Ship Mortgage and Pledge

GENERALLY

          maritime transport and trade involve high costs and significant risks, security mechanisms between shipowners and financial institutions are of paramount importance. This is where of ship mortgages and ship pledges come into play.

WHAT IS A SHIP MORTGAGE?

A ship mortgage is the establishment of a lien           on a ship for a specific debt . Through this mortgage, the creditor can collect their debt by having the ship sold through forced execution if the debt is not paid. Like real estate mortgages, ship mortgages are subject to official registration.

CHARACTERISTICS OF SHIP MORTGAGES

• in the nature of a right .
• registration in the ship registry .
• It can be established for both current and future debts.

Mortgage types are divided into two categories : fixed-amount mortgages (for a specific amount) and maximum-limit mortgages (up to a specific upper limit)

HOW TO ESTABLISH A SHIP MORTGAGE?

• Contract between Ship Owner and Creditor: A mortgage agreement is drawn up in the presence of a notary public.

• Ship Registration: The mortgage must be registered in the ship register at the port authority.

• Payment of Fees and Expenses: There are certain fees and tax obligations involved in establishing a mortgage.

WHAT IS A SHIP MORTGAGE?

        A ship pledge is a limited real right established on a ship in favor of a creditor. A pledge is a broader concept than a mortgage and can be established not only on registered ships but also on smaller boats and ship parts.

DIFFERENCES BETWEEN MORTGAGE AND PLEDGE

• Registration Requirement: Mortgage registration is mandatory; pledges can sometimes be established through physical delivery.

• Scope: A mortgage covers the entire vessel, while a lien sometimes only covers specific parts.

• Execution Procedure: Both methods involve collecting debts through compulsory execution, but the procedures may differ.

LEGAL CONSEQUENCES OF SHIP MORTGAGE

        When a ship mortgage is established, the creditor acquires certain rights:

• Power to Sell for Money: If the debt is not paid, the ship can be sold.

• Priority Right: The creditor has priority over other creditors during the sale of the ship.

• Right of Enforcement: Even if the vessel changes hands, the mortgage remains valid for the new owner.

ERRORS MADE IN SHIP PLEDGE AND MORTGAGE PROCEDURES

• Incomplete mortgage registration.

• The amount of debt covered by the mortgage was incorrectly stated.

• Failure to renew secured receivables on time.

• Incorrect procedures were followed in the debt collection process.

These errors could lead to the creditor losing their rights.

CONCLUSION

Ship mortgages and pledges are the most effective security instruments used in the maritime sector to ensure the safety of creditors. Both the regulations of the Turkish Commercial Code and international conventions establish a rigorous legal framework regarding the validity and enforceability of these rights. However, even a small mistake during the establishment of these rights can lead to the inability to collect the debt or to lengthy legal proceedings.

Gozdenur Turna