So you have enough money to buy a yacht.
Maybe not a super yacht, like the billionaires own. But there are a lot of yachts to choose from. For just under $1 million you can buy a new 40-foot VanDutch Cruising Yacht, a sleek, speedy craft built for sun-drenched, cushioned comfort up top and air-conditioned relaxation in the hull.
It’s what the owners of an Illinois company thought they would soon get when they put down $150,000 toward its construction in March 2021. As part-time Miami Beach condo owners, the couple envisioned using the boat both for recreation and entertaining clients, according to their attorney.
They figured South Florida was the right place to find one. Fort Lauderdale, widely regarded as the “yachting capital of the world,” is home to nearly 100 yacht sales and brokerage companies, according to the website ftlauderdaleboating.com.
Two years later, they have no boat and no refund, and now they’re paying an attorney to recover their investment in federal court.
Florida might be a great marketplace for all kinds of boats, but before you hand over that cashier’s check to an agent or broker who’s promising to put you in the lap of high-seas luxury, you’ll need to make sure that your money is going to be protected in case something goes awry.
Failure to do so, as numerous boat buyers have learned, could leave you without a boat, without your money, and left to hire an attorney to seek restitution in court.
The complaint that the Illinois company recently filed in Miami against a longtime South Florida seller details two transactions for new boats that have so far left buyers empty-handed after handing over large sums.
Other Florida lawsuits filed by buyers who handed over large deposits for second-hand yachts could have been avoided if the buyers had made sure their money was being kept in a trust or escrow account as required under Florida law, said Miami-based attorney Paul McMahon.
McMahon is representing the Illinois company Med-Stop in its effort to recover the $150,000 that its owner Paul Kwiecinski put down in March 2021 toward construction and purchase of the 40-foot VanDutch yacht that caught their imaginations.
Who’s to blame?
According to the lawsuit, Med-Stop signed a contract with VanDutch Inc., a South Florida-based sales agent for popular VanDutch-branded yachts marketed by an Italian company called Cantiere Del Pardo, but designed and built by separate Dutch companies.
More than two years have passed, and Med-Stop hasn’t received its boat nor its deposit. In its lawsuit against VanDutch Inc., Med-Stop asserts that VanDutch Inc. violated Florida law requiring brokers to place any funds “received pursuant to a transaction” into a trust account in a bank or other financial institution with a net worth of more than $5 million until the sales is closed.
McMahon asserts that the provision covers all yacht and boat sales, and that VanDutch Inc. was required to comply because it was acting as a broker in the transaction.
However, VanDutch Inc.’s attorney Joseph Altschul disagrees, saying in an email that VanDutch Inc., as a sales agent for new vessels, was not licensed as a broker and thus not subject to provisions governing broker transactions.
McMahon says his review turned up no court rulings clarifying whether the requirement also applies to new yachts as well as to yachts being resold. He expects to establish that it does apply to new yachts as well, adding, “It would not surprise me if this case proves to be a wake-up call to Florida yacht brokers in new yacht transactions.”
Met-Stop’s suit claims that VanDutch Inc., its owner, its sales rep, and Cantiere Del Pardo defrauded Med-Stop by keeping its deposit and not delivering the boat Med-Stop’s owner ordered.
In an email responding to the suit, Altschul countered by saying that VanDutch Inc. recently offered to repay the deposit in six monthly installments of $250,000 each, but Med-Stop declined the offer. “All money received by VanDutch Inc. was property handled and remains available to refund to Med-Stop,” Altschul wrote.
In addition, the contract that Med-Stop signed with VanDutch Inc. exempts VanDutch Inc. from responsibility for any failure of the manufacturer to deliver the boat on or by the estimated delivery date, Altschul said.
Moreover, the suit’s assertion that VanDutch Inc. was acting as a sales agent for the Italian company Cantiere Del Pardo was incorrect, Altschul said. “VanDutch Inc. was never a sales agent for CDP,” the attorney wrote. “VanDutch Inc.’s agreement was with Van Dutch Production and Development, BV, a Dutch company, which subcontracted with CDP for production of the boat.”
Co-defendant Cantiere Del Pardo said by email that it “was not associated in any way neither with Med-Stop nor with VanDutch Inc.” and had no knowledge of the contracts discussed in the suit.
Protecting buyers’ investments
The question of how yacht buyers can protect their investments between the time they place their initial orders and pay their standard 10% deposits and take possession of their completed boats is a subject of intense discussion in online yacht-owner forums.
Numerous participants able to buy new yachts acknowledge fearing losing their investments if any of the companies in the construction process goes bankrupt or loses a key supplier. But they give varying advice about the best way to protect themselves, particularly when international boat brands and builders are involved. Because of the complexity such contracts demand, buyers should consider having a lawyer guide them through the process
In an essay posted on his LinkedIn page, Fort Lauderdale-based marine industry consultant Phil Friedman wrote that U.S. consumers can seek protection under the Uniform Commercial Code by “perfecting” what’s called a “preferred first security interest” in the new yacht. This essentially is a lien against the vessel in progress, which the builder must agree to include in the construction contract, that puts the buyer first in line for payout in the event of a shipyard reorganization or bankruptcy, Friedman wrote.
Similar protections are available in Canada and many countries in western Europe, he says, but adds that “new build buyer options narrow significantly” outside of the United States.
Sometimes buyers will visit big, well-established shipyards but find they’re contracting with a separate company that functions as a sales or marketing arm and has no assets to pursue if the vessel isn’t built under terms of the contract.
Trouble can ensue, he said, when the buyer pays a yacht sales company that in turn contracts with a shipbuilding company, which only leases its yard and other operating assets from yet another company.
“Therefore a new build buyer does well always to make sure that his or her contract is directly with the shipyard that will be building the yacht, or that the contract is specifically guaranteed by the shipyard involved, and backed by all the assets of that shipyard, and any other parent or umbrella corporation,” he said.
Another buyer that contracted in 2019 with VanDutch Inc. to build a yacht, a Michigan resident named Scott Wenzel, paid a $1 million deposit to have a 75-foot VanDutch yacht built overseas. When the vessel wasn’t built by the delivery date, Wenzel canceled the deposit and demanded his money back.
The case went to arbitration, as required under Wenzel’s contract with VanDutch Inc., and Wenzel won. Last October, a federal judge issued a default judgment affirming that VanDutch Inc. must repay the $1 million.
Altschul says VanDutch Inc. agreed to the arbitration award and judgment “to help Wenzel and his counsel obtain the money from VanDutch Holding BV, a Dutch company, Van Dutch Production and Development, BV, a Dutch company, and CDP (Cantiere Del Pardo).” He added VanDutch Inc. has since entered litigation against the Dutch entities relating to boats that were ordered but not produced by CDP, including Wenzel’s.”
The conflicts are reminiscent of another lawsuit first reported by the South Florida Sun Sentinel in 2019. In that case, a Wellington man, Kevin Turner, paid nearly $4 million to Fort Lauderdale-based yacht broker Rick Obey & Associates for construction of a vessel by British yacht builder SunSeeker.
Turner neither got his boat nor the money as Obey and SunSeeker blamed each other for a series of events that led to Obey losing its license to market SunSeeker yachts.
According to court records, the matter remains in litigation and Turner is still out his $4 million.
Brokers must hold money in trust
Even if Florida’s requirement that yacht brokers hold buyers’ money in trust or escrow applies only to vessels that are being resold, awareness of the law might have saved untold buyers a lot of money and/or time in court.
In 2019, a consumer sued a Miami boat dealer after paying a $11,150 deposit for a 2008 Hydra Sports 3300 Watercraft and then discovering “several defects” that “required several significant repairs,” according to a lawsuit by the consumer. Refund promises were repeatedly broken, the buyer claimed, and the case was settled after two years of litigation.
In 2014, a Broward County broker convinced a consumer to invest $20,000 to buy a yacht for $40,000 that the broker said would be worth $120,000 once repaired, another suit claimed. The broker promised to put up the other $20,000. After several months passed without repairs being made, the consumer learned that the boatyard where the yacht was being kept was preparing to sell it for non-payment of rent. The consumer had no authority to take possession because his name wasn’t on the title.
But perhaps one of the biggest wake-up calls alerting would-be yacht buyers of the need to protect their investments came in 2019, when Pinellas County prosecutors announced the arrest of longtime Madiera Beach yacht broker Matthew Taylor on charges he was systematically defrauding customers. Taylor, a former fishing guide, had owned the brokerage since 2004, and several of his five victims were repeat customers.
Victims included a man who paid $450,000 toward purchase and repair of an 86-foot Azimut yacht, and a man who gave him $669,955 as partial payment for an Azimut 62E.
According to the Pinellas County Sheriff’s Office’s news release about Taylor’s arrest, Taylor, as a boat broker, was required by law “to place all deposits for vessels into an escrow account that complied with Florida law.” Instead, he “treated the account as if it were a business operating account and a personal checking account, which does not follow the law.”
In 2021, Taylor pleaded guilty to five counts of grand theft and one count of failure to comply with escrow requirements for yacht brokers. He was ordered to serve a 17-year sentence and pay more than $1 million in restitution.
___
© 2023 South Florida Sun Sentinel
Distributed by Tribune Content Agency, LLC.
