Mortgaging of Aircraft

A new or used aircraft that has been purchased for public or private use is generally subject to some form of finance agreement between the buyer and a financial institution who will loan the money. In most cases such an agreement is transacted in the form of a mortgage, whereby the financial institution (mortgagee) agrees to loan the money over a defined period of time at a set rate of interest and repayment schedule.

Technically, this implies that the financial institution owns the aircraft however, it is registered in the name of the buyer (mortgagor) with the transaction and aircraft registration occurring in the same country. In the event that the mortgagor defaults on repayment of the mortgage, the financial institution must rely on the specific laws of the country to ensure that they are able to recover the monies loaned.

In a circumstance whereby the financial institution who gives the mortgage is located in one country and the buyer wishes to register the aircraft in another country; then the financial institution must normally be satisfied that the specific laws of the country of register will recognize the mortgage agreement in the event of default of payment by the mortgagor.

Legislation

Regulations that enable the Authority to maintain mortgage register are promulgated in the "Mortgaging of Aircraft Regulations 1979", and further enabled in the AN(OT)O. In essence these regulations state the following:

1. "Cayman Islands Register" means the register of aircraft maintained in the Cayman Islands in pursuance of the Air Navigation (Overseas Territories) Order.
2. an aircraft registered in the Cayman Islands register or such an aircraft together with any store of spare parts for that aircraft may be made security for a loan or other valuable consideration.

Definitions

The following definitions are applicable in the administration of the legislation:

1. appropriate duty: means the fee payable to register a mortgage as enabled under regulation 10(2) of the Air Navigation (Fees) Regulations
2. mortgage of an aircraft:as per 2.1 (i) above
3. mortgagor: the person or persons in whose favor the monies have been extended
4. mortgagee: the financial institution who has loaned the monies

Fees

Where the registered owner of an aircraft shown on the Cayman Aircraft Register is required to record a lien (mortgage) thereover in the Register, the fee payable is one tenth of one "per centum as valorem" which means one tenth of one percent of the value of the amount mortgaged. As an example, a mortgage of one million dollars ($1,000,000) would require duty to be paid of one thousand dollars ($1000) to register the mortgage however; the registration fee is capped at CI $25,000.00.

Last Updated: 2008-11-27