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Registration of Mortgage

Registration of a mortgage should be applied for from the authority maintaining the relevant register, which in most cases is Trafi (see Sect. 12.1). Eligible to apply are the owner of the means of transport or, with the owner’s consent, the creditor whose claim the mortgage is meant to secure (Vessel Mortgage Act, Section 24; Vehicle

Mortgage Act, Section 3). A mortgage expires 10 years after the date of registration, but can be renewed (Vessel Mortgage Act, Section 32; Vehicle Mortgage Act, Section 6).

A mortgage is registered against a means of transport, not against the debtor or other owner of the means of transport. Accordingly, a registered mortgage continues to encumber a means of transport even if its ownership is transferred to another person.

The mortgage system for means of transport resembles notice filing systems in that a registered mortgage only indicates that a security right (a charge) over the means of transport may exist, with a certain priority position. It is possible, for example, that the owner of a means of transport registers mortgages “just in case”, but never creates security rights. However, a registered mortgage gives more information to a person searching the register than a filed notice does. In particular, it indicates the maximum amount of money that the secured creditor is entitled to from the value of the means of transport with priority over other creditors, assuming a charge has been created. A bearer bond or other document expressing a monetary obligation must be appended when registration of a mortgage is applied for from the register authority. This requirement brings the mortgage system closer to a deed registration system, even if the document does not express an actual debt owed by the owner, and even though it does not indicate creation of a security right.[1]

The amount of money for which registration of a mortgage is applied for is up to the applicant to decide (when creating the bearer bond). “Accuracy” in the sense that the amount should correspond to some particular secured claim is not relevant from the register authority’s point of view. It is in the applicant’s interest that the amount fits the purpose for which registration of mortgage is applied for. As noted in Sect. 12.2, the idea of the “system of two promissory notes” is that a bearer bond with mortgage entry can be reused to secure several successive claims.

At present, the State does not guarantee that registered information reflects the true state of titles,[2] but the mortgage acts are supposed to ensure that this is so, as follows: According to Section 25(1) of the Vessel Mortgage Act, the register authority will not register a mortgage if the person who consented to registration is not recorded in the register as the owner of the vessel.[3] Subsections (2) and (3) concern situations where ownership of a vessel, or of a part of a vessel, has been transferred to another person, and registration of a mortgage is applied for based on the earlier owner’s consent. A mortgage can be registered if the application has been submitted before the register authority is requested to register the new owner’s acquisition of ownership. If this request comes before the application for mortgage registration, the mortgage will not be registered. According to Section 26(1), an application for mortgage registration will be rejected if it concerns a vessel, or part of a vessel, which is subject to distraint by the enforcement authority, belongs to a bankruptcy estate, or is subject to an ownership dispute before a court of law. Subsection (2) prescribes that a mortgage is void if it has been registered while a vessel, or part of a vessel, was subject to distraint or part of a bankruptcy estate, but before the register authority was informed about these circumstances. All these provisions apply to aircraft mortgages by virtue of Section 2 of the Aircraft Mortgage Act. The Vehicle Mortgage Act has its own provisions, which however largely correspond to those of the Vessel Mortgage Act.[4]

  • [1] On notice filing and deed registration systems, see Sjef van Erp, 2004, The Cape TownConvention: A model for a European system of security interests registration? European Review ofPrivate Law 12: 91-110; 96-97, 103-108.
  • [2] See Committee Report 1992:44, 10.
  • [3] This provision should rule out the possibility of conflict between a charge and an earlier retentionof title or financial lease. See Jarno Tepora, 1984, Omistuksenpidatyksesta (Vammala: SuomalainenLakimiesyhdistys), 309.
  • [4] See Section 4 of the Vehicle Mortgage Act. The difference is that the transfer of ownership situations covered by Section 25 Subsections (2) and (3) of the Vessel Mortgage Act are notmentioned.
 
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