Earlier we gave the tip here to have a hull under construction registered with the Land Registry. In practice, even that is not enough. As Ab van Buuren noticed.
It is a difficult time for many boat builders. The credit crunch is hitting hard and many shipyards are balancing on the edge of the abyss. In the past, the subject of shipyard bankruptcy and what you can do to minimize your risk and damage has been discussed many times. One of the tips was to get your ship under construction registered with the Land Registry, which makes the legal relationship of you to the ship from register clear to others. Once the ship is a registered property, it can also only be legally transferred into ownership through the mediation of the notary and the same conditions apply to transfer of ownership as, for example, with a house. When the shipyard starts building the hull – and at a certain point there is an actual hull that is eligible for registration and branding – it is not yet registered property. It only becomes so after it has been registered by the Land Registry in the appropriate register and branded by employees of the Land Registry.
In the case of Ab van Buuren the trustee argued that, despite the fact that the ship had been registered with the Cadastre before the date of bankruptcy, ownership had not yet been transferred from the shipyard to the client. The trustee argued that since the ship had only been transferred to the buyer one day after the bankruptcy date, the yard had become powerless to dispose of the ship at the time of transfer and could therefore not legally deliver the ship. At the moment of bankruptcy a party becomes unpowered to dispose of all its property and this power of disposition is taken over by the trustee and the bankrupt party can therefore no longer conclude contracts or dispose of property itself. Ab van Buuren, however, was under the impression that when the ship was registered, it was also legally his property. The District Court followed the trustee in his argument that merely registering the ship does not mean that the ownership is validly transferred to the buyer/principal, but that a prior specific legal act between both parties is necessary. This legal act would then have to be the actual delivery of the hull by the yard to the client.
Van Buuren had to prove that a delivery/transfer of ownership had already taken place before the date of bankruptcy. Fortunately he was able to prove that before the registration he had agreed with the shipyard that the ownership of the vessel would be transferred to him and that the shipyard would keep the vessel to finish it. Unfortunately, neither party had put this in writing, so they had to testify under oath that they had indeed made this agreement. And so it happened, as an oral agreement is just as valid as a written agreement. What does this mean for you prospective client? As soon as possible after the hull is built or the keel is laid, in any case at the time when the ship can be considered for registration, you must agree in writing with the shipyard that it delivers the hull and all associated goods to you constitutum possessorium, with the simultaneous statement that it no longer holds the goods for itself, but for you. Subsequently you have the vessel registered at the land registry. The mere registration of the vessel with the Cadastre is indeed an indication for third parties that you are the owner of the vessel, but is not a legal act in itself and therefore does not automatically transfer ownership of the hull to you!
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