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Admiralty law |
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In a ship mortgage (common law) or ship hypothec (civil law term, covering also a maritime lien), a shipowner gives a lender (or mortgagee) a security interest in a ship as collateral for a mortgage loan.[1] Similar to other types of mortgages, a ship mortgage legally consists of three parts: the mortgage loan, the mortgage document (deed) and the rights derived from the mortgage deed onto money lender. Ship mortgages differ from other types of mortgage in three ways. First, some privileged claims could have a higher ranking over that of mortgagee against the ship. Second, ships naturally move between jurisdictions. And third, a ship is always at risk of partial or total damages at sea. The use of ship mortgages emerged as a widely accepted practice in shipping industry in the 19th century as a major source of finance for ship owners.
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