Insolvent broker takes deposit question

That's a way of ensuring that the broker doesn't have possession of more than he would be entitled to if a sale is completed. However, if it falls through, who is liable to repay the buyer's deposit? You might think it's the broker but it may well be the seller (the broker is usually the seller's agent so the seller has liability as principal).
 
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Clients accounts are not at all safe.

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That's simply not true. A properly operated client account will effectively protect the funds in it from other creditors (particularly the bank or other secured lender) if there is an insolvency. Even in the BA Peters case (I believe), all of the brokerage buyers and sellers recovered their money (or the boat which they purchased). Without the client account, those sellers may well have lost as well as buyers. The people who lost were those buying directly from BA Peters, which is a totally different contractual structure.
 
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The general point I am making is that the seller cannot arbitrarily retain the deposit.

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You said exactly the opposite? You said "You can keep the deposit if he is in breach of the contract", which is why Observer correctly disagreed with you.

Just to be clear, and I'm merely repeating what Observer said, if a buyer pays a deposit then reneges, the seller may NOT automatically keep the deposit. He might keep it if the contract specifically provides for it to be kept as liquidated damages and it doesn't offend the general principle that contracts may not impose penalties/punishments, but seller may not AUTOMATICALLY keep a deposit if the contract is silent on the point

Again, I'm talking only English law
 
Correct and it would be safer if all funds were not handled by the broker at all but it is normal for the deposit to be lodged with the broker. If that's the case, what I said was that the deposit should not exceed the broker's commission but, obviously, it would be safer if the deposit was as small as possible to protect both buyer and seller
 
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Clients accounts are not at all safe.

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That's simply not true. A properly operated client account will effectively protect the funds in it from other creditors (particularly the bank or other secured lender) if there is an insolvency. Even in the BA Peters case (I believe), all of the brokerage buyers and sellers recovered their money (or the boat which they purchased). Without the client account, those sellers may well have lost as well as buyers. The people who lost were those buying directly from BA Peters, which is a totally different contractual structure.

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you have missed the reality of the situation.

When Brokers have cash flow issues all they have to do is dip into the clients account, history has proven this is exactly what they do time after time.
 
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you have missed the reality of the situation.

When Brokers have cash flow issues all they have to do is dip into the clients account, history has proven this is exactly what they do time after time.

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What do you mean by "I'm missing the reality".

Where is this evidence that (boat) brokers have "time after time" dipped into client funds. I agree with Tranona here - the record is that if it has happened, it is only very rarely. One of the benefits of a client account is that the duty of trust it imposes will or should make a broker reluctant to break the trust, and in the vast majority of cases, it works. Nevertheless, the legal reality is that while the client account funds (if the account is operated conscientiously) will be secure against insolvency, they will not and pragmatically cannot be secure against misappropriation.

Even in the BA Peters case, the brokerage buyers and sellers all ended up whole.
 
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the legal reality is that while the client account funds (if the account is operated conscientiously) will be secure against insolvency, they will not and pragmatically cannot be secure against misappropriation.


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Oh but it can.

The FSA regulate the clients accounts and if an Insurance broker legs it with the cash the Policy Holder is protected.

This is covered by all Insurance Brokers paying into a fund to cover the dodgy ones.

Why shouldn't the marine Brokers also contribute to a fund , until they do I will not hand across hard earned cash !

Of course an escrow is perhaps one solution but is it really in the best interest of a client for a broker to refuse a sale on the basis a buyer was concerned about handing over cash to a broker ?
 
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the legal reality is that while the client account funds (if the account is operated conscientiously) will be secure against insolvency, they will not and pragmatically cannot be secure against misappropriation.


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Oh but it can.

The FSA regulate the clients accounts and if an Insurance broker legs it with the cash the Policy Holder is protected.

This is covered by all Insurance Brokers paying into a fund to cover the dodgy ones.

Why shouldn't the marine Brokers also contribute to a fund , until they do I will not hand across hard earned cash !

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You really are a most irritating dickhead. The account is NOT "secure" against misappropriation. What you are describing is a (in effect) insurance or bonding arrangement that protects the client if misappropriation occurs.

Anyway, you're argung aginst yourself - I remind you of your previous comment "Client accounts are not at all [in ordinary usage "not even a little bit"] safe". Now you're saying that they [sometimes] are. Make your mind up FFS.
 
I meant the same as you are saying, but did not express it well. That is why I added the not very good example of terms that could be breached and the seller entitled to retain part or all of the deposit - but his probably confused rather than clarified!
 
Not sure you are right in the Peters case. See some of the earlier exchanges on this thread. Only those clients whose deposits went directly into the client account were able to recover. Those where Peters had, for whatever reason paid the deposits into the general account for subsequent transfer to the client account were not able to recover.

As I understand it Peters became insolvent because they were trying to transfer monies to the client account, but because the account was in overdraft the bank refused.
 
I'm not sure that you're distinguishing between the brokerage sales and direct sales. The facts in the judgement are incomplete but it appears that all of the brokerage clients, buyers and sellers, were made good one way or another; with one possible exception: a couple who ordered a new boat from Peters and for whom Peters acted as broker to sell their existing boat. It seems Peters received the sale price of £97,500 and paid only £17,500 into the client account. I infer that £80,000 was applied against the purchase price of the new boat, which was not delivered, so the £80,000 was lost. Assuming the £80,000 was due on the new boat contract, this put the couple in the same position they would have been in if there had been no brokerage sale, so that case is arguably not an exception.

The people who lost, as far as I can tell, are those who agreed to purchase directly from Peters and paid deposits/part payments that were not held in the client account. Those circumstances are qualititatively different to the brokerage sales.
 
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The account is NOT "secure" against misappropriation. What you are describing is a (in effect) insurance or bonding arrangement that protects the client if misappropriation occurs.

Anyway, you're arguing against yourself - I remind you of your previous comment "Client accounts are not at all [in ordinary usage "not even a little bit"] safe". Now you're saying that they [sometimes] are. Make your mind up FFS.

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No I did not mean to say a persons money is sometimes safe when handed to a Yacht Broker.

I agreed if the money was invested in a clients account then it had some protection from insolvency of the broker. THAT DOES IN NO WAY MEAN IT IS EVER SAFE FROM THE YACHT BROKER HELPING HIMSELF TO FUNDs

As to your comment about show me evidence, there isnt any as it is not illegal for the broker to use the funds but that does not mean it isnt going on(I am aware of three so far unproven cases over the last 3 years of 'delayed' payments from Brokers.

I need not argue against anyone, this is an open forum that I am just saying how I feel, as it is how I feel and how I think it is right to me. I accept is may not be how you think and you can type
how you feel, as long as we both type honestly then others can make their own judgments cant they.

If any Brokers are reading they can learn from my posts....................

They should learn that in order to look after the best interests of their clients (sell boats to all buyers) they need to work out a flexible way to sell a boat to someone who is not happy handing significant cash to an unsecured middleman, its not that hard to do and a lot easier than finding another buyer !

sorry if grammar literacy poor , typed on mini mobile thing but hope you can follow.
 
Just a final thought on this from me.

It is my belief that with the rise of the Internet over the last 10 years a lot of "wannabe" brokers have sprung up often working from home or a cheap rented office somewhere with no financial backup or real knowledge.

There is no regulation and there is no qualifications, so there are plenty of, say, boat cleaners or maintenance chaps who see brokerage as a quick buck. Bang up a flash web site, tell your customers that you'll sell their boat for a grand and bang, in business and some easy money.

And since all many boat owners seem to care about is what it's going to cost they have no problem finding listings.

Size isn't everything, as Peters proved, but I'll bet some of these guys have little to lose and everything to gain.

And I wouldn't be surprised if it ends up costing one or two owners a lot more than they bargained for when they listed their boat cheaply...
 
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