We have recently been involved in two separate transactions involving significant sums of money. In one case, a well known and reputable Yacht Broker put forward Standard Terms and Conditions as to the transaction, which clearly incorporated a number of typographical errors, but more importantly, included a clause which did not provide proper security for the deposit paid to them, and arguably, therefore, could have resulted in the purchaser being able to demonstrate absolute entitlement and ownership of the deposit in the event of the transaction failing. Efforts to agree a sensible variation of the standard contract to resolve the problem failed when the Brokers were seemingly unable to secure their client’s consent to a variation of the standard form agreement they were using. As a consequence, the purchaser chose not to take the risks of proceeding in those circumstances, and now looks elsewhere.
By contrast, and in respect of another transaction of similar significant value, Brokers have simply agreed to allow us to hold the deposit on the client’s behalf as evidence of the client’s commitment to the transaction, and to proceed with the survey and inspection with a view to ultimately completing the matter if the client is entirely happy with the purchase. Alternatively, both parties essentially walk away from the transaction. Buying a boat is not dissimilar to buying a house, and one has to question how many purchasers, sensibly advised, would hand over a 10% deposit to buy a house in advance of their having the benefit of their survey/valuation report. One also has to question how many people, selling a house in those circumstances, would instruct Estate Agents not to proceed to allow such a survey or valuation, until the deposit money is in their hands.
With values of houses and boats ever rising, and with it being clear that there is no present excess of demand over availability, it may be time to think again about the whole model of yacht purchasers and, in particular, whether a deposit should become payable in advance of the survey, and how that deposit (if paid) should be held, given the unpalatable fact that the current economic climate has inevitably put very real pressures upon all marine associated businesses, not least Brokerage. Most Brokers fully accept and recognise the realities of the situation, and the need to provide absolute security to ever more cautious purchasers, but there can be no doubt that the seeming universal belief that a deposit is both necessary and that pursuing it, even at risk of jeopardising the transaction, must always be in the Vendor’s best interests. It can undoubtedly be argued that the payment of a deposit serves to protect the Vendor from time wasters, and that it will prevent “gazumping“. In better, more affluent times, that may have made sense, but certainly not now. There can be no doubt that much progress has been made in recent years in simplifying the circumstances in which a purchaser is able to walk away from transactions where the vessel fails a survey or sea trial, and accordingly, in increasingly “easy in, easy out” contractual arrangements, the only real financial exposure that a purchaser has is to the lift in, lift out charges, and touching up any anti-fouling which may have been abraded as part of the survey process. The former can be readily dealt with by getting the charges paid to the Marina Operators “up front” and I have certainly yet to see anyone refuse to meet reasonable expenses, even if they are not proceeding with the transaction.
There can be no doubt that some Brokers are still very much attracted to the idea of taking a deposit, as it provides them with absolute security for their commission charges. Surely, that is a matter, which can be far better addressed by an open and realistic conversation with the Vendor. It may be that payment of deposits (certainly on the present terms and at the present rates) is no longer going to be assumed to be the norm, and Brokers may need to give careful consideration as to whether embracing change will be in their client’s and the Vendor’s best interests, and in turn, in terms of marketing. We have only to look at Ebay to see that the world is increasingly looking for simple and cheap solutions to sales transactions, and those who can embrace change and adopt new procedures, will doubtless greatly benefit from them.