How safe are the client a/c's of brokers/dealers?

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Kaste

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How safe are the client a/c\'s of brokers/dealers?

Just a bit of general advice please. Proposing to buy new boat (old boat as px) initial deposit on credit card. Balance to be paid in two tranches and I am insisting that monies are held in a client account, but now wondering how secure they really are if the broker/dealer goes bust or placed in administration.
 
Re: How safe are the client a/c\'s of brokers/dealers?

As far as I'm aware, the only true 'Clients' account are the ones solicitors/lawyers have (for property conveyancing for example)
Any bank will give a broker or boat dealer a so called client's account but it will often not be ring fenced if the company goes down owing money to the bank...
You could demand an undertaking from the dealer's bank that all monies in the 'client' account are considered as 'Escrow' - I'm sure the dealer will kick the bank to arrange this if they think the boat sale will go sour otherwise!!
 
Re: How safe are the client a/c\'s of brokers/dealers?

Hi looking at your profile with a current boat targa 43 your obviously taking about spending a few thousand so i would be very careful who you deal with at this moment in time.

Maybe you could do a company house search on the dealer its easy to do, and see what there current status is.

With a boat as big and valuable as yours I would be very careful as they could take charge of it while your new boat is say for example in build, maybe even sell it on pocket the money as part payment for your new boat and still go bust in the meantime.

It all seems to get very weary, mistrusting and complicated in this day and age.

I would set out some strict guidelines if your not sure, maybe other forum members can either back up or otherwise give an idea on who you are dealing with.

There seems to be so many companies in the marine trade going bust lately, I would have never belived BA Peters would go, I was lucky at the time they owed me nothing but could have been caught a month earlier or so.

Maybe the panel can advise you on the boat your looking for too.

How would you actually know if your deposit was in a clients account, and how would you know if they hadnt drawn from it in the meantime as its there managed account, if unsure use a marine law firm like ward and mackenzie to make your purchase.
 
Re: How safe are the client a/c\'s of brokers/dealers?

The dealer/broker shouldn't be holding money in the client account in your situation, or at least not more than a few days, as he should be passing it on to the builder. Your contract, assuming you've had advice, will ensure you then own part of the boat if the dealer goes belly up, and you'd have to negotiate with the adminstrator or builder to get it finished.

If you're worried about the few days, or that they might not pass the money on, i'd consider telling the dealer you'll only make transfers direct to the builder, and then pay the dealers commission on delivery?
 
Re: How safe are the client a/c\'s of brokers/dealers?

The other way of doing it is taking a marine loan and once happy pay it off?

the bank takes the risk and you can sleep at night. the bank will also check all paper work and stuff.

Yom
 
Re: How safe are the client a/c\'s of brokers/dealers?

[ QUOTE ]
There seems to be so many companies in the marine trade going bust lately, I would have never belived BA Peters would go,

[/ QUOTE ]

Why not? They lost the dealership that muist have provided 90+% of their income stream, and promptly expanded!

I never believed they could survive.
 
Re: How safe are the client a/c\'s of brokers/dealers?

It's EBY on a new T44 GT. In fairness EBY have offered to place monies in Fairline's Client A'c. But that goes back to the priginal question how safe would Fairline's C/acct be these days. T43 in px, all original documents held by me until handover. Have had dealings before with EBY and no problems in fact quite the opposite which is why I am dealing with them again. But times are different nowadays.
 
Re: How safe are the client a/c\'s of brokers/dealers?

unfortunately, an assurance of a client a/c, and the legal situation of that client a/c can be a way apart.
If EBY have agreed to pay into Fairlines client a/c (whatever THAT might be), why not simply pay it there yourself?
But, and no slight on Fairline, you still only have someone else's word of the status client a/c. I d check that out too.
Dont RYA have some guidance on this sort of thing? Even if you are not a member, spending £45 or so to become one gives you cheap legal advice....
 
Re: How safe are the client a/c\'s of brokers/dealers?

In the current climate, if buying another new boat I would insist on a bank guarantee to safeguard your deposit. Buying in stage payments you are buying the hull as she is built. If they go under you will own own half a new boat - but will have lost your own as you signed this over as the deposit.
Your bank guarantee should say that in the event they don't deliver what you ordered by a specific date then on demand you will be entitled to all your money and value of the trade in used as deposit back.

The boat builders will not want to do this - and they will put every objection up because it costs them money to get the guarantee and if they are not too sound financially the bank wont issue one.

When I bought my last new yacht from Westerly just before they went under I got a bank guarantee because I too traded in my previous model as the deposit, the new boat was late and the guarantee was very close to expiring. Only after Westerly saw that I was serious about claiming on the guarantee did they renew it, I should have known they were in trouble because the new guarantee was from the MD's personal banker not the company bankers.

I was lucky and we got our boat finished just a month or so before they went under, many buyers were not and lost a lot of money.

If you cannot get a guarantee walk away from the deal, no business is safe in the current economic climate.
 
Re: How safe are the client a/c\'s of brokers/dealers?

We are currently buying a new boat and SWMBO (a banking lawyer) insisted we get a marine mortgage whilst the boat is in build because the risk is then the bank's. She works lots with the marine industry so I guess its sound advice.

Enjoy the new boat.

Matt
 
Re: How safe are the client a/c\'s of brokers/dealers?

The RYA advice is very general and does not actually cover buying a new boat on stage payments through a dealer - only direct with the builder. The two secure alternatives are a bank guarantee or an escrow account where money can only be released if both you and seller agree. If the stage payments are going to the builder then you can claim ownership as you go along provided materials are clearly identified with the boat.

You say you have already paid the deposit with a credit card, which may give you some additional protection, and I assume the PX will take place at the end, so your risk is the two stage payments in between. The suggested builder's contract terms would cover this if the work in progress was clearly identified with your boat.

However, I assume your contract will be with EBY, not Fairline and I guess that would add new complications.
 
Re: How safe are the client a/c\'s of brokers/dealers?

First off, EBY and Fairline are 100% honest so all you need to protect against is a "good faith" insolvency.

A client account is as good as the terms between you and your counterparty, which is EBY. If they agree to hold your money in that account and do, then as a matter of property law you own that money even if EBY goes bust. So long as you can prove that that's what you agreed (ie in writing) the liquidator would certainly give you your money back PROVIDED it is still there.

The catch is, I don't see how it can still be there. Ordinarily, EBY hand over the money to Fairline so they are not going to hold it in client account cos they don't possess the money. If instead they ARE going to keep your money escrowed in a client accoutn and pay Fairline's stage payments out of other EBY money then great, but make sure that's the written understanding. Fairline dont have a client account so you were given a red herring on that point

The best way, in practice, to protect your stage payments is to get personal ownership of the boat as soon as possible, which means when the hull is out of the mould usually. Fairline will give you a bill of sale for the part compelted boat. EBY have done this before, it is well trodden path. If EBY or Fairline go bust you then own the part-finished boat and although that's messy you are in a pretty good position.

I seriously think the chances of Fairline insolvency are tiny and i wouldn't worry about that. I have no idea about EBY finances but they're good folks.

I dont agree the comments about marine mortgage including the one apparently made by a banking lawyer. When you take a mortgage loan you owe the bank money personally. The debt is secured on the boat but the bank's recourse is not limited to the boat. They can come after you personally and get any other wealth you possess. Just like with a house mortgage. Banks do not offer limited recourse loans in the marine market afaik.
 
Re: How safe are the client a/c\'s of brokers/dealers?

Are you saying then that assuming the px is 40% of the new boat value, the bank would fund the stage payments and the final invoice charging the customer mortgage repayments as appropiate to the outstanding loan.

Builder / broker goes tits up and you, the customer, still have the 40% value old boat but the bank would look to you to honour the outstanding mortgage even if there is no ownership outside of the builders interest.

Would it not be safer to fund the whole building process via a credit card? I cannot see the escrow a/c thing working as the broker/builder needs the funds as cash (op ex) to fund the building.
 
Re: How safe are the client a/c\'s of brokers/dealers?

I feel I should clarify the situation. The boat is built and being delivered to EBY later this month. They hadn't sold it until they put an attractive deal to me. They will get copies of my PX boat and I keep the originals until completion. The first payment is due when they get the boat, when it will be placed in storage until Mid Jan when my final funds are available and sold as a Jan 2009 boat. Moneywise its a real deal as far as I am concerned. I have no issues with EBY or Fairline and have in fact spoken to Derek Carter at SIBS when this deal was originally proposed to get Fairline out a warranty issue withy me on the T43. However the question still remains to find the least risky route for lodging of the funds until mid-Jan.
 
Re: How safe are the client a/c\'s of brokers/dealers?

jfm beat me to saying this

The reason I asked who it was, was because if the company was a large reputable one, and bearing in mind the current banking situation, you could and probably should pay for the boat as soon as possible. IMO pay for the boat and trust the supplier. Its a bit like extending the warranty backwards to before you buy the boat.

We were in the same situation but with Princess Motor Yacht Sales. I decided after talking to lots of people to pay the whole bill as soon as possible without any quibble and without any retention - very unlike me. That way there was no doubt who owned the boat - my justification was that it was better to be arguing over a warranty issue than who actually owns the boat if the dealer went bust.

In fact PMYS kept the financial negotiations and the warranty/delivery of the boat entirely separate - every little niggle was delt with immediately even though we'd paid the bill. It also means that you can get on and enjoy the purchase experience.
 
Re: How safe are the client a/c\'s of brokers/dealers?

I'm not quite following your question, sorry. But if you have a mortgage secured on the boat, and the boat sinks or doesn't get fished by a gone-tits-up builder, there is aboslutely no question that you still owe the bank the money borrowed. If you happen to own a £1m house with only a £200k mortgage on it you'll for sure be repaying the bank, by selling your house. It is a complete myth to suggest that the bank is on risk only by reference to the boat. (And it's an even scarier myth to say "a banking lawyer says so"!). As i said above, the bank loan is secured on the boat, but all that means is that if the borrower defualts on the loan then the bank can take the boat and sell it to get their money back, and they dont need to share that money with borrower's other creditors. That's all it means. The bank can still pursue you for repayment of the loan out of your other assets. It's exactly the same with a house mortgage

Loans do exist where the bank can only get repaid out of the proceeds of the security asset (in this case the boat) and they're usually called "limited recourse loans". A normal boat mortgage isn't one of these. By all means anyone can ask the bank for such a loan but I think you'll be wasting your breath!

One advantage of a mortgage is that the bank will go to great lengths to get the title paperwork right, to protect its interests, but the spin off is that it protects your interests too. But that's a quite different point
 
Re: How safe are the client a/c\'s of brokers/dealers?

Ah, that's different. i think we all thought this was a stage payments job.

OK, well then either (a) pay the deposit now and have it held in client account/escrow account by EBY till delivery, or (b) pay the deposit now without client account/deposit and have title to the boat transfered to you (bill of sale etc) now and execute a contract with EBY that says you may not take possession of it till you have paid the balance (in other words they have a lien on the boat until you have made the final payment in Jan 2009). That puts both sides in a correct/fair position and should keep everyone happy.

The main thing is that the paperwork is clear. Not just to you and EBY but to a liquidator if EBY went bust

I'm not at all suggesting they will go bust - as I said above they're honest top people and a pleasure to deal with
 
Re: How safe are the client a/c\'s of brokers/dealers?

As safe as with Del buoys uncle Arthur Daly if it goes belly up. Only a solicitors client account is safe'ish. A brokers client account legally offers little protection, they still have access to it. But it's really based on trust and reputation, so dealing with well known brokers of long standing and good reputation the risks should be less. Personally I'd like a bit of paper giving me title to the boat or part finished boat.
 
Re: How safe are the client a/c\'s of brokers/dealers?

If the boat exists, do a deal with fairline wereby you purchase shares in the boat with each payment until you own all the shares.... ergo you own 20% of the shares on clearance of first payment, a additional 30% on second payment, and balance upon handover of trade.....

So you have a secure interest in the boat from moment one... you will have to conduct various transactions, instead of one, but I cant see how thats a problem...
 
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