Lien on horse sold / raced in the States???

[TrueColours]

A friend of mine (Canadian) is selling a youngster to a buyer in the States, specifically as a race prospect.

The agreed price was XXX - lets call it $10,000.00 and they are paying $5000.00 up front and have told him that he can put a lien on the balance owing of $5000.00 and that as the colt runs and (hopefully!) makes money at the races, that after the jockey is paid his fees, they are next in line to collect any proceeds from purse monies and the balance of $5000.00 can be paid off in this manner, as long as the colt DOES make money

he is willing to go forward with this set up but asked me if I had ever heard of anything being done like this (I havent) but was told that it is done in the States "all the time"

Is that correct and if so, are there specific forms one fills out to get this set up? Do you then file those forms with the Jockey Club? Or with specific tracks? Who do you give them to to protect your own interests as seller?

Many thanks for any/all suggestions and assistance on this one!

[Strategic Maneuver]

I would advise your friend to tread carefully on this as once that horse crosses into the US and his JC papers show them as new owner, your friend will have little recourse to ever get the rest of the sales monies, no matter how much the horse earns or "doesn't earn". He could perhaps "lease" the horse to these buyers until such time as they have paid him the agreed upon amount.

[BenB]

It was done the same way overhere, but if the horse is sold outside than there is no way the original seller getting his money.
So I should not dealing this way.

[madelyn]

I've done all kinds of deals.. sold horses on time payments, cuff deals, etc. Here is what I would suggest.

You could write a contract selling 50% of the horse at this time to the buyer. Sign the papers to the buyer AND the seller. In the contract, stipulate that once the buyer's share of the horse's earnings reach $5000 the horse will be transferred entirely. Here's the sticky part - when the horse wins a race, the bookkeeper at the track will make the check out to both owners, unless one of the owners has provided an affidavit regarding dispersal of the funds. The seller needs to sit on the horse (watch stable mail, etc.) and probably be involved in the first few races. You can't ask the buyer to run a track earnings check up to Canada to be endorsed.

[Dave C]

The person your friend needs to talk to is his banker. Liens can be put against livestock, North of the border anyways. Bankers are familiar with the paperwork. Having said that, banks have been burnt many times when the livestock have been sold out from under them, so even a lien would seem to be a 'good faith' arrangement.

My advice: JC papers only get signed when the seller has received the amount they are willing to accept as final payment for the horse. Those papers are the only real leverage the seller has once the horse has left the premises. Contracts aren't worth the paper they're written on to some people, and unless there is a significant amount of money at stake they aren't worth going to court to enforce.

[madelyn]

Dave C, my advice was to sign the papers over to both parties. IE: If Jim is selling the horse to Bob, then Bob AND Jim are both listed as owners. The papers HAVE to go to the track where the horse will race. Bob would have rights to enter the horse, etc. The gotcha in that is that Jim will have to get an owner's licence where the horse is racing, and earnings checks will be made out to both owners. But it DOES protect the seller's interest. The seller can't leave the papers in his/her name alone, because then the buyer has no rights as a race owner.

[Danzig]

If this transaction is being conducted with a US citizen from any of the 49 states other than Lousiana, one would be well-advised to follow the (US) Uniform Commercial Code (UCC) as it pertains to contracts.

However, if Canadian contract law would prove to be more favorable to the seller in question, said contract could be drawn-up explicitly stating that all disputes will be settled in the legal jurisdicition of which the seller resides.

[TrueColours]

Thanks so much everyone, as always ...

You have all raised a lot of points I wouldnt have even thought of.

Ive sent him the link to this thread so he can mull over the suggestions that have been given to him and see what he wants to do to protect his interests in this colt

But what happens if he is half owner, and the blacksmith bills, vet bills, etc dont get paid? Wouldnt he then be liable for half of those costs as well?

Also - what track is in Erie, PA?

[madelyn]

In a deal I did last year, the buyer offered me 10% of the horses for 20% of the selling price, net. In other words, I kept 10% ownership of the fillies, no expenses. This is an easier deal to follow up on than a "cuff" deal where the buyer promises you x dollars "if" the horse wins.

So I get 10% of the EARNINGS of the horse and pay no expenses. I went from the sole owner on the back of the papers to the third listed owner. When one of the fillies ran last week, I filled in paperwork for the track including my percentage (10) of ownership. We didn't cap the deal. It is possible the filly will be sold or put in a claimer around the time the 20% of the purchase price is reached. If not we can look at it when the earnings are there and I choose at that time to "sell out" my interest for a buck or whatever is left owing, or maybe buy back in. It worked out, since only one of the fillies is racing now. The other got hurt in a stall accident and is working as a lawnmower.

In your friend's case, he/she could maybe retain 25-30% of the horse for 50% of the selling price, capped at $5K in net earnings in the percentage, (no bills, calculated on winnings). If the horse never wins or places, it's moot, and it works just like a "cuff" deal (the seller gets zero) but if the horse goes on, it might also give your friend the option to "buy back in" if the price is right.

[summerhorse]

I would sure do a financial and background check on the buyer. I guess it depends on how much he wants the horse sold and if he is willing to risk a very real possibility of never seeing the horse again. And yes he'd be responsible for half the bills (or all of them) if the guy didn't pay them.

I think I would lease the horse. Remain as owner (would need a license as said) and all the checks would go to him until horse is paid off. Then as soon as he was sign him over.