How do you know you are not going toget stiched up

[cliffdale]

So time has come to start making offers. Ive just heard that someone lost a boat to a company going into liquidation.

How do you know if the boat has a loan secured on it?

If its a private sale, is there someone who will deal with the transaction so I dont get stitched up?

Is it safer to deal through a broker.

What is the best way to protect the deal.

All suggestions welcome.

A worrying time and it would be my luck to lose everything.

Cliff

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[AuntyRinum]

<How do you know if the boat has a loan secured on it?>

The only way to be sure of that is to buy a British registered vessel. Any mortgages on it will be logged on the register in exactly the same way that the Land Registry keeps a record of mortgages on properties.


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[Birdseye]

We've had this question before and I think that I remember that the absence of a record on the part 1 does not necessarily mean that there is no loan secured on the boat.

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[DavidJ]

Ensure that any moneys handed over to the broker in advance goes into a separate account. If the broker does go under then it's easier to identify your bit.

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[Observer]

Let's lay this myth to rest.

If a vessel is Part I registered, a lender with a security interest will not be able to claim priority on an unregistered mortgage.

If you are buying a Part I registered vessel, you can arrange for the Shipping Registry to fax confirmation of entries on the mortgage register immediately before you complete. If there is no mortgage registered at that time, you will acquire unencumbered title.

If a vessel is not Part I registered, there is no register of charges so a mortgage will be unregistered (unless the owner is a corporation) by definition. In that case, a lender with a charge on the vessel will be able to enforce a prior interest against subsequent owners.




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[Kevin]

Hi

Im far from being an expert in these matters but agree that just because the boat is part 1 registered and that no loans show against the vessel the boat could still have an unregistered mortgage against it. But As I understand it in UK law in that situation the debt stays with the person who took on the debt and does not travel to the new owner, so that should the boat be sold on with an unregistered mortgage the person who buys it keeps the boat as the lawful owner and any debt owed on the boat remains with the seller. This isnt stated as fact but from what Ive heard talking to people in this field.

If it is a registered mortgage then the lender may come back for the boat from the new purchaser.

Again not sure if my facts are correct but thats what Ive been told.

Kevin

 

[jfm]

good faith buyer of mortgaged boat

Observer, re you last para, if a boat is not part 1 (or similar overseas) and a lender has a mortgage on the boat but it's unregistered, and the boat seller/owner is a private individual, I thought that a buyer who buys it in good faith without knowledge of the mortgage gets unencumbered title, ie the courts will not allow the lender to enforce the mortgage? I might be wrong, but that's my dim and distant memory on this. Buyer has to be unaware and in good faith. obviously

In reality in the UK, none of the big lenders will lend on a mortgage and not insist on part 1 reg with the mortgage registered, so all this is a bit academic.....

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[Kevin]

As far as I know the lenders over here lend a maximum of about 25,000 as an unregistered mortgage over that then they would have it registered.

Ive doubled checked and I think that if the mortgage is unregistered then the purchaser keeps the title and the debt remains with the seller.

Hope this helps

Kevin

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[Observer]

Re: good faith buyer of mortgaged boat

jfm,

RYA advice is (or was) that a mortgage on an unregistered yacht is binding against a bona fide third party purchaser. They refer to a decided case from 1991 - The Shizelle. If that's not current, I am happy to be corrected. If some kind of equitable relief was granted in a later case, what are the boundaries/principles applied?



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[Dave_Snelson]

Try and transact with a credit card if dealing with a broker or dealer. A dealer usually ownes the boat and therefore has responsibility as to its condition, a broker does not - but there are good brokers out there! Get a standard contract for boat sales drawn up (RYA or similar), this will cover outstanding loans, liens and mortgages. Make sure ALL the boat will become yours (no outstanding shares to others). Have a survey done by a competent surveyor with professional indemnity insurance. State the scope of the survey in writing, i.e. "Hull & Major Machinery" or "Comprehensive" - find out what will be checked over and what will be excluded.

<hr width=100% size=1>Madoc Yacht Club
<A target="_blank" HREF=http://www.madocyachtclub.co.uk>http://www.madocyachtclub.co.uk</A>

 

[jfm]

Re: good faith buyer of mortgaged boat

I can't remeber the legal background. Not worht researching for reasons in may last para above. Might have been equitable relief by Denning on a good day even for him I thought courts were very unsympathetic to lenders claiming mortgage without making others aware (eg the practice of rivetting mortgage notice plates to mortgaged machinery in industry, etc....) becuase otherwise the whole 2nd hand market in this country falls into disarray......

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[andy_wilson]

You don\'t.

This whole area is one of great risk.

Lenders may have the yacht as security without it being registered.

Suppliers of stores delivered to, work done upon, or berthing / yard fees incurred by the vessel that remain unpaid, can all lead a yacht to be arrested until the bill(s) are settled.

If you give a private vendor a deposit, who is to say he will return it if the survey is unsatisfactory.

You could see if a reputable broker would act as stakeholder for the deal at a reduced commission.

You could enlist a solicitor to do the same, but would probably cost you more, especially if they are unfamiliar with the 'standard terms and conditions of sale of a yacht'.

Old war story.

A friend bought a motor yacht in Mallorca, from a German, through a broker who marketed to Germans. The broker was not the main agent in the marina, but rather one who's untidy office was upstairs and out of the way. He also asked for part of the sale price in cash (his fee). The yacht was great and had just had work done on one engine, and the other gearbox - amounting to 14,000 euros, by the local Volvo agents (run by an englishman).

2 months after the sale, and with flights booked for our Xmas break aboard with same friends, they were advised that as engineers bill remaind unpaid, they (we) could not go aboard, use, move or otherwise interfere with vessel, and on the following Monday the case was going to (Mallorcan) court to have the vessel arrested due to these bills.

Check the register by all means. Check the main marine mortgagees (and the vendors own bankers). Check the insurers, check the marina, check the local marine traders. The last 3 checks stand a realistic chance of happening, and will almost confirm to you that it is a genuine owner making a genuine sale and will hopefuly confirm that things haven't started to 'slip'.

Get a statement from the vendor of any outstanding sums, check them out and agree that you will settle them directly from the purchase price.

And take up religion.

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[Benny1]

Re: good faith buyer of mortgaged boat

Re Boat Mortgages.

I don't think the boat has to be registered if it is a dealer who has taken out the mortgage on it. So if you are buying new or "neraly new" eg ex demo, then the boat will be unregistered and a dealer can have a mortgage on it.

As far as I understand it, it is then up to the dealer to pay off the mortgage. If however he does not do this then there is no protection for the buyer as there is in the motor trade (specific laws have been passed to protect punters, basically as there are more people who buy cars and hence vote, but nothing has been passed that applies to marine mortgages in the same manner).

If there is an unsettled mortgage on the boat and the vendor goes under, then the finance company have title to the boat (and will still have the ownership documents) and can sell it at whatever price they desire. They are not obliged to get best price and pay back the new "owner" as well as their loan, so in the worst case you can lose all your outlay.

However, you will only tend to be caught out in this manner if you are paying cash for the boat. If you are taking out a new motgage to buy the boat then it will have to be part 1 registered and your mortgage company will insist that the existing charge is removed. If you are unsure as to the boats financial "status" and are a cash buyer then it may be wise to take out a small mortgage, which will ensure all other charges are removed, and then pay it off straight away.

If you are buying off a dealer and they are a limited company then you can do a company search (via Companies House) which will reveal all the charges that that company has outstanding...includung marine mortgages. You may find it makes interesting reading. It should show wether the boat you are buying has a charge registered against it, the amount of the mortgage and who the charge is registered to.

Best to remember that marine loans are not loans at all, but mortgages and are hence more similar to a property loan than one you would take out to buy a car or a settee.

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[jfm]

Re: good faith buyer of mortgaged boat

Hmmm that rings a bell benny. The point I was making about a good faith buyer getting clear title specifically applies to cars, not to anything else, now I remember. So what you say about checking everthing you can makes sense. Thanks! Basically, buying 2nd hand is never free from risk......

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[Benny1]

Re: good faith buyer of mortgaged boat

...and neither is buying new. As my father always says, remember that even Rolls Royce went bust once. No company is infallible.

All you can do is try to mitigate your risk by ensuring that you are left exposed for as little time as possible.

However, there will almost always be a few hours to a few days gap between you paying over your cash and the vendor (be it a private individual, a dealer or even a manufacturer) being able to provide you with clear and unencumbered title. You just have to hope that nothing untoward happens in this time.

Of course, the vast majority of transactions go without a hitch, but if you get caught, you tend to get caught badly.

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