8.1 Introduction

8.1.1 The obligations of a mortgagor under a ship mortgage arise under a combination of common law and statute, and by the terms of the form of mortgage and other contractual arrangements between the mortgagor and the mortgagee. However, it is this last category that is the most important, since the deed of covenant will stipulate in detail the obligations imposed on the mortgagor, which will be more extensive than those imposed by common law and by statute. The principal rights of the mortgagor are to redeem the mortgage1 and to retain possession of and to operate the ship. In a statutory mortgage the legal title in the ship remains vested in the mortgagor,2 although this is not the position at common law where legal title is transferred to the mortgagee.3 However in both cases the owner retains possession of the ship until such time as a default by the owner occurs and the mortgagee exercises its right to take possession of the ship or arrests the ship in legal proceedings.