Whilst most reputable and successful yacht brokers operate strict policies, religiously crediting all payments and debiting all payments from a single dedicated client account, there are still unfortunately a dwindling number of brokers who continue to operate with mixed funds.

And the recent events at B A Peters demonstrate that the existence of such a client account does not in itself guarantee the automatic right of repayment in the event that the broker ceases to trade, particularly if there is a shortfall between the sums in the account and the persons entitled to the money.

The increasing using of distributors to market craft, and the fact that so few craft are now manufactured within the UK (or even EU), means that, whereas buyers would normally obtain security for their payments by the proportionate transfer of title as the build continued, the absence of direct commitment by the manufacturer to the purchaser makes such security somewhat illusionary.

It is also difficult to see how some manufacturers, who have built up well known and well established businesses on the basis of funding their trading activities from purchasers’ stage payments, do not have either the intention or the cashflow to finance their day-to-day operations using accrued profit.

The habit of therefore using customers’ money to partly pay manufacturers’ stage payments, but otherwise fund the distributor’s day-to-day operation is commonplace.

Letters of credit
A number of yards have sought to investigate the use of revolving letters of credit or bank guarantees, but ultimately whilst such arrangements may provide a measure of additional financial security, the fees are substantial and ultimately do not address to a conflict of interest between the distributor (and their need to finance the day-to-day operations of the business and the construction of craft, and the purchaser) and the purchaser (would ultimately wish to make no payments of any substance until the vessel is available for immediate collection and use).

A number of brokers are now contemplating providing the additional reassurance of lodging deposits and indeed completion monies with solicitors or other third parties so to provide additional financial security to both purchaser and vendors.

That arrangement, whilst initially attractive, could prove unworkable if the parties have not given careful thought to the specific conditions upon which the money is to be paid, held and, in turn, released.

Brokers have clear (if occasionally competing) obligations both to buyer and seller and tempting as it may be seem to either party's request to lodge monies with a third party for security purposes, this can create as many problems as it solves.

Similarly, the use of escrow accounts by distributors (which involve all payments from the account being agreed by the distributor and purchaser) can create difficulties – particularly if agreed draw downs against manufacturers’ invoices reveal the distributor’s profit margin.

Introducing an industry wide secure system for dealing with customers' money is therefore going to be difficult but arguably essential to maintain public confidence, as events at Northern Rock have demonstrated, one company’s perceived money problem can profoundly influence the public perception of an industry.