn't mostly does what it claims and I don't want to be a scaremongerer, but on super high value items, maybe being transferred between HNW people who own assets outside of Oz, it might be useful keeping in mind some wider scenarios.

And of course the benefit of PPSR comes at a cost; there are no free lunches

 

[ph321]

But please be careful in assuming that the state has totally solved the problem. If the seller has cheated on the HIN and engine numbers you are not covered. And if the claim against you comes from someone who can enforce their claim in a country other than Australia that adds a new factor too. I'm not saying PPSR doesn't mostly does what it claims and I don't want to be a scaremongerer, but on super high value items, maybe being transferred between HNW people who own assets outside of Oz, it might be useful keeping in mind some wider scenarios.

And of course the benefit of PPSR comes at a cost; there are no free lunches

I think the HIN / Engine Numbers bit is covered as long as you or your surveyor double check them. "Buyers can acquire serial-numbered personal property free of security interests if they search the PPS Register and do not find any security interest registered against that property. The search must be done immediately before the transaction, or up to the previous day if the property is a motor vehicle. This means that buyers are not responsible for faulty serial number registrations."

I can't find much with a quick Google around potential claims from outside Australia so I assume there is still some risk there. Although an international claim may be hard to enforce for a boat that lives in Australia? Either way, for the majority of transactions where an Australian registered boat is bought off an Australian citizen, the service does offer peace of mind.

 

[hullabaloo]

Yup you did ask for advice so fwiw these are my thoughts on that question (in UK).

This is all off the cuff. Can probably think of some more and some refinements. BJB is good on this stuff and he might chip in.

wow, off the cuff !
i don't think you have left anything for bjb to chip in about.
thank you, we like your imput. :friendly_wink:

 

[ari]

This is quite interesting and I'm surprised there isn't a more organised register of interests available. In Australia we have the PPSR (Personal Properties Security Register) which allows you to search using the HIN & Engine Numbers. It's quite specific that "if you complete a search and the search confirms that there are no outstanding debt or finance and you completed your search the day before or the day of the purchase you will take the watercraft free of encumbrance.". The same applies to motor vehicles.

That is the obvious thing to have. If there were a central finance register that included HIN numbers and engine/gearbox numbers, and finance companies (or anyone else with a financial interest) were told 'you can only pursue outstanding finance on the boat if you'd registered it on the central finance register', it would give a huge amount of currently missing piece of mind.

Maybe not bulletproof, but you'd need to be a pretty serious and skilled fraudster to convincingly change all those serial numbers in such a way that it wasn't detectable to a surveyor they'd been tampered with.

What it would remove is the casual It'd be ever so helpful to keep that loan on the boat going for a bit of breathing space, I'll just tell them it's not registered and has no finance and pay it off in six months instead temptation.

The idea that you could spend a significant amount of money on something like a boat or car with no real way of guaranteeing no third party has an interest is scary.

Paul

It sure is!

 

[MapisM]

If there were a central finance register that included HIN numbers and engine/gearbox numbers, and finance companies (or anyone else with a financial interest) were told 'you can only pursue outstanding finance on the boat if you'd registered it on the central finance register', it would give a huge amount of currently missing piece of mind.

Interestingly, we are going round in circles a bit, on this matter. In your boots, I wouldn't insist though, because what you are suggesting is very similar to the system which has been in place in IT for longer than I can remember.
Which is per se a good enough reason for not adopting anything similar, 'innit?

 

[jfm]

What follows is guesswork but maybe broadly in the right ball park.

To set up this register just for boats in UK would (at a guess and anyone chip in with better info) cost £10m in year 1 (software, set up, search for employees, office fit out, the process of passing law fairly ie consultation, etc) and then say £3m pa (salaries, office rent, software/database management). Lets' amortise the £10m set up cost over 10 years so £4m per year.

This quick google https://www.statista.com/statistics/530382/boat-ownership-numbers-united-kingdom-uk/ says there are c.200,000 motorboats/powerboats/yachts in UK but obviously that includes sub £10k stuff so I estimate 50,000 high value boats where finance duping is enough to hurt people. Then let's say 20% are sold used per year - average 5 year hold. That's 10,000 transactions pa. So the cost of the register service is £400 per transaction if every transaction uses it, or £800 if 50% use it.

Not an huge amount to be fair, but not trivial. Are people prepared to pay that? And if £800 is too much on a £25k boat so the price of the service becomes a % of the boat purchase price instead of a flat fee, are people buying a £150k motorboat prepared to pay say £3,000 for the service?

My numbers may be very rough and happy to be shot down! The Aus PPSR fees are lower than my numbers above but it covers a MUCH greater number of assets than just boats so there is a massive economy of scale

 

[ph321]

What follows is guesswork but maybe broadly in the right ball park.

To set up this register just for boats in UK would (at a guess and anyone chip in with better info) cost £10m in year 1 (software, set up, search for employees, office fit out, the process of passing law fairly ie consultation, etc) and then say £3m pa (salaries, office rent, software/database management). Lets' amortise the £10m set up cost over 10 years so £4m per year.

This quick google https://www.statista.com/statistics/530382/boat-ownership-numbers-united-kingdom-uk/ says there are c.200,000 motorboats/powerboats/yachts in UK but obviously that includes sub £10k stuff so I estimate 50,000 high value boats where finance duping is enough to hurt people. Then let's say 20% are sold used per year - average 5 year hold. That's 10,000 transactions pa. So the cost of the register service is £400 per transaction if every transaction uses it, or £800 if 50% use it.

Not an huge amount to be fair, but not trivial. Are people prepared to pay that? And if £800 is too much on a £25k boat so the price of the service becomes a % of the boat purchase price instead of a flat fee, are people buying a £150k motorboat prepared to pay say £3,000 for the service?

My numbers may be very rough and happy to be shot down! The Aus PPSR fees are lower than my numbers above but it covers a MUCH greater number of assets than just boats so there is a massive economy of scale

I agree it's unlikely to be too popular at those prices. Aus PPSR covers its operating costs of about $40m pa (£22m) with searches for $2 (£1.10) and fees to register an interest ranging from $6-115 (£3.30 - £63.00). Interests can be registered against virtually anything from motor vehicles to intellectual property.

 

[Portofino]

Wasn’t the Italian boat reg formed for another reason along the lines of “ state control “

Like this —— https://m.youtube.com/watch?v=1w-xNgBOYH8

Additional so the state could levy a tax on Mr X ( owner ) as and when ? Bit like the U.K. DVLA and road fund licence / car tax .State knows where you live or at least the “registered keeper “

Each State uses the database as they wish adding modding it as successive Govs come and go .
Like say CO 2 with DVLA example .


Just happens to be convenient and possible for prospective lenders Mr Y to register a debt if he chooses on the IT reg .

For Mr Z the buyer of an Italian reg boat as long as he understands the rules of engagement ( free of chase- able loans in IT law , the VAT status as well ) of the reg it’s as good as you can get in Europe ,the “blue book “

The reason why the state allows Mr Z access is to collect his fee to re reg or if an exporter like me theres also a dereg fee .
State generates fees / taxes at every reg change .Also the state needs an up to date accurate target list , like in the vid ^^^ so they kick the right door down .

Presumably state gets first place in the line of creditors over Mr Y the lender ?

Interestingly does the Australian tax man have access to this PPSR ? And crucially does the Aus Gov use any info on it to levy taxes ? Don,t know ?

It works on many levels in Italy there blue book , not least as said by MapishM that a loan like Hp or what ever , NOT entered on the blue book isn’t enforcable through the IT legal system.So Mr Z is pretty safe ,as safe as you can get .
So the reg system in this case protects Mr Z ( buyer ) in IT law .

Back to the U.K.
Would you want folks , business customers, neighbors,, work colleagues etc using FOI ,and potentially HMRC sniffing around ? Remember the Cardiff version is voluntary and there’s zero fiscal info ——- at the moment but if a compulsory boat reg system came into force especially to protect the Mr Z , there would have to be the amount paid recorded etc as well as the loans .

For those that don,t know the IT versions of detail is pretty exhaustive, price paid , your address etc as well as horse power , engine no ,s HIN , and dims etc .

A naughty Gov could use any of that info to raise a tax .It would have to merge Cardiff ( state control) into compulsory reg - let’s hope Corbyn ,s lot aren’t reading this

In IT some put a relative like sister or what ever to hide true ownership .But if you do that you defect any downside on to her if there is any for her ? Simultaneously sheiding the “ state “ or anybody else from the fiscal amounts YOU have involved.
In 2011 Guardia Finanza raided a marina in IT out of 900 boats on the IT reg 1/3 rd of the owners ( relatives ? ) had declared income of less than €6000 pa .

Sure any enforable loan is on the boat AND noted in the blue book that’s the point .
Conclusion buy used boats in Italy .

Leave the UK as is — voluntary reg and zero fiscal info and continue to use the list of advice given by JFM ^^^^ .

 

[petem]

JFM, surely the most accurate searches of the P1 are against the HIN as that will have been verified by the Surveyor when completing the Tonnage Survey (that is sent directly from Surveyor to MCA)? One hopes that the MCA are competent enough to check for duplicate Part 1's for the same HIN. Just searching for similar names sounds too flaky. A

FWIW as you may know my boat is formally Andiamo F but the marina and servicing guys all know it as Andiamo.

Alternatively, could the Part 1 registry be checked for ANY registrations that the owner has?

On a related note, applying for a Part 1 on a boat that one doesn't own would be rather easy. All you'd have to do is forge a single BoS and give the surveyor access to the boat (easy to do if you have access for cleaning or work in marina office). Having your own Part 1 would prevent this fraud. Tin hat territory I know but a weakness in the system my it

 

[ari]

JFM, surely the most accurate searches of the P1 are against the HIN as that will have been verified by the Surveyor when completing the Tonnage Survey (that is sent directly from Surveyor to MCA)? One hopes that the MCA are competent enough to check for duplicate Part 1's for the same HIN. Just searching for similar names sounds too flaky. A

FWIW as you may know my boat is formally Andiamo F but the marina and servicing guys all know it as Andiamo.

Alternatively, could the Part 1 registry be checked for ANY registrations that the owner has?

On a related note, applying for a Part 1 on a boat that one doesn't own would be rather easy. All you'd have to do is forge a single BoS and give the surveyor access to the boat (easy to do if you have access for cleaning or work in marina office). Having your own Part 1 would prevent this fraud. Tin hat territory I know but a weakness in the system my it

Part 1 doesn't include the HIN so there is no way of searching P1 for that. It only records the name and Official Number (which should be permanently affixed to the boat but there is no mechanism for ensuring it is and many people simply don't bother. Not because they're intending to do anything dodgy, just because they don't bother). How hard is it to change a boat name?

As to how easy it is to fraudulently register a boat on P1, absolutely correct! They used to demand every Bill of Sale right back to and including the Builder Certificate. Now they just require 'five years proof of title'. So that's a downloaded MCA Bill of Sale filled in, signed and dated 5 years and 1 day ago and access to the boat for the surveyor.

As I said earlier, Part One was set up many many years ago when the marine world was a very different place.