Boat Hypothecation Agreement
BoatWiki - Definitions
Definition
A hypothecation agreement as defined in boating terms is a pledge that allows a lender to attain ownership of a boat in the event of a default in repayment. Under these circumstances, the borrower retains ownership, title, and possession of the boat until the occurrence of such event.
Meaning
Marine lenders will typically require some kind of an instrument or agreement that allows them to take possession and forecose on the subject boat in the event of a default on the loan terms. This usually takes the form of a security agreement, preferred mortgage, and/or hypothecation agreement.
Context
A hypothecation agreement, apart from mortgages or security agreements, is not in itself widely employed in the recreational boating industry. However, exceptions may occur where a non-borrower pledges a boat as collateral for someone else's loan or where personal guarantees are required when the borrower is a legal entity.
Conclusion
Boaters who are involved with collateralizing a loan should seek legal assistance with any concerns about hypothecation agreements, preferred mortgages, or security agreements.
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Credits and References
3/1/2022 - Page initiated by Team BoatWiki.
8/3/2022 - Revised and updated.
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