Since 1 May 2026, a French ship mortgage can be granted on a ship under construction (Transport Code, article L. 5114-6-5). It must be in writing on pain of nullity, can only be granted by the owner and ranks from the minute of its registration. To benefit from it, the buyer must own the hull during construction: the early transfer of title clause becomes the condition for financing.
In June 2026 a Geneva private bank agrees to finance 60% of the construction of a 34-metre sailing yacht ordered by a French client from a yard in La Ciotat, price 11.8 million euros, delivery planned for 2028. Until the spring, its risk department would have required the yacht to be built in the Netherlands or Germany, where the hull can be mortgaged from keel laying, or would have demanded a personal guarantee from the borrower covering all the instalments. It now asks for two things: a clause transferring title to the hull to the buyer at the first instalment, and a mortgage registered on the ship under construction in the district of the yard. The yard, which had never seen this structure, ends up accepting it.
This page deals with financing a new yacht after Ordinance no. 2026-265 of 8 April 2026, which codified ship mortgages in the Transport Code and expressly allowed mortgages on ships under construction. It describes the texts, what they allow, what they do not yet say, the place of maritime liens that rank ahead of any mortgage, the interaction with foreign registries, and how the lender, the yard and the buyer should organise the contract so that the security exists on the day it is needed.
1. What the Ordinance of 8 April 2026 changed
Until 30 April 2026, the Transport Code referred, for ship mortgages, to section 7 of Chapter I of Title IX of the Customs Code (former article L. 5114-6, now repealed). The regime was customs-based and scattered, and its application to a hull not yet registered under the French flag was not self-evident. Ordinance no. 2026-265 of 8 April 2026, in force since 1 May 2026, created articles L. 5114-6-1 to L. 5114-6-10 in the Transport Code, which now form the general law of the French ship mortgage.
French-flagged ships may be mortgaged, except those flagged under a bareboat charter; they may only be encumbered by contractual mortgages, and the mortgage must be created in writing on pain of nullity (Transport Code, article L. 5114-6-1). It can only be granted by the owner of the ship or by an agent holding a special power (article L. 5114-6-2). Unless otherwise agreed, it extends to the hull and to all accessories, machinery, rigging and equipment, but not to freight (article L. 5114-6-4). It may be granted on a ship under construction (article L. 5114-6-5). The conditions for its publication and preservation are set by decree (article L. 5114-6-6). Priority is determined by the order of the dates, hours and minutes of registration, mortgages registered at the same moment ranking equally (article L. 5114-6-7). Registration secures, at the same rank as the principal, two years of interest in addition to the current year (article L. 5114-6-8).
The text on ships under construction is short and imposes no condition as to the stage of construction, unlike German law, which requires keel laying and visible marking (Schiffsrechtegesetz, § 76). Nothing therefore prevents, on its wording, mortgaging a hull from the first instalment. The difficulty lies elsewhere: a mortgage is registered on an identified ship, and a ship under construction has no final name, no port of registry and no French flag. That is the function of the register of ships under construction, examined in the next section.
2. The register of ships under construction, the basis for registration
All registered ships and all ships under construction on the territory of the French Republic must be entered in a register kept by the administrative authority designated by order of the minister responsible for the sea (Transport Code, article L. 5114-2). For each ship a record is drawn up setting out the particulars needed to identify the vessel, the name of the owner, with the names of all co-owners and their shares, and the rights over the ship (article L. 5114-3). The register is public and anyone may obtain extracts (article L. 5114-4). Implementing rules are set by a Conseil d’État decree (article L. 5114-5).
This register existed before the Ordinance, but it was little used: a buyer who had his ownership of a hull recorded there did so out of caution, with no case law to tell him what the entry was worth. Article L. 5114-6-5 gives it a new function. A mortgage on a ship under construction has no possible basis other than the record of the ship under construction, which shows the owner and the rights over the ship; that is where registration must be made, in the district of the yard, before the ship receives her name, her port and her flag. The implementing decree provided for by article L. 5114-6-6 will set the form of that publication and its preservation, and how the entry on the record of the ship under construction will be carried over to the registered ship at delivery. At the date of this page, that decree has not been published and the practice of the registration services is not known. A lender registering today should therefore provide in the credit agreement for an obligation to repeat the registration when the ship is registered, at the borrower’s expense, and for a ranking clause that does not depend on an administrative practice not yet settled.
3. Only the owner can grant a mortgage: the transfer of title clause becomes key
The rule of article L. 5114-6-2 is the hinge of the whole mechanism. A mortgage can only be granted by the owner of the ship or by a special agent. Yet, unless otherwise agreed, title to a ship under construction only passes on acceptance of the ship after trials (Transport Code, article L. 5113-3). A buyer who has signed the contract proposed by the yard, without an early transfer clause, owns nothing until delivery and therefore cannot grant his bank any mortgage over the hull he is financing. The yard, for its part, could mortgage it, in favour of its own bank.
Two structures follow. The first, the only satisfactory one for the buyer, transfers title to the hull to the buyer as payments are made, with the transfer entered on the record of the ship under construction and a mortgage granted by the buyer to his bank over that hull. The yard keeps custody and risk, and undertakes not to create any security over the hull or over equipment marked in the buyer’s name. The second, which yards sometimes propose, leaves the yard as owner and has it grant a mortgage in favour of the buyer’s bank, as security for the obligation to deliver; it is fragile, because the buyer’s bank then becomes a mortgagee of a yard whose borrowing and other registrations it does not control, and because if the yard becomes insolvent the hull remains in the estate. The first structure has an immediate commercial effect: a yard that refuses early transfer refuses bank financing for its client, and says so to its bank.
The credit agreement must reflect this sequencing. Drawdown of each instalment is conditional on three documents: the buyer’s surveyor’s certificate that the milestone has been reached, entry of the corresponding transfer of title on the record of the ship under construction, and the refund bank guarantee covering the amount paid. The mortgage is granted in writing from the first transfer, registered in the district of the yard, and its scope automatically extends to the portions of ownership transferred later, the ship’s record being updated at each milestone.
4. Maritime liens rank ahead of any mortgage
The lender must know that the mortgage is not the first security on the ship. The following are privileged over the ship, the freight and their accessories, in this order: legal costs incurred to bring about the sale and the distribution of the price, port dues and taxes, pilotage, custody and preservation costs since entry into the last port, claims arising from seafarers’ employment contracts, salvage rewards and contributions in general average, compensation for collision and for personal injury or property damage, and claims arising from contracts made by the master outside the home port for the needs of preserving the ship (Transport Code, article L. 5114-8). These privileged claims rank ahead of any mortgage, whatever its registration rank (article L. 5114-13). Ordinary-law privileges, by contrast, only rank after mortgages (article L. 5114-14).
For a ship under construction, these liens are mostly theoretical: there is no voyage, no crew, no salvage. They become real from sea trials and delivery. Two rules reassure the lender. Liens are extinguished after one year, six months for claims for supplies ordered by the master (article L. 5114-17), and they are also extinguished, in case of a voluntary transfer of ownership, two months after publication of the transfer deed (article L. 5114-19). A diligent lender therefore requires, at delivery, a certificate of absence of privileged claims and hull insurance covering the risks of the trials, the mortgage extending to the insurance proceeds only if the loan agreement arranges this by assignment.
5. French flag, change of flag and the mortgage
The French ship mortgage assumes a ship that has been or will be registered under the French flag. A French-flagged ship is built in the territory of an EU Member State or has paid the import duties and taxes due there (Transport Code, article L. 5112-1-2), and meets the ownership or management conditions of article L. 5112-1-3. Francisation confers the right to fly the French flag (article L. 5112-1-1) and leads, with registration, to the entry of the ship and the issue of a registration certificate (article L. 5112-1-11), after a safety inspection (article L. 5112-1-12).
The Code protects the mortgagee against the ship slipping away. Any voluntary operation that results in the loss of the French flag of a mortgaged ship is prohibited, except suspension of the flag for a bareboat charter, and anyone carrying out such an operation with intent to breach the prohibition incurs the penalties for breach of trust (article L. 5114-6-10, I and II). A ship cannot be struck off the French flag by the authorities if it is subject to a published and preserved mortgage (article L. 5112-1-8), and suspension of the flag for a bareboat charter requires the prior consent of the mortgagees (article L. 5112-1-7). Finally, and this is the most useful text for construction abroad, mortgages granted by the buyer before francisation on a ship bought or built abroad are valid and effective provided they are published in France (article L. 5114-6-10, III).
This last text allows a French bank to finance a hull built in Vollenhove or Viareggio on a French-law mortgage, published in France from the outset and destined to rank on the French-flagged ship at delivery. It does not remove the need for local registration: it is the registry of the yard’s country that makes the buyer’s ownership enforceable against the yard’s insolvency administrator, and it is the French registration that gives the lender its security under the law of the flag. The two are cumulative, and the page on Dutch, German and Italian yards describes the local registries.
6. What the lender must require from the construction contract
The lender is not a party to the construction contract, but it is its first reader. It requires the contract to contain the progressive transfer of title clause with registration, a prohibition on the yard encumbering the hull and marked equipment, the independent refund guarantee for advance payments of which the lender is named beneficiary or assignee, a clause insuring the hull under construction for its rebuilding value with assignment of the proceeds, a licence over the plans allowing completion elsewhere, and an international sanctions compliance clause. It also requires the contract to name the flag, the classification society and the applicable code, because a ship that cannot be certified has no value as collateral.
The lender also takes, for the period before the mortgage is registered or to supplement its scope, a pledge of the borrower’s rights under the construction contract and the refund guarantee, and an assignment of insurance proceeds. These ordinary-law securities are not mortgages; they bear on claims, not on the hull, and give no right to follow the asset. They only make sense as a supplement to the mortgage on a ship under construction, not as a substitute, and that is precisely what the reform of 1 May 2026 has made possible in France.
7. Co-ownership and holding structures
Where the ship is operated in co-ownership, each co-owner may mortgage its undivided share, and the manager may mortgage the ship with the consent of a majority of interests representing three quarters of the value of the ship (Transport Code, article L. 5114-6-3). For a yacht held by a company, the mortgage is granted by the legal representative or by an agent with a special power (article L. 5114-6-2), which means the powers must be up to date and, for a foreign company, that its capacity to grant a French-law mortgage has been checked under the law of its seat. A lender financing a holding structure in practice requires, in addition to the mortgage, a pledge over the shares of the owning company, which gives it control over the company itself in case of default.
The choice of structure also affects francisation: the company must have its seat in the Union or the European Economic Area and the ship must be managed and controlled from a permanent establishment in France in the cases provided by the Code (article L. 5112-1-6), failing which the ship will not be registered under the French flag and the French-law mortgage will have no basis. This point is settled before the construction contract is signed, not at registration.
The firm advises lenders, buyers and yards on structuring these transactions and drafting yacht construction contracts: contact us.
For a complete picture, our practical guide Building your yacht: a French or a foreign shipyard, which law are you choosing? compares the four national regimes, France, the Netherlands, Germany and Italy, and ends with a comparison table and model clauses; it can be downloaded free of charge. To have your own situation reviewed, contact the firm.
Further reading: Buying a second-hand ship on the Norwegian Saleform 2012: key clauses and disputes.
Frequently asked questions
Before 1 May 2026, did one have to wait for launching to mortgage a hull?
Before Ordinance no. 2026-265 of 8 April 2026, the Transport Code referred to the Customs Code for ship mortgages, whose texts concerned French-flagged ships, and a mortgage over a hull not yet registered relied on an interpretation that lenders did not always accept. The new article L. 5114-6-5 settles the point: a mortgage may be granted on a ship under construction, with no condition as to the stage of construction. The publication rules remain to be set by decree (article L. 5114-6-6), and a prudent lender provides for registration to be repeated when the ship is registered.
Can my bank take a mortgage if the yard remains owner of the hull?
Not from you. A mortgage can only be granted by the owner of the ship or by an agent with a special power (Transport Code, article L. 5114-6-2), and unless otherwise agreed the yard is the owner until acceptance (article L. 5113-3). Only the yard could then mortgage the hull in favour of your bank, a fragile structure that leaves the hull in the yard’s assets and in the insolvency estate. The solution is an early transfer of title clause, entered on the record of the ship under construction, followed by a mortgage granted by you.
Is a mortgage registered in France on a yacht built in Italy valid?
Yes, provided it is published in France: mortgages granted by the buyer before francisation on a ship bought or built abroad are valid and effective on that condition (Transport Code, article L. 5114-6-10, III). It does not replace entry of the contract and the transfer of title in the Italian register of ships under construction (Codice della navigazione, articles 238 and 242), which alone makes the buyer’s ownership enforceable against the yard’s insolvency administrator. The two registrations are cumulative.
Which claims rank ahead of the mortgagee bank on a new yacht?
The privileged claims of article L. 5114-8 of the Transport Code, which rank ahead of any mortgage whatever its rank (article L. 5114-13): legal costs of the sale, port dues and custody costs, seafarers’ claims, salvage rewards and general average contributions, collision and damage compensation, and claims under contracts made by the master to preserve the ship. These liens are extinguished after one year, six months for supplies (article L. 5114-17), and two months after publication of a voluntary transfer of ownership (article L. 5114-19).
Can the owner change flag after mortgaging the yacht?
No, not without the creditor’s consent. Any voluntary operation that results in the loss of the French flag of a mortgaged ship is prohibited, with the sole exception of suspension for a bareboat charter, itself subject to the mortgagees’ prior consent (Transport Code, articles L. 5114-6-10 and L. 5112-1-7). An operation carried out with intent to breach the prohibition exposes its author to the penalties for breach of trust. A mortgaged ship also cannot be struck off the French flag by the authorities (article L. 5112-1-8).
On the same subject, the contract: yacht construction contract: ownership of the hull, refund guarantee and shipyard insolvency; foreign yards: building a yacht in the Netherlands, Germany or Italy; delivery: acceptance, sea trials and hidden defects in a new yacht.
On the security interests over a completed ship, and what must be obtained before wiring the funds, see (in French): Acheter un navire après le 1er mai 2026 : les sûretés maritimes ont changé de code, pas de nature (Village de la Justice, 16 September 2026).