What is a Real Estate Lien in Turkish Law?

REAL ESTATE LIEN

A real estate lien is a limited real right under Turkish Law. It is established to secure a specific debt. If the debt cannot be collected on time, it gives the right to convert the property into cash and collect the debt. The conversion of the real estate lien into cash occurs when the debt is not paid on time. Real estate liens hold a significant place in our legal system. They provide security in terms of debt rights and are crucial for the economic life of our country. The right to dispose of the property even if the debt is not paid makes real estate liens common in practice.

SUBJECT OF REAL ESTATE LIEN

Not everything can be subject to a real estate lien. Values on which a real estate lien can be established include:

– Land
– Independent and permanent rights registered in the land registry
– Independent sections subject to condominium ownership
– Shares in co-ownership
– Properties subject to joint ownership (unanimously)

TYPES OF REAL ESTATE LIEN

There are three types of real estate liens. These are:

1. Mortgage
2. Mortgage bond
3. Annuity bond

Apart from the types of real estate liens mentioned above, no new real estate lien can be established. Real estate liens are limited in number.

MORTGAGE

A mortgage is one of the types of real estate liens. Its purpose is to provide security for a specific debt. A mortgage can be established if there is a valid debt. If there is no valid debt, there can be no valid mortgage. The existence of a mortgage depends on the existence of a valid debt. In other words, if a mortgage is registered in the land registry despite the absence of a valid debt, the registration is fraudulent.

It should be noted that if the debt secured by the mortgage is transferred, the mortgage is also transferred. The mortgage will terminate when the debt is extinguished or collected. If the real estate subject to the mortgage is converted into cash and the amount obtained is insufficient to cover the debt, personal liability will continue for the remaining debt. The debt for the remaining amount will continue for the person providing the mortgage.

MORTGAGE BOND

A mortgage bond is also one of the types of real estate liens. It both provides security for the debt and allows the value of the real estate to be circulated. The value of the real estate is separated and attached to a valuable document called a mortgage bond. When a mortgage bond is issued, an abstract right to debt arises. The personal liability of the debtor continues. As a rule, a person can issue a mortgage bond on a property they do not own.

ANNUITY BOND

The sole purpose of an annuity bond is to circulate the value of the real estate. With the issuance of an annuity bond, the value of the real estate becomes independent. This value is imposed as a burden on the property. An annuity bond is also a valuable document. The right included in the annuity bond differs from the principal debt. The principal debt is extinguished with the issuance of the bond. The debtor’s liability is limited to the value of the real estate stated in the bond. However, the person who wants to issue an annuity bond must be the owner of the property. This condition does not apply to other types of real estate liens. An annuity bond cannot be issued on another person’s property. Annuity bonds are quite common in practice.

HOW TO ESTABLISH A REAL ESTATE LIEN?

A real estate lien is generally established by registration in the land registry. In some cases, however, a real estate lien can be acquired exceptionally without registration. Detailed information on non-registration acquisition cases can be obtained from an Istanbul Real Estate Lawyer.

REAL ESTATE LIEN AGREEMENT MUST BE MADE

To establish a real estate lien, a real estate lien agreement must first be made. This agreement is signed between the property owner and the creditor. The agreement must be made in an official manner, meaning it must be prepared by the land registry officer. Otherwise, the agreement is invalid and has no effect.

Elements that must be included in the real estate lien agreement:

– Owner(s) of the property to be mortgaged
– Secured creditor
– Property subject to the lien
– Secured debt
– Contract interest, if any
– Information regarding the type of lien
– Information on the degree of the lien

REAL ESTATE LIEN AGREEMENT MUST BE REGISTERED

To register the made real estate lien agreement, a registration request must be submitted. Authorized persons can make the registration request. The owner is entitled to make this request. If the lien is established by law, the request can be made directly by the creditor without the owner’s consent. This only applies to mortgages.

FEATURES OF REAL ESTATE LIEN

1. A real estate lien can be established for a specific amount of debt.

The amount of the debt must be shown in Turkish currency. The debt does not necessarily have to be monetary; obligations to perform, deliver, or refrain from actions that have a monetary value can also be secured.

2. The lien right can only be established on properties registered in the land registry.

No lien right can be established on properties that are not registered in the land registry. It is also not possible to establish a lien on public properties. When establishing a lien, the specific property must be clearly identified; ambiguity is not acceptable.

3. A lien right can be established on more than one property for the same debt.

This is called a collective lien. It involves distributing the security among several properties. The total value of the lien on the properties should not exceed the amount of the debt.

4. If there is more than one lien right on the same property, the older lien takes precedence over the newer one.

This principle results from the fixed degree principle in practice. Exceptions exist, and it can be agreed otherwise.

5. Integral parts of the property are also included in the security.

This includes structures built to remain permanently under or above the property, plants, springs, and natural products grown there. The attachments of the property are also undoubtedly included in the security.

6. Rental income obtained from the mortgaged property is included in the security.

TERMINATION OF REAL ESTATE LIEN

A real estate lien can terminate under various circumstances, such as:

– Abandonment of registration

Cancellation will terminate the lien. This requires a written request from the secured creditor. If the written request is directed to the land registry officer, the officer will remove the lien from the property. If the secured creditor avoids requesting the cancellation despite the obligation, the owner can apply to the court and request the cancellation. The court’s decision will be constitutive, ensuring the cancellation.

– Destruction of the mortgaged property

If the property is completely destroyed, the lien will automatically be extinguished. Subsequently, the lien must be canceled, but this is a declarative, not constitutive, action. Although the lien ends, the debt right will continue. Partial destruction of the property does not extinguish the lien; it continues on the remaining part.

– Termination of the debt

If the debt is terminated for any reason, the real estate lien will automatically disappear. Annuity bonds are an exception to this. If the creditor avoids making a request, the owner can file a lawsuit to correct the land registry.

– Conversion of the property into cash in case of non-payment of the debt

If the amount obtained covers the debt, the lien will be terminated.

– If the lien is established for a specific period, it will be extinguished when this period expires.

– Expropriation of the mortgaged property

When a property is expropriated, all real rights on it, including the lien, will terminate. The lien will pass to the expropriation compensation. The administration will not pay the owner without the consent of the creditors, ensuring the protection of the creditors.

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EXAMPLES OF DECISIONS

“In the concrete case, it is understood that the mortgage deed tables requested for registration were prepared as if they were shown in an official manner, the journal numbers of other transactions were given, in other words, the mortgage establishment procedure was shown as if it were carried out with fake documents. As explained above, if the deed table is prepared in an official manner and receives a journal number, but the mortgage is not registered in the land registry due to an error, the mortgage right holder can request the registration and correction of the land registry. Article 1025 of the Turkish Civil Code grants this right. The plaintiff filed this lawsuit believing that the mortgage deed tables were prepared in an official manner. In short, the plaintiff has the right to file a lawsuit. However, since the mortgage right requested for registration by the plaintiff did not arise, the rejection of the lawsuit is correct for these reasons, and the appeal objections are rejected, and the decision is upheld…” 14th Civil Chamber         2011/6124 E., 2011/7884 K.

 

“Article 45 of the Execution and

Bankruptcy Law stipulates that the creditor can pursue the debtor only by converting the lien into cash for a debt secured by a lien, and it is considered sufficient for the existence of the lien, regardless of whether it is a movable or immovable mortgage.
In the concrete case, the fact that the debt was secured by an immovable mortgage does not prevent the creditor from pursuing the debtor by converting the movable lien into cash. Therefore, the court’s decision to reject the request based on a written reason is incorrect, and the decision to accept the request is erroneous.” 12th Civil Chamber         2011/18441 E., 2012/4354 K.

 

“In the complaint petition, it was claimed that the machinery and equipment covered by the real estate lien were removed from the property with the intention of harming the creditor, and the crime stipulated in Article 331/4 of the Execution and Bankruptcy Law, which envisages imprisonment from two to four years and a judicial fine of up to one thousand days; however, the defendants were sentenced to 6 months of imprisonment each, which is a deficient penalty…” 11th Criminal Chamber         2012/30777 E., 2014/5882 K.

 

“…it is possible to register or cancel an unregistered lien or a fraudulently canceled real estate lien in the land registry by court order. It should also be noted that according to Article 1022 of the Turkish Civil Code, “the effect of the registration begins from the date of the journal entry, provided that the legally required documents are attached or, in the case of temporary registration, the documents are completed on time.” This regulates the pre-registration effects and consequences of the real right. Furthermore, according to Article 888/1 of the law, “the transfer of a mortgaged property does not change the debtor’s liability and security unless otherwise agreed.” In other words, even if the mortgaged property changes hands, the new owner is considered the debtor of the mortgage.” 14th Civil Chamber         2011/7147 E., 2011/8817 K.

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