New Boat

[Grey Fox]

Thank you everyone for taking the time to give lots of good advice. I would be buying directly from the manufacture. I can see that I need to do some due diligence. The last paragraph of RJJ's post neatly sums up my concern.

 

[Rhylsailer99]

Think about if the guy has 10 customers putting deposits and he pays himself a huge wage then dissolves the company and vanishes in a puff of smoke.

 

[pvb]

What gives you that impression? - particularly as I have spent most of my life working in or associated with the marine industry. All I am saying is that the number of buyers who actually lose out is small, but very visible. In the whole scheme of things nothing like the millions lost through dodgy home improvements, furniture retailers going bust, holidays home scams and so on. The Oyster and Discovery buyers are generally not the losers because they are buying using the type of contract I described earlier - they would be mad not to do so - and that is what those builders work with. The losers there are usually trade suppliers, landlords, contractors, banks and investors. Almost always the boats are completed either by the administrator or whoever picks up the pieces. The losses tend to be limited to time delays and possible cost increases when negotiating with the new entity to complete the boat. By the nature of the production process for these semi custom boats the number of individuals affected at any one time is small.

The Peters affair was almost a one off and was far more complicated than most people realise. It has achieved a notoriety out of all proportion to the amounts of money lost by buyers. This is not to excuse the actions of certain people involved, but in fact the major actions taken that resulted in the court case were actually done in good faith in an attempt to protect the buyers' deposits. The fact that it had to go to the High Court for a ruling suggests that it was not as straightforward as some people like to think. It is also not well known that not one single brokerage client whose funds were held correctly in the client account lost. As I said you need to read the background, the court case and the ruling with an understanding of Banking and Trust Law to fully understand what went on.

I am sorry you had a bad experience with the dealer from whom you bought your boat - perhaps if you had bought it direct from Clipper you would have had the same exemplary experience that I had.

I can understand that, as you've worked in the boat industry yourself, you are very defensive of it. However, there's no doubt that the situation for buyers remains totally unsatisfactory, and the BMF appears to have no desire to improve it.

When I was originally looking at boats, I visited a Clipper branch to ask about the Cruiser 37. The two guys at that branch had zero product knowledge and they acted like dodgy double glazing salesmen. That put me off Clipper. My subsequent dealings with their head office confirmed the impression, although I understand the director I dealt with subsequently left the company.

 

[Tranona]

Thank you everyone for taking the time to give lots of good advice. I would be buying directly from the manufacture. I can see that I need to do some due diligence. The last paragraph of RJJ's post neatly sums up my concern.

If it is any help, a typical contract when I was negotiating such things on behalf of my employer was 10% to reserve the build slot, 10% on start, 20% on hull completion, 30% on engine installation (these were powerboats with expensive engines!) 25% on completion and 5% on completion of sea trials. At each stage, payment was subject to inspection by buyer's representative, usually a surveyor and a Bill of Sale was completed identifying what the buyer now owned. This means that in the unlikely event of insolvency, the part completed boat does not form part of the builder's assets. As discussed earlier it does leave the buyer with the problem of getting the boat completed, but in recent cases with UK (and Scandinavian) builders this has been resolved satisfactorily through the administration process, or by the entity picking up the pieces. However, in preference a bank guarantee is simpler and better as the seller's bank is effectively insuring your money. Scandinavian builders often offer this as a matter of course.

Such contracts in principle meet the buyer's need for some security and the seller's need for cash to progress the build. Personally I would be happier dealing with an established builder direct as it is easier to do due diligence with just one company, and you have the opportunity to secure your money with the asset as it goes along. Buying through an intermediary is much more risky as often they do not have significant assets, nor do you have any legal right over the part complete boat for which you have paid - your claim would be against the dealer with whom you have the contract. However, if one is dealing with one of the small number of major UK dealers, this risk is low despite the well known horror stories from the past.

Good luck and hope you get the boat you want.

 

[Tranona]

I can understand that, as you've worked in the boat industry yourself, you are very defensive of it. However, there's no doubt that the situation for buyers remains totally unsatisfactory, and the BMF appears to have no desire to improve it.

When I was originally looking at boats, I visited a Clipper branch to ask about the Cruiser 37. The two guys at that branch had zero product knowledge and they acted like dodgy double glazing salesmen. That put me off Clipper. My subsequent dealings with their head office confirmed the impression, although I understand the director I dealt with subsequently left the company.

Well, makes one wonder how hundreds of boats find happy owners through this process if it all so awful!

Sorry about your experience with Clipper - exactly the opposite of mine dealing with the same people (although probably not the same salesman!)

 

[pvb]

The Peters affair was almost a one off and was far more complicated than most people realise. It has achieved a notoriety out of all proportion to the amounts of money lost by buyers. This is not to excuse the actions of certain people involved, but in fact the major actions taken that resulted in the court case were actually done in good faith in an attempt to protect the buyers' deposits. The fact that it had to go to the High Court for a ruling suggests that it was not as straightforward as some people like to think. It is also not well known that not one single brokerage client whose funds were held correctly in the client account lost. As I said you need to read the background, the court case and the ruling with an understanding of Banking and Trust Law to fully understand what went on.

Your claim may be technically correct but it doesn't begin to tell the whole story. Unfortunately, because Peters had wrongly paid customer money into the current account rather than the client account in many cases, quite a few people lost a lot of money. Some customers even appealed to the Supreme Court to get their money back, but lost.

Moriarty & Anor v Various Customers of BA Peters Plc [2008] EWCA Civ 1604 (16 December 2008)

 

[Laser310]

If not, it sounds very much as though you're providing their working capital - you're paying for them to finish the boat that's due to roll out in November. If that's the case, your question becomes: how certain are you that there's somebody after you, to repay the favour? Because if sales then dry up....you're stuck with a half-build boat and probably struggling to show you own even that.

I agree - both the size of the deposit and the lead time suggest that they need to use the deposit to fund current builds.

And, it might not only be for boats in build - some might be needed to pay for warranty work on boats that have already been delivered. Both practices were behind the Gunboat bankruptcy in the USA. The current owners, Grand Large Yachts in La Grande Motte bought GB out of bankruptcy and seem to be doing fine - I have visited the yard.

Even once the build starts there is no guarantee that funds you pay will go 100% to your yacht. Anyway, as, RJJ says, the partially built hull you might own after a bankruptcy will be difficult to complete - you will pretty much have to buy the yard. In the GB situation, they sold for pennies on the dollar - so basically worthless. A friend was caught up in this.

I would only consider commissioning a new yacht from one of a few yards - it doesn't sound like this is one of them.

Even if you can afford to loose the money, just the hassle of being involved in a dispute.., and possibility of not ending up with a boat.., would be enough to make me look elsewhere.

 

[Norman_E]

What strikes me is that 25% is wanted to secure a build slot many months away whilst the buyer's money will be used to finance the building of boats now under construction. I can understand 25% when the buyer's boat has been started. A small deposit is fine to secure a slot, but 25% makes it look a bit of a Ponzi scheme. Are the builders going to rely on deposits from later buyers to build the OP's boat?

 

[pvb]

Are the builders going to rely on deposits from later buyers to build the OP's boat?

Possibly! It would be interesting to know the identity of the builder.

 

[Resolution]

Amidst all this talk of distrust and defaults, fair play says we should also be taking account of the risk that the builder or its dealer is taking on the customer or buyer. They don’t all pay up on time and in full!

 

[pvb]

Amidst all this talk of distrust and defaults, fair play says we should also be taking account of the risk that the builder or its dealer is taking on the customer or buyer. They don’t all pay up on time and in full!

What "risk" are they taking if they've got a deposit as well as the boat?

 

[LadyInBed]

For 160 grand there must be several boats already on the water and ready to sail away.
What makes this one stand out and special?

 

[seajayare]

I am in the process of buying a new boat . I have paid a 25% deposit (about the same size as the OP) and have a vague build date of early next year. I found the builder to be totally unwilling to change anything substantive in the contract (I've used the contract for years , not going o change now ... etc etc etc) and I guess like in all things when times are good for builders and they have a product that you want they can get away with it.

I had hoped that the BM contract would have been useful and freely available but found that you can't get it from the RYA (member or not) or from BM (unless you are a member. it's not easy to become a member of this organisation as an individual).

It seems to me that having a standard contract is a very good idea (it's what is used for houses after all) but a contract that a buyer cannot get a copy of and that sellers are not obliged to use (even those who are members of BM) is not a very likely to foster market development.

Anyway nothing has gone wrong , yet, and I live in hope.

Hooray for those folk that want boats that come with reasonable contracts!!

 

[pvb]

Hooray for those folk that want boats that come with reasonable contracts!!

The contract isn't worth the paper it's written on if the seller decides to go bust. That's the big problem.

So you've shelled out £40K or so and only know that you might get a boat in about a year's time? Is this a reputable builder?

 

[Resolution]

What "risk" are they taking if they've got a deposit as well as the boat?

When demand is strong, as now, not much. Just a hit to cash flow projections. But finding another buyer is not always either quick or easy. Sod’s Law says that the defaulting buyer had ordered the least popular specification.

 

[seajayare]

The contract isn't worth the paper it's written on if the seller decides to go bust. That's the big problem.

So you've shelled out £40K or so and only know that you might get a boat in about a year's time? Is this a reputable builder?

Reputable or not if they go bust I have a problem! I did what research I could, crossed my fingers and jumped. I wouldn't recommend it as an approach but I don't think I am alone in what I have done.

 

[pvb]

Reputable or not if they go bust I have a problem! I did what research I could, crossed my fingers and jumped. I wouldn't recommend it as an approach but I don't think I am alone in what I have done.

You're not alone! But it's a totally unsatisfactory situation, and the boat industry needs to sort it out. You don't get asked to pay for a car until you can see that it's physically present.

 

[Tranona]

The contract isn't worth the paper it's written on if the seller decides to go bust. That's the big problem.


[/QUOTE]

That is simply not true. The whole idea of the type of contract that I have described is that it means exactly what it says. If the contract gives the buyer title to the goods in line with the payments made then if the builder goes bust it means the boat in its current state does not form part of the assets of the builder. I tried to explain - but seemingly it did not register, the whole point of such a contract is to avoid losing the boat so that the owner has an opportunity to arrange completion. This is sometimes done by the administrator and sometimes done by the entity that takes over.

All very well throwing around these doom and gloom scenarios, but it would be helpful to have some conc rete examples of then actually happening!

 

[Tranona]

Reputable or not if they go bust I have a problem! I did what research I could, crossed my fingers and jumped. I wouldn't recommend it as an approach but I don't think I am alone in what I have done.

Of course you are not alone. Millions of people do similar things when the buy furniture from well known retail chains, an Aston Martin, or even a Ford Fiesta, have an extension to their home, or any other consumer good or service where the exchange is not instant and a deposit is required. I doubt many people here have ever bought a super car built to their specification, but if they do the process will be similar to buying a boat built to order. When I bought my present boat I was actively considering buying a new Morgan Aero8, which was more or less the same value. The non refundable deposit was larger than for the boat! - and the delivery time was longer. So buying a boat in a retail setting is really no different - and the sums involved are dwarfed by the amounts of unsecured deposits held by car dealers, both for individual transactions or in total. Somehow though the same thing for boats seems to get certain folks all wound up as if they are being picked out for special negative treatment!

We are all adults and we assess what is involved in achieving our objectives and make a judgement based on what we see. Just think of all the people who have lost money on holiday home scams for example, despite all the information available that says don't do it. This is a world away from buying a boat where in comparison the risk of losing out is tiny - even though the sums of money involved are often large. As I said earlier if the process was so awful how do hundreds of new boats get bought every year in the UK. OK some people won't buy because they don't like the risk, but doubt there are sufficient to make any difference if the small risk was removed.

 

[pvb]

Of course you are not alone. Millions of people do similar things when the buy furniture from well known retail chains, an Aston Martin, or even a Ford Fiesta, have an extension to their home, or any other consumer good or service where the exchange is not instant and a deposit is required. I doubt many people here have ever bought a super car built to their specification, but if they do the process will be similar to buying a boat built to order. When I bought my present boat I was actively considering buying a new Morgan Aero8, which was more or less the same value. The non refundable deposit was larger than for the boat! - and the delivery time was longer. So buying a boat in a retail setting is really no different - and the sums involved are dwarfed by the amounts of unsecured deposits held by car dealers, both for individual transactions or in total. Somehow though the same thing for boats seems to get certain folks all wound up as if they are being picked out for special negative treatment!

I've bought loads of new cars, built to my desired specification, and I've never had to pay more than a token £500 or £1000 deposit. More importantly, I've never had to pay the balance of the purchase price until the car has actually arrived at the dealership and I've seen and inspected it. Your Morgan story isn't in any way typical of the automotive industry.