Proving ownership

Sneaky Pete

Sneaky Pete

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I have a bit of a dilemma here. Made an offer for a boat which has been accepted. 10% deposit is about the norm while survey and other checks are done, that’s fine. This is a private sale with no brokers involved (so far) however the deposit is fairly substantial. Not knowing the vendor at all I am reluctant to hand over a deposit in trust. Without involving a broker who is into this for 3% plus VAT what else could I do to safeguard this deposit money?

Secondly how can I check that there is clear ownership of the vessel that it does not have any loan on it; I believe that any outstanding finance on a vessel follows that vessel if sold.
 
We were almost in this position 3 years ago. I asked a broker if they would deal with the necessary checks and paperwork on an hourly rate and they said yes.
 
I handed over a deposit 10% on a boat several years ago. The survey revealed lots of minor things that individually were not large but collectively was quite a bit of work or yard fees amounting to 25% the value of the boat. I wanted to pull out of the deal but the vendor insisted that as there was no structural fault with the boat the sale should stand. I could not afford to walk away from the deposit and he would not reduce the price for what he termed cosmetic things.
I eventually and reluctantly accepted the boat and it took me 2 years to sort out all the many minor issues. I learnd a lot about how boats are constructed but I would not in the future hand over a deposit and would much rather lose a boat!
 
To answer your 2nd question, assuming an unregistered or part 3 (SSR) registered boat:
1) the first owner of a boat will generally demonstrate ownership by means of an invoice from the boat builder / importer. This will also demonstrate VAT has been paid. Subsequent owners will then demonstrate ownership by means of a bill of sale, signed by the seller and the buyer. Ideally there will be a complete paper trail, going from current owner back to the original invoice, but this is often not the case with older boats. The first boat we bought in 2007 was built in 1984, but the paperwork only went back 12 yrs and 3 owners, which I was happy with.
2) it is nigh on impossible to prove there are no outstanding liens on a second hand boat, but you can do some research, to reduce the risks. I would think most boat owners would have a sheaf of receipts showing moorings, new bits and pieces, work done etc had all been paid for; the sellers of both boats I've bought certainly did. In both cases I also checked with the marina / boat yard where the boat was located that bills had been paid, and no monies were owed. On this basis, I was reasonably sure I wasn't buying into somebody else's debt.....
I think things are different for part 1 registered boats.
 
I sold my last boat 17 yrs ago privately & used the RYA contract. I held the deposit
a few thing the survey highlighted ( some already obvious like gas installation Co32 std non draining gas bottle ). we split the remedial`s cost 50/50. She is still in the same ownership, we still exchange Christmas cards.

Oh she was Part 1 Registered so fully documented
 
Sneaky Pete said:
I have a bit of a dilemma here. Made an offer for a boat which has been accepted. 10% deposit is about the norm while survey and other checks are done, that’s fine. This is a private sale with no brokers involved (so far) however the deposit is fairly substantial. Not knowing the vendor at all I am reluctant to hand over a deposit in trust. Without involving a broker who is into this for 3% plus VAT what else could I do to safeguard this deposit money?

Secondly how can I check that there is clear ownership of the vessel that it does not have any loan on it; I believe that any outstanding finance on a vessel follows that vessel if sold.
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Your perfectly valid questions show exactly why it can be a good idea to use a professional broker.
 
Whyboats at Bursledon offered me a transaction process only fee of £1,000 if I found the buyer when they were listing my last boat. I thought this was more than fair, but they did find the buyer so they got their full fee.

Finance on boats normally requires a Part 1 registration to lodge the interest the finance company holds. I guess a boat could be collateral against a debt without being part 1 registered, but how would the finance company prove its interest as there would be no formal registration of the boat they could not prove their interest. I would therefore be less worried about outstanding finance if the boat isn't part 1 registered.

As for the deposit - you are the buyer so perhaps offer full cash upon completion, with a small deposit of say £500 to confirm your commitment, but the deposit doesn't have to be 10%. I would add a right to walk for any reason, and with your deposit returned, if you decide you are unhappy with the boat prior to completion, without any obligation upon you to explain why.

It would be reasonable to offer up the basic costs of the haul out (if the vendor arranges it) and fuel for the sea trial, which £500 would easily cover. Unless he has a queue of would be buyers he will likely agree to your offer.
 
The key document to show title is the Bill of Sale to the current owner, and ideally Bills of Sale for all the previous changes of ownership. This is all covered in detail on the RYA site, with a list of documents you should expect to see. As already suggested if you are going to carry out the transaction yourself you should use the RYA contract, although if it is a significant amount of money it is wise to use a broker to handle this side. This has the advantage that he will hold your deposit in his secure client account. It is not easy to keep your deposit secure unless you use a third party such as a solicitor to hold it in an escrow account - which will cost, of course.

As already mentioned, finance usually requires the mortgage to be registered, or at the very least the finance house will hold the original documents so the boat cannot be sold without them knowing. In reality very few boats have secured finance against them as they are considered poor security. The only little wrinkle is that there might be a private unregistered loan secured against the boat, but the courts are unlikely to enforce that simply because such loans are not registered, and the seller has confirmed by signing the Bill of Sale that he has clear title and the boat is free of any charges. So, although in theory the risk is there, in reality it is very, very small.

This part of the sale process is where a good broker really earns his keep and well worth his fee for the security.
 
Sneaky Pete said:
I have a bit of a dilemma here. Made an offer for a boat which has been accepted. 10% deposit is about the norm while survey and other checks are done, that’s fine. This is a private sale with no brokers involved (so far) however the deposit is fairly substantial. Not knowing the vendor at all I am reluctant to hand over a deposit in trust. Without involving a broker who is into this for 3% plus VAT what else could I do to safeguard this deposit money?

Secondly how can I check that there is clear ownership of the vessel that it does not have any loan on it; I believe that any outstanding finance on a vessel follows that vessel if sold.
Click to expand...

I was in exactly this position when I bought my catamaran. I had met the owner a couple of times but only at the boatyard. The boat had no docs worth a damn because the owner, who bought from the yard, hadnt bothered to keep them.
I tried doing all the HP/ loan checks via the usual sources and they came back all clear but invariably with some legalese saying that they had no record of a loan but wouldnt guarantee it. Legally worthless. So instead I did credit checks on the seller even to the extent of getting his permission to check with his accountant. The idea being to establish that he could be sued for more than the value of the boat if necessary. He turned out to be a multi millionaire.

There are no documents of title for a boat as there are for a house and no 100% reliable way of establishing that it is free of lien. You just have to gather together as much as you can and make sure that you can get back at the seller if necessary.
 
KellysEye said:
Always use a broker they will hold the deposit in an Escrow account which is protected until the contract is signed and the balance paid. Escrow details here it can be used in any transaction: http://www.investopedia.com/terms/e/escrow.asp
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Brokers do not hold funds in an escrow account, but in what is generally known as a "client account". It is secure provided the account is set up in accordance with the YDSA rules. Solicitors use a similar type of account, but may also set up an escrow account for specific transactions.

The effect of the two types of accounts is essentially the same for the buyer and seller, but there are important legal differences, so therefore important to know which type of account is being used.
 
Thanks for all the replies. I have asked a solicitor to hold the deposit in trust until an inspection is carried out. Unfortunately due to money laundering rules they cannot accept my business, the only way around this is if I am an account holder with said solicitor which I am not. As I said on my post the broker would hold the deposit in a client account however the cost to do this is 3 times the deposit for about 1 weeks work. The balance would be paid direct from my account to the seller.
All the other points raised VAT receipt, bill of sale, builder cert, SSR, declaration of conformity all check out fine, just the uncertainty of handing over a deposit to a stranger.
Hopefully all will be good in the end.
 
Is it not possible to set up a joint bank account to which the buyer and seller are joint signatories i.e. the account needs both signatures for withdrawal to be made? Provided the contract is clear there should be no problem in releasing the money following the survey to whichever party is agreed.

In the (hopefully unlikely) event of a disagreement, the money can't be released until both parties finally agree (or the court decides).
 
Sneaky Pete said:
I have a bit of a dilemma here. Made an offer for a boat which has been accepted. 10% deposit is about the norm while survey and other checks are done, that’s fine. This is a private sale with no brokers involved (so far) however the deposit is fairly substantial. Not knowing the vendor at all I am reluctant to hand over a deposit in trust. Without involving a broker who is into this for 3% plus VAT what else could I do to safeguard this deposit money?
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Not answering your question, but it would be worth asking the vendor if they'd accept a deposit of less than 10%.

I think 10% is the 'norm', purely because brokers want to be pretty sure that they are holding enough to get their hands on their commission when the sale completes.

Of course, in a private sale, that doesn't apply, so you just need to give a big enough deposit to give the vendor confidence that you're serious.

I've agreed this many times over the years, both as a vendor and as a buyer.

It has never caused any friction.

In fact, as a seller, if the buyer seems trustworthy (yes, I know, like all good con-men), I'm usually willing to withdraw the boat from the market just on the buyer's word. After all, I do understand their concern about giving me a big deposit, and they are going to pay for haul out and survey (which indicates serious intent).

So ... no harm in asking to dispense with the deposit altogether, or to accept much less than 10%.
 
Sneaky Pete said:
Thanks for all the replies. I have asked a solicitor to hold the deposit in trust until an inspection is carried out. Unfortunately due to money laundering rules they cannot accept my business, the only way around this is if I am an account holder with said solicitor which I am not. As I said on my post the broker would hold the deposit in a client account however the cost to do this is 3 times the deposit for about 1 weeks work. The balance would be paid direct from my account to the seller.
All the other points raised VAT receipt, bill of sale, builder cert, SSR, declaration of conformity all check out fine, just the uncertainty of handing over a deposit to a stranger.
Hopefully all will be good in the end.
Click to expand...

Once you have signed the contract the deposit serves no useful purpose as, provided the conditions are met, you are legally bound to complete.

The boat must be very cheap if the broker's fee is 3 times the deposit! Would not expect his charges to be more than a few hundred £s.

However suggest the best approach with the seller is to offer a small (say £1000) on signing the contract. The only risk to him is that you may incur some costs or do some damage and then withdraw if for example the survey shows up real problems.
 
Thanks for pointing out this error. Someone has nicked the 1 from above the 3 it should have read 1/3. Commission for this is 3% + VAT on full asking price of boat not deposit.
We are slowly coming to an amicable agreement.
 
Playtime said:
Is it not possible to set up a joint bank account to which the buyer and seller are joint signatories i.e. the account needs both signatures for withdrawal to be made? Provided the contract is clear there should be no problem in releasing the money following the survey to whichever party is agreed.

In the (hopefully unlikely) event of a disagreement, the money can't be released until both parties finally agree (or the court decides).
Click to expand...
I have done this when conveyancing a house sale and it worked.
 
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