The Gentleman’s Lawyer

Episode two of our Gentleman’s Lawyer series looks at the benefits and dangers of investing in a classic car…

Dear Gentleman’s Lawyer,

I am looking to invest in classic cars. I am a big fan and hear that as well as a pleasurable hobby, classic cars can be a good investment.

Anyway, a syndicate have approached me to join them in buying a Ferrari GTO. If you have any experience in this area, please could you let me know how I should approach this kind of business, and what I need to get in to place to make sure I am properly covered by any potential problems.

Thanks Gent’s Lawyer!

(Bertie, by email)

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Dear Bertie,

I am so glad you contacted me about this kind of investment. I too am a big classic car fan, and I have been lucky enough to work on some of the most elaborate purchases; a 1953 250 Mille Miglia Berlinetta and a few 1962 Ferrari 250 LMs, among others.

I suggest you approach this business with caution, as a lot of newbies get sucked in by the old hands, and without the proper contract, they can find themselves out of pocket on what may as well be a phantom car.

Syndicates will often present you with an agreement of ‘fractional’ or ‘shared’ ownership. Similar to when a group of people collectively own a racehorse, each party to the agreement will own a share of the car. However you should carefully read what your rights are to the car, what kind of power you will have in making decisions about the car (e.g. Can it be driven? Who decides when it needs maintenance? How are maintenance and security costs divided? Do you have any say about when it can be sold? etc. etc.).

So, among many other details, these are some of the most important clauses that should be included in the fractional ownership agreement with which you’re presented:

• Regulation: How the ownership will be governed, the requirements to the ownership and the sale or resale of it.

• Gains Taxation: How owners will be taxed on profits made from a sale of equity.

• Protection from Creditors of other Co-Owners: Whether the car and/or the co-owners are protected from the co-owners’ creditors.

• Disputes: How ownership disputes are determined and the consequences when a co-owner does not fulfill his/her obligations

• Death: How the death of another co-owner will affect the other co-owner(s), and what will happen to the deceased co-owner’s share

Regardless of the above, my main suggestion would be to use a solicitor, especially a good one with experience in this niche area of law.

All the best,

The Gentleman’s Lawyer

To discuss any of the above or other legal matters, please contact the Gentleman’s Lawyer at lawyer@thegentlemansjournal.com.