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Loan

Security

4 April 2017

Last revised

minutes

6

Reading time

Without sufficient security in place, having provided a loan to a shell company to buy an expensive, mobile asset, lenders could be left out-of-pocket and finance would be impossible to obtain. While loan security can be found in various documents, the requirements themselves can always be traced back to the loan agreement.

minutes

6

Reading time

4 April 2017

Last revised

Without sufficient security in place, having provided a loan to a shell company to buy an expensive, mobile asset, lenders could be left out-of-pocket and finance would be impossible to obtain. While loan security can be found in various documents, the requirements themselves can always be traced back to the loan agreement.

  • Unpaid crew, suppliers, and collision victims have liens over yachts, creating competing claims for lenders.

  • Port authorities can detain a yacht for unpaid dues, further complicating the lender's position.

  • Yards can have possessory liens on yachts if the owner hasn't paid for works carried out.

  • Mortgages grant lenders rights against the yacht itself in the event of default, and they are the most important type of security.

  • Mortgage registration is essential, either as a statutory mortgage or a common law mortgage, to establish priority and enforceability.

  • Covenants and assignments supplement the mortgage document and dictate obligations and transfers of rights.

  • Deeds of covenant and collateral security documents cannot be registered but are still important for additional protection.

  • Non-statutory mortgages serve as a backup when statutory mortgages are invalid, but they have limitations in enforcement.

  • Yacht registration is required, and the deed ensures the yacht remains registered throughout the mortgage term.

  • Insurance covenants are crucial, and policies must cover the yacht and third-party liabilities to safeguard the lender's interests.

  • Covenants and assignments supplement the mortgage document and dictate obligations and transfers of rights.

  • Deeds of covenant and collateral security documents cannot be registered but are still important for additional protection.

  • Non-statutory mortgages serve as a backup when statutory mortgages are invalid, but they have limitations in enforcement.

  • Yacht registration is required, and the deed ensures the yacht remains registered throughout the mortgage term.

  • Insurance covenants are crucial, and policies must cover the yacht and third-party liabilities to safeguard the lender's interests.