Assignment of Claims in Turkish Legal Framework

What is the assignment of claims (Transfer of Claims)?

The assignment of claims is the transfer of the creditor’s right to claim to a third party through a contract made in accordance with the form, without seeking the consent of the debtor. The debtor is not a party to the transfer agreement. There is no need for them to even be aware of it. This agreement results in a change of parties between the creditors.

How can the assignment of claims be realized?

The assignment of claims in the Turkish Code of Obligations is a regulation regarding voluntary transfer. However, transfer is also possible through legal or judicial means. In this case, no declaration of will is required for the transfer of the claim. In fact, it would be more appropriate to speak of a transition rather than a transfer here.

What is the scope of the assignment of claims?

With the assignment of claims, the main right to claim passes to the transferee. The transfer of the right to claim can be partial or complete. In partial transfers, the claim must be of a divisible nature. In addition, priority rights and associated rights, except those specific to the transferor’s personality, also pass to the transferee. Accrued interest is also considered to be transferred along with the main claim.

Do priority rights pass to the transferee with the assignment of claims?

Priority rights that are not tied to the transferor’s personality pass to the transferee along with the claim. Article 206 of the Turkish Enforcement and Bankruptcy Law determines the order of creditors. When the transferor transfers this claim, which is among the privileged claims written in this article, the transferee creditor also benefits from the same privilege. Apart from this, if there is a claim annotated in the land registry, the transferee will also benefit from the effect of this annotation upon transfer.

Do interests pass to the transferee with the assignment of claims?

Interests pass to the transferee along with the main claim when they are accessory to the claim. According to Article 189 of the Turkish Code of Obligations, accrued interests are also considered to be transferred along with the main claim.

Do formative rights pass to the transferee with the assignment of claims?

Formative rights pass to the transferee along with the main claim when they are accessory to the claim. However, if the formative right is tied to the debt relationship rather than the claim, it will not pass to the transferee in this case.

Do security rights pass to the transferee with the assignment of claims?

If the parties have secured the timely and complete performance of the claim, these security rights, which are not tied to the transferor’s personality, also pass to the transferee with the transfer as a rule. Securities are at the forefront of accessory rights. The transferee benefits from pledges, sureties, and other securities, if any, without the need for a separate transaction.

Does movable property pledge pass to the transferee with the assignment of claims?

If the claim subject to the transfer agreement is secured by a movable property pledge, the transferor is obliged to deliver the pledge in their possession to the transferee. The movable property pledge is an accessory right in the form of property. In the movable property pledge placed to secure the claim, unlike the provision of establishment by delivery, the transferee acquires the right of pledge with the transfer transaction without the pledged movable property being delivered to the transferee.

Does the pledge of movable property subject to mandatory registration pass to the transferee with the assignment of claims?

If the claim subject to the transfer agreement is secured by a pledge of movable property subject to mandatory registration, the transferor will not be obliged to deliver the pledge in their possession to the transferee. In a Supreme Court decision in Turkey, it was ruled that “According to the assignment of claims agreement made between the plaintiff and the bank outside the case, the registration of the commercial enterprise pledge, which is the guarantee of the claim, in the name of the plaintiff is requested. Since the commercial enterprise pledge is an accessory right dependent on the main claim, there is no legal obstacle to the transfer of the pledge to the assignee of the claim,” stating that the commercial enterprise pledge can be subject to the assignment of claims agreement.

Does the right of retention pass to the transferee with the assignment of claims?

The right of retention is an accessory right that arises in favor of the creditor and guarantees the claim. The right of retention that has arisen due to the transferred claim will automatically pass to the transferee with the transfer of the claim. However, there are different opinions on this matter in the doctrine.

Does the pledge established on rights and claims pass to the transferee with the assignment of claims?

The right of pledge on a right or claim gives the pledgee creditor the authority to collect the claim by liquidating the right or claim on which the pledge is established through enforcement. In case of assignment of claims, these pledge rights will automatically pass to the transferee.

Does the mortgage pass to the transferee with the assignment of claims?

Just as a mortgaged property can be transferred, a mortgaged claim can also be transferred by the pledgee creditor to a third party without the debtor’s approval. Since the mortgage is an accessory right that secures the claim, it cannot be separated from the claim. Therefore, in case of the transfer of a mortgaged claim, the mortgage automatically passes to the transferee.

Is registration in the land registry necessary for the transfer of a mortgaged claim?

According to Article 891 of the Turkish Civil Code, “The validity of the transfer of a claim secured by a mortgage does not depend on the registration of the transfer in the land registry.” In accordance with this provision, registration is not mandatory for the mortgage to pass to the new creditor. Despite the completion of the transfer transaction, the name of the old pledgee creditor remains in the land registry.

Do mortgage bonds and annuity certificates pass to the transferee with the assignment of claims?

According to Article 924 of the Turkish Civil Code, “The transfer of the claim in the mortgage bond or annuity certificate depends on the delivery of the pledge certificate. If the pledge certificate is registered to a name, the name of the transferee and the transfer transaction are written on the certificate.” With this provision, the legislator specifies the form of the assignment of claims in case of mortgage bonds and annuity certificates.

Does the surety pass to the transferee with the assignment of claims?

The liability of the surety creates an accessory liability. If there is a surety attached to the main claim, according to the general rule, the surety is also transferred with the assignment of the claim. In addition, if the creditor has made a partial transfer, they can retain the surety for their own claim and exclude the transferred part from the surety.

Can it be agreed in the assignment of claims agreement that security rights will not be transferred?

Within the framework of freedom of will and contract, parties can agree that security rights will not be transferred. For example, if the parties agree that the surety claim will not pass to the transferee but will belong to the transferor, in this case, the surety obligation ends.

Is the debtor’s approval required in the assignment of claims?

The debtor’s approval is not required in the assignment of claims. The debtor is not a party to the transfer agreement. There is no need for them to even be aware of it.

What is the formal requirement for the assignment of claims?

The assignment of claims agreement is subject to written form (Turkish Code of Obligations Article 184). Written form is also sufficient for the transfer of mortgaged claims, but in practice, it is prepared at a notary or land registry office for security purposes.

When should the transferor have the power of disposition in the assignment of claims?

Since the assignment of claims is a disposition transaction, its validity depends on the transferor having the power of disposition over the claim. This power should exist at the time the transfer transaction is made, as a rule.

Which one is valid if the claim is transferred to more than one person?

If the right to claim is subject to more than one assignment of claims agreement, the transfer made earlier in time becomes valid due to the “priority principle” applicable in disposition transactions.

Can a bankrupt creditor transfer their claim?

The power of disposition over the claims registered in the bankruptcy estate of the bankrupt creditor ends (Turkish Enforcement and Bankruptcy Law Article 191). Therefore, the bankrupt creditor cannot transfer their claim.

Can a seized claim be transferred?

In case of seizure, the creditor does not have the power of disposition over the seized claim. Therefore, a seized claim cannot be transferred.

Is there a guarantee liability of the transferor in the assignment of claims?

In cases where the claim is transferred by law, according to Turkish Code of Obligations Article 191/2, as can be understood from the text of the article, the former creditor has no guarantee obligation towards the new creditor. In other words, the previous creditor will not be responsible for the existence of the claim and the debtor’s ability to pay.

Is it possible to transfer the claim below its real value?

Even if the assignment of the claim is promised below its real value, the transfer will be based on the real value. For example, if a claim of fifty thousand liras is transferred for thirty thousand liras, the claim will be considered transferred over fifty thousand liras, and if there is a follow-up for the debtor, it will be made over fifty thousand liras.

In case of the assignment of a claim bound to a judgment, can the transferee resort to enforcement with judgment?

In case of the assignment of a claim bound to a judgment, there is a positive approach to whether the transferee can resort to enforcement with judgment. In other words, the transferee of a claim based on a judgment will be able to proceed with the execution of judgments against the debtor.

Do the reasons for the suspension of the statute of limitations pass to the transferee with the assignment of claims?

The reasons for the suspension of the statute of limitations in Turkish Code of Obligations Article 153 are personal. They are valid for the transferor. Therefore, the statute of limitations starts to run with the transfer.

To whom do the default interests that will accrue after the assignment of claims belong?

It is clear that the default interests that will accrue after the assignment of claims will pass to the transferee. The Supreme Court has confirmed this situation in a decision.

What is the status of the default interest that occurred before the transfer?

It is argued that the default interest that occurred before the transfer does not pass to the transferee, while the default interest that occurs after the transfer passes to the transferee.

Does the excessive damage pass to the transferee with the assignment of claims?

It is accepted that the excessive damage that occurred before the assignment of claims, in other words, the damage that cannot be compensated by the default interest, within the scope of Turkish Code of Obligations Article 122, does not automatically pass to the transferee with the transfer, the right to claim excessive damage belongs to the transferor, and the right to claim excessive damage that will occur after the transfer will pass to the transferee.

In alternative obligations, does the right to choose the performance granted to the creditor pass to the transferee with the assignment of claims?

In alternative obligations, the right to choose the performance granted to the creditor is accepted as a formative right attached to the claim and passes to the transferee with the assignment of claims.

Does the right to withdraw from the contract pass to the transferee with the assignment of claims?

Since the right to withdraw from the contract is a formative right attached to the debt relationship, it will not pass to the transferee. The transferor, who continues to be a party to the debt relationship, will be able to continue to use this right.

In a sale with retention of title, does the retention of title clause pass to the transferee with the assignment of claims?

In a sale with retention of title, although the sold item has been delivered to the buyer, the ownership does not pass to the buyer, and in case of assignment of claims, the right to retain ownership, which remains as the seller’s right, also passes to the transferee as ancillary rights. The transferor and transferee of the claim can request the registration of the assignment in the special register.

Does the arbitration clause pass to the transferee with the assignment of claims?

If there is an arbitration clause in the contract, unless otherwise regulated, the transferee will be able to benefit from it.

Does the penalty clause pass to the transferee with the assignment of claims?

If a penalty clause is stipulated in the contract, unless otherwise regulated, the transferee will be able to benefit from it. If the delay in the claim occurred after the transfer, the right to demand the penalty clause has passed to the transferee. Otherwise, it should belong to the transferor.

Can the holder of the usufruct right transfer the usufruct right?

The holder of the usufruct right can transfer the use of the usufruct right, if not the subject of the usufruct right, to someone else (Turkish Civil Code Article 806). The owner can also establish a usufruct right through the assignment of claims (Turkish Civil Code Article 795).

Is a transfer made on the condition that the movable property pledge remains with the transferor valid?

A transfer made on the condition that the movable property pledge remains with the transferor is rightfully considered invalid. Two reasons are presented: First, the immovable property pledge right cannot be separated from the claim on which it is based; second, waiver of the immovable property pledge right can only be terminated by making a cancellation statement at the land registry office.

Does the guarantee agreement pass to the transferee with the assignment of claims?

Since the guarantee does not have an accessory nature, it is not included in the scope of the assignment of claims. Therefore, the guarantee agreement does not pass to the transferee with the assignment of claims.

Is it mandatory to notify the debtor in the assignment of claims?

It is not mandatory to notify the debtor in the assignment of claims. However, a debtor who is not notified of the transfer transaction is discharged from their debt by making a payment in good faith to the first creditor (Turkish Code of Obligations Article 186).

 

 

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