Quiet Enjoyment Letter
The mortgagee's undertaking not to disturb a performing charterer's possession on an owner default, and why a charter that does not run with the ship needs one.
A quiet enjoyment letter is an undertaking given by a mortgagee to a charterer that, for as long as the charterer performs its obligations, the mortgagee will not disturb the charterer’s possession of the ship or terminate the charter on a default by the owner, and will procure that any transferee on enforcement takes the ship subject to the charter.
It exists because a charter party is a contract and does not run with the ship. Without the undertaking, a lender enforcing its mortgage could sell the ship free of the charter and strip a performing charterer of the asset it has been paying for, which is an unacceptable risk where the charterer has taken possession under a bareboat charter party and built its operation around the ship.
The full article will cover the standard forms of undertaking, what a charterer should ask for and what a lender will resist, the interaction with the assignment of earnings and insurances , the position of a sub-charterer down the chain, and the enforceability questions that arise where the letter, the mortgage and the charter are governed by different laws.