Shipping is an important sector of the Cyprus economy. Consequently, shipping finance is an essential part of the Cyprus shipping industry. International and national financial institutions can shape the development of the shipping industry on the island. In addition to banking and financial institutions, another important dimension that must be taken into account is the provision of high-quality legal services.

Mortgages are a very popular tool to guarantee the payment of a loan or any other financial obligation of a shipping company towards its creditors. The mortgage is constituted on a ship in favor of the creditors. Precisely the Cyprus Merchant Marine Law No. 45/1963 (Registration of Ships, Sales and Mortgages) allows the constitution of a mortgage on all or part of the ship. The latter constitutes a guarantee for the generation of a loan.

To create a mortgage, the vessel must be registered under the Cyprus flag. Generally, a mortgage constitutes a guarantee of a loan or other financial obligations based on the terms and conditions agreed upon by the parties, without the need for exchange permission control. At this point, it should be clarified that the law of Cyprus does not allow the creation of a mortgage on ships registered in parallel in the Cyprus Ship Registry. In other words, a mortgage can only be constituted if a vessel is registered provisionally or permanently.

As soon as a mortgage is created, it must be deposited with the Cyprus Registrar of Ships or with a consular officer following the instructions of the Registrar. The mortgage is presented in the Registry of Ships from the date and time of its deposit. It remains as a lien on the ship until the mortgagees release it. It should be noted that mortgages on ships have priority over others depending on the exact date and time of their presentation to the Registrar.

In case the ship on which a mortgage was created belongs to a Cypriot company, the mortgage must also be registered in the Registrar of Companies within a period of 42 days after its creation. In case of liquidation of the shipowner company, the security of the mortgagee is guaranteed and protected. The mortgage can be transferred by completing the legal transfer form and then submitting it to the Cyprus Registrar of Ships or a consular officer.

Release of a mortgage

A mortgage is discharged only if the mortgagee properly executes a discharge memorandum. Subsequently, it must be validated and handed over to the Cyprus Registrar of Ships or a consular officer following the instructions of the Registrar.

Protection of Mortgage Rights:

In Cyprus, mortgage rights are protected under the provisions of the Admiralty Law. Some of the most important supplies are listed below:

  • A mortgagee may bring legal action for foreclosure in a court of Cyprus, or may exercise his assigned right of disposition of the vessel or its part which is subject to the mortgage.

  • The mortgagee has the right to sell the mortgaged vessel. However, if there is more than one mortgagee, they will need a court order.

  • In the case of a forced sale by auction or other private agreements, then the mortgagor’s right takes precedence in the distribution of the rent.

Advantages of boat mortgages in Cyprus:

The Cyprus Mortgage System offers some considerable advantages, some of them are listed below:

  • The details of all registered mortgages are securely archived.

  • The bureaucratic procedures related to the registration, transfer and cancellation of mortgages are not complicated and efficient.

  • As mentioned above, registration of a mortgage can be done at a Cyprus consul. In other words, the registration of a mortgage can take place abroad without unnecessary delay since the date of deposit of the mortgage to a Cypriot consul is considered as the date of registration.

  • In case the vessel is provisionally registered, its status will not be affected by its permanent registration.

  • No stamp duty is imposed on any mortgage document.

Create a Naval Mortgage:

The constitution of a naval mortgage requires adequate legal and administrative guidance that ensures the interests of all parties. If you wish to receive more information, contact us: [email protected]