PetersOpal

[Coupe]

[ QUOTE ]
...if they want lots of money upfront, get another builder. It is not your job to finance them, its is the banks. If they wont then there is no way you should.

[/ QUOTE ]

This method works as I have proven on the three occasions I have purchased. Without betraying confidence, it is possible, with well funded dealers, to place a reasonable deposit and then no more payments until delivery.

 

[rubberduck]

That's fair enough as the dealer needs to know you are serious, any more than a deposit, however, would cause me to walk away. I would however want some peace of mind, even for 10%.

 

[Whitelighter]

I think 10% plus balance on completion with guarantee is acceptable

 

[rubberduck]

I would agree with that, but would take each case on its own merits. If anything led me to believe that anything was amiss, such as ccj's, pending legal action, big losses etc then I would think again. The fact that you have made the effort to make your customers feel comfortable would be enough. perhaps others should follow suit.

 

[Whitelighter]

I quite agree with you. CCJ's and pending legal issues would be very offputting to me too. My concern was the 'how would I feel buying from me' question, and I wanted to try and show that I was doing everyhting to safe guard our customers hard earned.

 

[rubberduck]

Good luck at SIBS. /forums/images/graemlins/smile.gif

 

[Whitelighter]

Thank you

 

[Observer]

[ QUOTE ]
Fine suggestions in principle but other side wouldn't play ball. Many manufacturers will not contract directly with customer, on principle. And any sensible manufacturer will not accept the x/64ths idea (I certainly wouldn't if I were them) because if the customer defaults the manufacturer can't sell 64/64 of the boat unencumbered to the next buyer on the waiting list.

So imho these ideas dont work. Jez's idea is still by far the best I have ever heard. And he is evidently able to make it work in practice

[/ QUOTE ]

Some builders may have the financial muscle to fund construction through to handover with only 10% deposit but most, I suggest, won't. Besides, from business perspective, it's completely reasonable to expect purchaser to pay interim payments based on construction progress in the same way as under a JCT construction contract.

The bank guarantee is good in principle but the bank will not give a guarantee unless the builder is a strong covenant or the bank has cash collateral. If the builder's covenant is strong, the guarantee is not needed because he won't be going bust (although makes risk assessment nice and easy for the customer). If the covenant is not strong, the bank won't guarantee unless it has cash collateral but the same collateral can't be used twice. If it's securing the guarantee obligation, it's not also available as working capital and/or can't be used to secure overdraft to fund construction. Possibly the bank may accept less than 100% cash security and offer guarantee and overdraft facility for (say) 1.5 times cash deposit.

Bank's risk then is that guarantee is called and value of what's been built isn't equal to the outstanding debt (if guarantee has been called that implies a production problem anyway).

It's a bit intractable. Businesses need finance to operate and (reasonably) customers are entitled to make sure their money is safe. The root problem is undercapitalisation but then the cost of equity is more than debt. Dunnot what the answer is but good on jezbanks for coming up with a scheme that gives his customers peace of mind.

 

[Seven Spades]

Yes bt by the sound of it you have to buy a Najad or HR!

 

[moondancer]

I believe that the most practical solution is for the industry to organise a level of insurance safety net for consumer protection. I don't believe that the other suggestions (other than possibly Westline's) would work across the industry.

I have said on a couple of other threads that this is the time to see if the BMF can act in the interests of consumers and ultimately the industry, through reputational risk, and take leadership on this issue.

 

[Observer]

[ QUOTE ]
I believe that the most practical solution is for the industry to organise a level of insurance safety net for consumer protection. I don't believe that the other suggestions (other than possibly Westline's) would work across the industry.

[/ QUOTE ]

What make you think that an insurance backed scheme would work? Who's going to underwrite it? Insurers aren't moneylenders or credit appraisers - they generally prefer to analyse risk from a statistical perspective and that needs a big pool(s) of similar types of risk. I don't think that exists in boatbuilding.

 

[Deleted User YDKXO]

Well it works in the travel industry. Anyone with common sense only buys their holidays/flights from ABTA/ATOL bonded companies and there are a lot of small companies with weak balance sheets in the travel industry
A similar scheme promoted by the BMF or YBDSA could work in the boating industry. It is simply unacceptable for people to lose thousands or tens of thousands of pounds when a dealer goes down. The boating industry is not the same as other retail environments because the sums of money are so much larger and therefore a proper system of protection should be in place

 

[KevB]

I was quite happy to pay a 10% deposit when placing the order for my boat but no way would I have ever funded the building of it with interim payments. Seems bloody madness. I know it's apples and oranges but you wouldn't do it for a car.

I want something tangible when I hand over my money, not funding someone who is making a profit out of me.

 

[rubberduck]

I am in business & it is my lookout if I extend credit to the wrong people, but why on earth should any retail customer loose out if the people they are in the process of buying goods from goes bust, whether it be a coffee table or a million pound yacht ?
When it comes to brokerage, the goods were never an asset of the company, so any money held should be handed over, & if used for other purposes then the directors should be held personally liable.

 

[glenndraper]

what an interesting thread - I have spent an interesting hour digesting all the ideas - One point that has not been made is the scenario where one is purchasing a boat direct from the manufacturer - as we are - It is simply a matter of having your name registered for the Hull ( when you pay the first installment) then the engines when you pay the next instalment etc etc
This way the builder does not own the boat he is building as far as the receivers are concerned as you have - effectively a charge on the boat to the value of your payments to date.
It is true that the manufacturer retains an interest in the construction because if the purchaser should cancel or default at any time all the purchaser would be owed by the builder would be the amount at any time during the build that they had paid (less the deposit - which would be defaulted due to cancellation ) The builder would then be free to sell on the completed boat to the next chap on the waiting list and on that sale would clear the charge to the original purchaser.

 

[Observer]

[ QUOTE ]
I was quite happy to pay a 10% deposit when placing the order for my boat but no way would I have ever funded the building of it with interim payments. Seems bloody madness. I know it's apples and oranges but you wouldn't do it for a car.

I want something tangible when I hand over my money, not funding someone who is making a profit out of me.

[/ QUOTE ]

There's a substantial difference between buying a small boat (= commodity item) for a few thousand or tens of thousands and a large(r) one for hundreds of thousands. Yoiu wouldn't expect a building contractor to finance the construction of a £1m house on a 10% deposit. Why should you expect a boatbuilder to do so?

Car are commodity items - OK they can be built to a specific order but the scale of production is incomparably greater than boat-building.

 

[Observer]

[ QUOTE ]
Well it works in the travel industry. Anyone with common sense only buys their holidays/flights from ABTA/ATOL bonded companies and there are a lot of small companies with weak balance sheets in the travel industry
A similar scheme promoted by the BMF or YBDSA could work in the boating industry. It is simply unacceptable for people to lose thousands or tens of thousands of pounds when a dealer goes down. The boating industry is not the same as other retail environments because the sums of money are so much larger and therefore a proper system of protection should be in place

[/ QUOTE ]

Do you think there's a valid basis for comparison between the travel business and boat building? The bonding arrangements for air travel and package holidays are statute based - they were introduced for political reasons because, when an airline/tour operator went bust, thousand or tens of thousands of voters were affected. That's politics. I can't see any government taking action to compel bonding arrangements to create a lifeboat for injudicious, wealthy (relatively) boat purchasers.

 

[Observer]

Yes - that's the way it's done with large boats. There is possibly a value range where that's either not practicable or there is insufficient customer concern/pressure to force builders to agree to it. Always worth trying though (bank guarantee a la jezbanks would be better).

 

[Seven Spades]

Here is a suggestion. It might be possible to pay the manufacturer by using an irrevocable letter of credit. It is possible to discount a LC with some banks and therefore the builder would not be without funds throughout the build, however he is guaranteed his money upon exchange of title. before that point your money is completely secure. It is a different approach because you would need to lodge the full amount or assets with your bank in order to raise the LC in the first place. manufactures will not like the hassle factor, but if this were to become the norm we would all be happy to live with it.

 

[powerboats]

The BMF already have a standard contract for the purchase of a new boat at a fixed price, which is available for members to download from the website.

With reference to ownership of the boat the contract states the following:

11. OWNERSHIP OF THE BOAT


11.1. The Boat and/or all materials and equipment purchased or appropriated from time to time by the Builders specifically for its construction (whether in their premises, upon the water or elsewhere) shall become the property of the Purchaser upon payment to the Builders of the first Stage Payment. As and from that date title in additional materials, gear and equipment bought for or appropriated to the Agreement shall pass to the Purchaser upon such purchase or appropriation. The Builders shall, however, have a claim (known as a “lien”) over and be entitled to retain possession of the Boat and any materials or equipment purchased for or appropriated to the construction until they have received full payment of all sums due to them under this Agreement and any variations, whether invoiced or not. Title in any materials or equipment rejected by the Purchaser or otherwise not used in construction of the Boat shall immediately pass back to the Builders.


11.2. The Builders shall, so far as it is reasonably practicable to do so, mark all individual items of equipment and materials which are purchased for or appropriated to the construction of the Boat.


11.3. The Purchaser shall not without the prior written consent of the Builder (which shall not be unreasonably withheld) sell, assign, pledge or otherwise charge this Agreement or any rights arising under it, or the Boat itself by way of security for any indebtedness prior to delivery except for the sole purpose of obtaining a loan to finance the construction of the Boat. If the Purchaser charges the Boat in breach of the terms of this Clause, the full balance of the Contract Price shall become immediately due and payable without affecting any other rights or remedies of the Builders.

I don't know how widely this contract gets used, however.