Boat deposits

[Jarrah Jack]

I've been thinking about the issue since I've started reading all the bad news about people loseing significant amounts of money to boat builders going bust.

I know from this forum and others than I'm far from alone. It actually sickens me that people can do their hard earned so easily and have no way of getting their money back.

How, it seems to me, is it that when we hand over a deposit we are really investing in the business as an unsecured creditor with absolutely zip in the law to protect us?

There is a crisis of confidence in the boat building industry for good reason. I've read on these pages that people will not buy a new boat because of the issue. I've also read that respectable boat builders are feeling the heat as well and where a boat builder who is a member has been done the other way around.

I've posed questions on a couple of threads to a couple of builders about how they handle their deposits. Neither have a totally satisfactory setup in my mind. Both say that the contract is with the dealer not direct to the builder and the dealer sends an equal amount to the builder. ( one of them).The point is with these arrangements is that it seems the deposit is not seperated from the health of the business at all. Anyone paying a deposit can not be expected to do any due dilligence on the health of the boat building business.

The question to ask is whether the dealer will refund the deposit if for whatever reason the boat doesn't turn up. If the dealer owns the boat outright and has it on site then it is a different set of circumstances.

I've read that you need to get a HIN number on the hull and contract asap. What are we then supposed to do if the business goes bust. Break in and get the hull, wait for the administrators to give their blessing? Whatever it is there is still too much trauma involved for the buyer and it does not need to happen.

Why can't someone in the industry come up with the solution of a trust fund. Solicitors and accountants have them. I think that the trust fund solution would help the industry out of this predicament. Why couldn't it be a win win situation for both all those good builders out there and the buyers???????????????????

As Finga said if a builder needs the deposit for the interval between ordering materials and completion of the frame and skin of the hull then its not a good sign anyway. ( or something like that) :smiley:

Smashed Crabs how will you handle deposits when your production starts? I hope it goes well for you mate.

Thanks for reading everyone, I didn't really want to say all this but feel that it needs to be made an issue on its own.

Cheers

[Noelm]

not a lot different to a house or anything else, they all require a deposit and "progress" payments, now we all know sometimes the progress does not happen and the builder goes guts up, in whch case your deposit is almost never recovered, and I am pretty sure most builders know when they are in bad times, and I guess they are trying to trade out of it, but I am also just a sure that lots of companies know full well that they will not be around in a short time and just simply fleece unsuspecting clients of their hard earned cash, how to sort these out is anyones guess, as is a better system of deposit holding.

[tigermullet]

One way of getting the industry to put something in place would be for all prospective boat buyers to go on strike for a while. Just refuse to hand over the deposit until the industry or individual business comes up with a satisfactory contract.

The marine industry has had its way for far too long. Just look at the idiocy of refusing to stamp each motor with its year of manufacture. The whole industry has a lot to learn. I haven't been to a boat show for quite a few years but the last time I went it was difficult to find a price ticket on any boat or motor. The customer is supposed to ask. Imagine if Woolworths or Coles tried that approach.

[finga]

The marine industry has had its way for far too long. Just look at the idiocy of refusing to stamp each motor with its year of manufacture.
I thought they all were even if it was through an engine number.

If a manufacturer offered a good trust fund to place deposits etc into and a good contract that would protect the buyer people would use them over someone who offered nothing purely for peace of mind.
If a client pulled out and the product was good it would not take long for another client to take over the project.
It would be a good selling point when you consider the number of builders going belly up for what-ever reason.

Personally, if I was in the boat of getting a new boat built they could have a small holding deposit type deposit and the rest on completion.
if they did not like that then tough noogies. There's always another good builder.

[boatie_72]

Speaking from experience in the industry, I am aware the manufacturing division of marine Queensland, is current looking into and talking with their legal department to create a process and documentation for a boat builder to handle deposit and progress payments correctly to give more protection to the customer. I believe this is also happening in the retail side of things also.

Keep in mind for larger builders such as Telwater, Horizon, Ally Craft etc and fiberglass boat builders like Signature, Haines Hunter etc. Do not take customer deposit nor take the deposit from the dealer, they fund the whole construction until the items is complete. 9/10 times it is only the small manufactures that take deposit and progress payments I.e. plate boat builders. This is fine if they manage the funds correctly. And this is the main area which the Manufacturing division of marine Queensland is looking into.

This is only for QLD as each state has a different division.

I hope this helps.

[tunaticer]

It is a wonder there is not a fund offered by banks for situations such as purchases of items to be built like boats houses or sheds, where the money is guaranteed upon completion of the job in the contract. Once the buyer is satisfied with the finished product he can phone through a PIN number or Authorisation code to release the funds to the builder. The account would be set up with the contract to build and the moneys locked away from contract start to finish.
If the builder goes arse up the buyer still has his moneys in the account and will need to be released by a termination of contract clause by the solicitor / administrator.
At least with a system like this the moneys are guaranteed to the builder and the buyer has peace of mind that he holds the authorisation codes to release the moneys when satisfied.

[frankgrimes]

Paying via Credit Card is potentially an option - If goods are not received, then utilise "chargeback" facility (Dont know how viable this would be on "larger" purchases)

Mick

[cormorant]

Most soliciters and accountants have a trust account and could with a suitably written contract do progress payments at suitable times and a bank guarantee could also be included to ensure the buyer has the funds. All cheap and easy to manage and very comon in small business transactions . The deposit forms teh first part of teh payments in trust and is only released upon completion to XX stage 1.

You cannot guarantee a boat builder will stay i business and complete your boat. You must always pay only up to the completion of the previous stage and never in advance and make sure your boat is identifyable ( hull number , engine number) and that the contract and reciepts specify that it is owned outright by you at every stage payment. At least that way you can take it to another builder to have finished if they go belly up.

Don't get done ove rby a boatbuilder. If he can't afford to borrow the money from his bank to finance teh materieal to start your boat and get it to a stage where a finance company would finance it and a insurance company will insure it you don't want to deal with em. If their bank won't trust em, they don't have enough business assetts or a personal guarantee why would you!!


Credit cards- you are at the mercy of someone else making decisions on whether you got your goods or not according to teh contract the boatbuilder has with teh credit card company - it may go against you and comes with a 3% fee to start with which the builder will want to recover

[Lovey80]

This was a very large issue for me when I was looking around for a small glass cat as there is nothing off the shelf that meets my wants in handing over 100k plus on a boat. Not only did I find a builder on the Sunshine coast that builds IMO a far better product than anything off the shelf in that range, his policy for payments gave me a lot of confidence that I would not lose my dough in the event he does go belly up.

1. On agreement to build/contract signed the builder will punch out a bare hull and put a HIN number on it. He will then take the small initial deposit and hand over a receipt for a hull with that HIN number. From that point YOU own the boat he is working on.

2. The second payment is for the purchase of the engines. If you supply your own this is negated. If he does supply he will immediately supply a receipt with engine numbers for the engines. From that point YOU own the hull and Engines.

3. The final payment is paid on delivery of the completed vessel.

This system gives me complete peace of mind that when I finaly scratch the coin together I will be the proud owner of a Sea Trek Super Sports Cat 5900.

Other than an industry wide trust account that is the only system I would go with after recent events.

[boatie_72]

I can tell you now, that many (not all) plate boat builders, do not have enough working capital to finance a boat through full production. Nor do half of those builders cover insurance for their factory, public liability insurance and product liability insurance. They are in a lot of cases, a guy with a shed and a welder that can buy some kit drawings and build a boat.

At the end of the day there are some great plate boat builders out there that do the right thing by their customer, like AMM, Bluewater etc. and have been around for many years. But unfortunately it has brought a couple of fly by night "plate boat builders" to give customers a sour taste in their mouth.

[PinHead]

This was a very large issue for me when I was looking around for a small glass cat as there is nothing off the shelf that meets my wants in handing over 100k plus on a boat. Not only did I find a builder on the Sunshine coast that builds IMO a far better product than anything off the shelf in that range, his policy for payments gave me a lot of confidence that I would not lose my dough in the event he does go belly up.

1. On agreement to build/contract signed the builder will punch out a bare hull and put a HIN number on it. He will then take the small initial deposit and hand over a receipt for a hull with that HIN number. From that point YOU own the boat he is working on.

2. The second payment is for the purchase of the engines. If you supply your own this is negated. If he does supply he will immediately supply a receipt with engine numbers for the engines. From that point YOU own the hull and Engines.

3. The final payment is paid on delivery of the completed vessel.

This system gives me complete peace of mind that when I finaly scratch the coin together I will be the proud owner of a Sea Trek Super Sports Cat 5900.

Other than an industry wide trust account that is the only system I would go with after recent events.

That all sounds great Chris..but if the builder goes down the gurgler and your boat is on the premises..you then have to fork out for a lawyer to deal with the liquidators and nothing is 100% guaranteed then. Unfortunately it is a matter of trust.

About 5 years ago I paid $5000 deposit for a fibreglass boat..built with the options I wanted..no contract..all on a handshake and a fax verifying the factory fitted options. I did not have to pay another cent until I saw the baot and was happy that everything was fitted as requested.
A pity that it was not done like that here.

I can relate another tale...as some have mentioned the housing industry...I "roughed in" 2 air cond systems in a couple of houses at Springfield Lakes...units in the ceiling and duct down to the lower level. The builder did not pay me...bill was for 11k..I spent another 3k on legals..the day before we were due to go to court the builder shut up shop and declared himself bankrupt..I lost the 14k.
The owner then had to apply to the courts to get the building contract cancelled so he could take possession of the 2 houses even though he had made his progress claims.

The owner and myself then had some fun phone calls..he wanted me to finish the job..i told him i wanted my 11k first..no deal..i wonder how much gyprock he had to cut out ot find those ducts..LOL

My point is..no matter how watertight you think you have a contract some bugger will find away to make your life hell when things don't go right.

[Spaniard_King]

No Matter what system goes into place there will be costs and who should foot these costs?? (how much is too much)

[smashed crabs]

I've been thinking about the issue since I've started reading all the bad news about people loseing significant amounts of money to boat builders going bust.

I know from this forum and others than I'm far from alone. It actually sickens me that people can do their hard earned so easily and have no way of getting their money back.

How, it seems to me, is it that when we hand over a deposit we are really investing in the business as an unsecured creditor with absolutely zip in the law to protect us?

There is a crisis of confidence in the boat building industry for good reason. I've read on these pages that people will not buy a new boat because of the issue. I've also read that respectable boat builders are feeling the heat as well and where a boat builder who is a member has been done the other way around.

I've posed questions on a couple of threads to a couple of builders about how they handle their deposits. Neither have a totally satisfactory setup in my mind. Both say that the contract is with the dealer not direct to the builder and the dealer sends an equal amount to the builder. ( one of them).The point is with these arrangements is that it seems the deposit is not seperated from the health of the business at all. Anyone paying a deposit can not be expected to do any due dilligence on the health of the boat building business.

The question to ask is whether the dealer will refund the deposit if for whatever reason the boat doesn't turn up. If the dealer owns the boat outright and has it on site then it is a different set of circumstances.

I've read that you need to get a HIN number on the hull and contract asap. What are we then supposed to do if the business goes bust. Break in and get the hull, wait for the administrators to give their blessing? Whatever it is there is still too much trauma involved for the buyer and it does not need to happen.

Why can't someone in the industry come up with the solution of a trust fund. Solicitors and accountants have them. I think that the trust fund solution would help the industry out of this predicament. Why couldn't it be a win win situation for both all those good builders out there and the buyers???????????????????

As Finga said if a builder needs the deposit for the interval between ordering materials and completion of the frame and skin of the hull then its not a good sign anyway. ( or something like that) :smiley:

Smashed Crabs how will you handle deposits when your production starts? I hope it goes well for you mate.

Thanks for reading everyone, I didn't really want to say all this but feel that it needs to be made an issue on its own.

Cheers

Jarrah Jack

It's a hard one mate , i have seen both sides of the argument'
I dont want to build unless we use our own cash , fully self funded at this stage. No borrowings from banks yet , looking for a third cashed up investor that also doesn't need to borrow.We are going to operate small scale and it will be on a line up basis but keep the cash in your pocket untill it's your turn , monies to be held third party( talking to solicitor)
Another option were looking at is of the shelf hulls , then buyers can have a choice of upgrades of base product , again fully funded for of the shelf as well.

Long ways to go yet , plenty of time to get it right , demo's to build first !

Kind Regards
SC
PS will someone hurry up and buy me 4.40 Mako already , i need the cash to build me SC 5.5m CC Demo ,oh and i need a bigger boat too so i can hit the reds! :smiley:

[cormorant]

This was a very large issue for me when I was looking around for a small glass cat as there is nothing off the shelf that meets my wants in handing over 100k plus on a boat. Not only did I find a builder on the Sunshine coast that builds IMO a far better product than anything off the shelf in that range, his policy for payments gave me a lot of confidence that I would not lose my dough in the event he does go belly up.

1. On agreement to build/contract signed the builder will punch out a bare hull and put a HIN number on it. He will then take the small initial deposit and hand over a receipt for a hull with that HIN number. From that point YOU own the boat he is working on.

2. The second payment is for the purchase of the engines. If you supply your own this is negated. If he does supply he will immediately supply a receipt with engine numbers for the engines. From that point YOU own the hull and Engines.

3. The final payment is paid on delivery of the completed vessel.

This system gives me complete peace of mind that when I finaly scratch the coin together I will be the proud owner of a Sea Trek Super Sports Cat 5900.

Other than an industry wide trust account that is the only system I would go with after recent events.


A problem with this is that if your hull goes missing? Grinds off the number ( sells it to someone else) or the motor goes missing and it is not in your posession will a insurer pay and was it insured on the boat builders premises if he goes broke. Insurers love companies that go broke as they know the liquidators will rarely persue a claim in the courts.

You need your insurer to agree to insure them on the boat builders premises and the to get paid out it has to be a valid claim that they secured them every night etc etc.

When businesses go broke very often staff and owners steal / take equipment eyc in belief thet it is theit right in lieu of wages etc. They get caught sometimes

[sharkcat one]

OK , Here go's

I am a boatbuilder and owner of a small boatbuilding company in which we make around 10 to 15 boats a year.

I feel sorry for the people who have lost money to boat companies that have gone bust. And I feel angry about the boat builders who have done this to clients because it makes the rest of us who are doing the right thing look bad , It makes our job harder ot get the clients to trust us .

Trust is a two way thing, because I have had clients walk away from boats that are nearly finished ( because they have gone bust or their income has changed ).
Someone said that if this did happen the boat company can just sell the boat to the next customer , not if the boat being built was a custom order with extra's .

For example I have a boat in my drive way at home , the boat just needs a motor and it's finished , the customer walked away from paying final payment . He paid $7,000 deposit and said things had changed and could not go through with the deal . This boat is a full custom job in that the hull is done in blue and silver metalic gelcoats with custom lockers and carbon console , this happened about 9 months ago . I have built 10 boats since then and finding it hard to sell this custom job as everybody wants their own custom boat.
So for the last 9 months I have had to fund this boat out of my back pocket ( less $7,000) , so it's not always the customer that gets bitten.

So for resons like this , in my company I ask for 1 third of the boat price as a deposit and the engine is paid for by the customer straight to the outboard dealer ( so the customer gets the reciept and owns the engine )and final balance is on hand over. HIN # is given to the customer when deposit is paid .

As for stage payments I ask for none .

I see some people get the wool pulled over their eye's regarding stage payments.
You the customer should never rely on photo's of your boat for stage payments, if you cannot go down to the boat builder and see your boat get a marine surveyor to check that your boat is up to next stage before you pay next payment. ( so many people don't do this and get caught) .

As for buying a boat from a small boat company , do some more research -- ask the builder if you can go and see a customers boat or at least speak with an owner about their boat . ( if he saids no , go somewhere else ) I'm proud to show off other boats that I have built and the owners are happy to help . If you don't get this type of response don't buy a boat from them .

Someone said earlier about trust accounts , never really thought about that side of things before , but I can see how usefull this can be to a customer , if a client asks me to set one up for them I would be happy to .

You people are not stupid , sometimes you just don't ask the right questions when purchasing a boat.
It doesn't take many right questions to judge a person , if he has the best boat in the world but is a dill , walk away and see someone else.


BOATIE_72 --- The larger small boat companies that you listed don't take deposit's because their boats are allready paid for by a thing called Floor Plan from the dealers.
You can't tell me that if I went into Springwood Marine tommorrow and ordered a signature which was not on the floor that they would not ask me for a deposit .
They would because if they didn't they would get every tom, dick and harry ordering boats .


Remember - all large boat companies started out small , so don't miss judge all of us because of a small few that went wrong.

cheers,

[cormorant]

"For example I have a boat in my drive way at home , the boat just needs a motor and it's finished , the customer walked away from paying final payment . He paid $7,000 deposit and said things had changed and could not go through with the deal . This boat is a full custom job in that the hull is done in blue and silver metalic gelcoats with custom lockers and carbon console , this happened about 9 months ago . I have built 10 boats since then and finding it hard to sell this custom job as everybody wants their own custom boat.
So for the last 9 months I have had to fund this boat out of my back pocket ( less $7,000) , so it's not always the customer that gets bitten."

I'm glad blokes like you still exist and hope you do well. It is often the blokes transitioning in size of business and type of boats they choose to build they get in trouble. I hope you have kept the $7000.

Always a bugger when you get a client who can't proceed and a few of those can kill a business. For the final custom fit out I think it is fair for a client to put some money up as long as the hull an be secured in case you go broke. Some honest clients can end up in hard times or have cashflow issues so probably wasn't out to fraud you from the start I hope.

That is a business decision having it in your front yard and like a client picking a builder you have to pick clients and sometimes you will be burnt. That's business.

3 choices - sell at market price - tip it out at auction - sue the buyer for the difference?? Worth chasing - possibly not but a letter and a garnishee order or a record with the court may stop him doig the same to another business later on. For several hundred dollars you could have got a bank guarantee from his bank saying he is good for the money or they would pay ( easier than settig up and auditing a trust account)

Sell at your cost and get on with making profitable boats

Modify and respray ( not easy with gelcoats I know and not worth it probably) existing boat and satisfy a current order and turn over a fast pofit and a happy client who gets his boat early and you get the cashflow. In theory with the way boat prices go up you are sitting on a good investment ( yes I am joking) . Someone will like it and buy it.

Hope you get more good clients and build more boats.

[smashed crabs]

Im starting to think again if you can't see it with your own eyes and touch it , then your taking a risk no matter what it is when you hand over the $$$

A few years ago now i wanted a Tiger 23 on the spot and the dealer didn't have it in stock but he said hand us the money in full and i will get it in for you , first thing i said to him was yeah right as if, so i bought another type of boat on that day instead for much more $$ instead .

One thing has dawned on me , every big ticket item i have ever bought was something i could look at right there and then , if i didn't like it i could walk away .
Only once have i spent the cash on somthing i couldn't see and it bit me on the arse .

Bugger it some things just have to be said , as long as my arse points down i will never buy a bloody thing that i can't see , to hell with that !!How the heck is a person to know if any company is about to go belly up?

Nah i reckon F%^K the lot , my money will be on what i can see here on in , if i cant' see it , touch it ,kick it ,poke it, smell it , lick it , eat it or drive it or anything else i can do with a boat then i don't bloody want it :angry:

Kindest Regards
Smashed Crabs

[White Pointer]

G'day,

Jarrah Jack has posed the major issues. He is pretty spot on. Here are some explanations - not excuses.

1. Custom boat builders take deposits to make sure that the customer won't walk away from the deal. The biggest expense in the project is getting the hull to completion with a HIN on it. If the buyer walks with no money down the builder is in strife for the cost of materials, wages and operating costs. With most custom builders building from one a month to one a week, this is a financial crisis. Most builders T&C of sale say that once the hull has a HIN on it the customer owns it. This has a legal precedent and offers some security.

2. Trust accounts are a great idea. The problem is that the money is locked away from the boat builder until the trustees get a release. If the customer won't sign the release - for whatever reason the boat builder is back in situation 1, above. The solution is to agree on an independent sign-off of the stage of completion. These are usually marine surveyors. It is expensive. This is what happens with house building. Stage payments are made on stages of completion with banks advancing funds to a timing and completion sign off. The builder (in QLD) is licensed by the Building Services Authority (BSA) and the BSA use the licensing fees to create an insurance fund in case builders default. The licencing, financing and inspection and paperwork costs get added into the (a) contract price or (b) mortgage fees and we wonder why housing is unaffordable. It's still a great idea for the boat industry, but is doesn't work because buyers won't pay for it. I know you won't pay for it.

So what should you look for in a boat builder to build your custom boat? Jarrah Jack said it was too hard to do due diligence. He is right again. Unless the business is a listed company on the ASX it may be impossible to get any information about their state of solvency. Here are some tips.

3. If it is a sole trader (i.e. a person using a trading name but no registered Company) ask for your deposit to be secured as a second mortgagee on his house or any other real property. If he doesn't have a house or any real property or can't get the security - leave quickly.

4. If it is a private Company ask how many Companies are there. Be very careful about XYZ Sales Pty Ltd and XYZ Manufacturing Pty Ltd. These are often constructs where the sales company receives the cash and makes the sales contracts but the manufacturing company owns the assets and uses your cash as it sees fit. If the sales company goes bust you may have no asset cover and get nothing while the manufacturing company liquidates and the owners and liquidators do very nicely, thank you. You might think this is illegal. It isn't. You might think it is fraudulent. It is, but the States have ceded their power to the Feds for Corporations law and ASIC is incompetent - so you are on your own. The Queenland Police won't touch it and the Feds will just go "Duhh!" You might also think that Consumer protection should deal with this. It does. Taking money while not intending to deliver the goods is a breach of S.58 of the Trade Practices Act. But getting the ACCC to act on such breaches gets just another "Duhh!" response. Frankly, we were better off under the common law and the early (like 1890's) Sale of Goods Act than we are today.

5. If it is a private Company ask what the ACN is and what the paid up capital is. If the paid up capital amounts to a $2 company or a $200 company it means the shareholders have paid stuff all to set up the company/companies and may stand to lose just tiny amount if it goes bust. But don't walk away yet. Ask how the Company is funded by the shareholders and what the owned assets are. If the answer is that that owned assets are secured by loans from the shareholders and the rest is leased or rented, ask the Directors to personally guarantee delivery of the boat or return of your money. If the Company is solvent they should. If it is insolvent they won't or they are stupid. Stay or walk away accordingly.

6. If the private company has significant paid up capital by the shareholders and little debt to them it means that these shareholders accept that they stand last in line to get anything back if the business goes bust. Therefore it likely that they are working hard to make sure they don't go bust. If they are likely to go bust they will stop trading and taking money and source funds to continue the business or they will inject funds to meet their obligations before liquidating, rather than lose control of the assets.

7. If you are buying through a dealership you are no better off. You place an order and the dealer places it on a builder but the builder will usually invoice a floorplan financier - not the dealer. If you have paid money to the dealer and he goes bust you lose it and the boat builder gets the boat back minus the floorplan financier's fees.

8. If you are buying from OS you need to set up a letter of credit that can only be negotiated by authority of the shipper. This means the seller doesn't get any money until the shipper accepts the bill of lading and the cargo (your boat) "passes over the rail of the vessel" which means it's on board and coming to you.

A bit long winded and I've had a rant. Hope it helps.

Regards,

White Pointer

[sharkcat one]

For me it's pretty hard to keep a boat in stock , unless you want a white one ( I have demo's and the use of some customers boats ) , as most of our boats have different coloured gelcoat hulls and decks .

cheers

[boatie_72]

Last time I checked using floor plan, the builder does still not get paid till the job is complete. Yes for larger vessel you can use progress payments from floor plan, but for most of the builders I mentioned they do not use that facility as it cost way too much. But keep in mind for those manufactures they can have up to 60+ boats on the go at any one time which they have to finance.

I don’t disagree that we all have to start small and work our way up, we have been there. But there is also a right way of doing it and a wrong way is all I am say.

[Jarrah Jack]

Thanks everyone for their very considered replies and I hope this discussion will be read by a lot of people.

I invite Noble Boats International and Seascape to take part in this discussion as well. The reason for this invitation is because reps from both companies have been discussing various issues on recent threads.

Cheers