Legal Analysis of Real Estate Liens and Mortgage Cases

Legal Analysis of Real Estate Liens and Mortgage Cases. Legal Analysis of Real Estate Pledges and Mortgage Cases. A real estate pledge is a limited real right established over a specific real estate to secure a receivable, regulated by the Turkish Civil Code (TCC); the most common type of this right, the mortgage, is vital for the security of financial relationships. The process of actually collecting this legal security through forced enforcement necessarily integrates the rules for establishment and scope determination in the TCC with the procedures of the Enforcement and Bankruptcy Law (ECB). Before resorting to general lien remedies pursuant to Article 45 of the ECC, creditors are required to pursue the lien through the conversion of the lien into cash, which determines the starting point for legal proceedings. Therefore, the effectiveness of a mortgaged receivable depends on the seamless integration of the formalities involved in its establishment and the procedural rigor involved in the conversion into cash (with or without a judgment).

The Place and Importance of the Real Estate Pledge Institution in Turkish Law

A. Definition and Legal Foundations

A real estate pledge is a limited proprietary right established on a specific immovable property to secure a claim. This legal guarantee, regulated under the provisions of the Turkish Civil Code (TCC), grants the creditor the authority to collect their claim by forcing the sale of the pledged property if the debt is not paid. The most common form of this right, the mortgage, is officially established upon the registration of the claim amount in the land registry. The mortgage holds vital importance in the Turkish legal system for structuring financial relations and securing claims.

B. Analysis of the Relationship Between Relevant Fundamental Laws

The actual collection process of a mortgaged claim requires a compulsory legal integration between the Turkish Civil Code (TCC) and the Execution and Bankruptcy Law (EBL). While the TCC determines the creation and scope of the proprietary right, the EBL regulates the procedures for liquidating this right through compulsory enforcement. The ultimate goal of satisfying the mortgaged creditor is achieved through the sale price of the immovable property via EBL procedures.

The “Rule of Prior Application to the Pledge,” stipulated in EBL Article 45, mandates that a secured creditor must first pursue execution by liquidating the pledge (mortgage) before pursuing general attachment methods. This rule establishes the TCC’s proprietary guarantee mechanism as a mandatory starting point in the field of compulsory enforcement. The economic effectiveness of the security provided by the real estate pledge in Turkish Law depends on the perfect integration of the formalities during the establishment of the proprietary right (TCC) and the compulsory enforcement (EBL) procedures. While the TCC merely establishes the existence of the right, it is the EBL that realizes the economic value of this right. In this context, the creditor’s ability to choose the swift and effective method of execution based on a judgment is directly related to whether the mortgage deed, drawn up during the establishment of the mortgage, contains an unconditional acknowledgement of a money debt. This clearly demonstrates the strategic importance of the establishment formalities for the subsequent execution stage.

Part I: Fundamentals of Mortgage Law, Establishment, and Protection of Security

1. Fundamental Principles Governing the Mortgage and the Proprietary Right Dimension

1.1. Principle of Registration and Publicity

The creation of a real estate pledge is based on the obligation to register it in the land registry (Principle of Registration). This principle ensures the right is known to third parties (Publicity). The immovable property upon which a mortgage is to be established must be registered in the land registry; only pledges subject to chattel pledge provisions can be established on unregistered immovable properties.

1.2. Principle of Specificity and Limitation

The principle of specificity applies both to the subject of the pledge (such as the block and parcel number of the immovable) and to the amount of the claim to be secured. The secured amount is limited to the claim itself and the accessory claims (interest, costs) that may arise from it.

Especially in definitive-sum mortgages (upper limit mortgages), this principle plays a critical role. The amount of the claim must be indicated so as not to exceed the mortgage limit. Any claim exceeding the mortgage limit cannot be included in execution through the liquidation of the mortgage; for the excess portion, the creditor must resort to general enforcement methods (ordinary execution).

1.3. Principle of Accessory (Fer’ilik)

The mortgage is an accessory right, established only to secure a valid claim. According to this principle, the mortgage right belongs to the creditor holding the claim; if the mortgaged claim is transferred (assigned) to a third party, the mortgage right automatically passes to the new claim holder. The principle of accessory is also evident upon termination; when the mortgaged claim terminates in any way, the mortgage right also terminates automatically. This fact reveals that a mortgage established for a non-existent claim, even if registered, can always be cancelled by a court decision. Even if registration provides publicity and strength, if the underlying debt relationship (principle of causality) on which the mortgage is based is invalid, this registration in the land registry constitutes an irregular registration and can always be discharged.

1.4. System of Ranking and Principle of Indivisibility

When more than one pledge right is established on a single immovable, the system of rankings is applied, and priority is determined by the date of registration in the land registry. The Principle of Indivisibility of Security (Indivisibility of the Pledge Right) means that the entire pledged property secures the claim and that the entire claim is secured. Upon the creditor’s request, the right to move up to an empty rank can be annotated in the land registry. Through this annotation, the creditor can assert their right against new owners and other pledge holders.

2. Mortgage Establishment Procedure (TCC and Land Registry Transactions)

The mortgage establishment procedure is carried out by drawing up an official deed at the Land Registry Directorates. To request the establishment and registration of a mortgage, it is sufficient for the contract signed by the debtor and the creditor (or the necessary documents such as the title deed or a document specifying the block/parcel number of the immovable) to be submitted to the land administration by the immovable property owner or their authorized representative.

In terms of legal requirements, the mortgage does not necessarily have to be established only on the debtor’s assets; the assets of other consenting persons can also be subject to the mortgage. Furthermore, a mortgage can be placed on multiple immovable properties for a single claim, just as a mortgage can be established on a single immovable property for multiple claims.

3. Protection of Immovable Value and Preventive Actions

One of the primary concerns of a mortgaged creditor is the depreciation of the immovable property shown as collateral. The TCC offers mechanisms to protect the creditor against this risk. According to TCC Article 865/I, if the immovable owner engages in culpable behavior that diminishes the value of the pledged property, the creditor may request the judge to prohibit such behavior (Preventive Action).

This Preventive Action shows that the mortgage has evolved from being a static guarantee into a dynamic legal protection tool for the creditor. Its purpose is to prevent the secured creditor from facing a serious risk in fully recovering their claim. Even before the debtor defaults, the owner’s mismanagement or deliberate actions can erode the value of the collateral. The law grants the power to halt this damage at the moment of the threat, not only at the moment of collection, thereby strengthening the secured creditor’s risk management. Additionally, statutory pledge rights may arise due to expenses incurred by the secured creditor to prevent or remedy the depreciation of the immovable property.

Part II: Execution Procedures by Liquidation of the Mortgage (EBL)

1. Commencement of Compulsory Enforcement and the Principle of Necessity

A creditor whose claim is secured by a mortgage is, in principle, obliged to first pursue execution by liquidating the pledge under EBL Article 45 if they wish to collect this claim. This rule applies even if the immovable property subject to the mortgage belongs to a third party. However, there is an important exception to this rule: for interest and annual instalment claims secured by a mortgage, the creditor has the option to resort to liquidation of the pledge, attachment, or bankruptcy proceedings (EBL Article 45/4).

2. Sharp Distinction Between Execution Methods and Their Conditions

Execution through the liquidation of the mortgage can be done in two main ways: based on a judgment (certified instrument) and without a judgment:

2.1. Execution based on a Judgment (EBL Article 150/i)

Execution based on a judgment is faster and offers the debtor more limited defence opportunities. For this path to be available, the execution must rely on a mortgage deed, prepared by the land registry officer, containing an unconditional acknowledgement of a money debt, or a court judgment. Creditors who are banks or credit institutions may also apply for execution based on a judgment by submitting a notarized document to the execution office showing that the statement of account sent to the debtor via a notary has been served.

In execution based on a judgment, a Writ of Execution is sent to the debtor and, if any, the owner of the mortgaged property. The debtor’s right to object to this writ is restricted; however, they may request the suspension of execution. If the debt is not paid within 7 days, the creditor may request the sale of the immovable property. Regarding jurisdiction, any execution office in Turkey is authorized for executions based on a judgment under EBL Article 34.

2.2. Execution without a Judgment (EBL Article 148 et seq.)

Execution without a judgment is pursued when the conditions for execution based on a judgment are not met. In this method, an Order of Payment is sent to the debtor, and the debtor is given a 7-day right to object. However, the debtor’s grounds for objection are limited: neither the debtor nor the third party can object on the basis of statute of limitations, nor can they object to the creditor’s mortgage right. If the debtor claims the debt does not exist, they may file a negative declaratory action for the cancellation of the mortgage (EBL Article 150). If the Order of Payment is not objected to and the debt is not paid within 30 days, the execution becomes final, and the sale can be requested. The competent execution office, unlike execution based on a judgment, is exclusively the execution office where the mortgaged immovable property is located.

The table below summarizes the fundamental differences between the two execution methods:

Comparison of Execution Methods by Liquidation of the Mortgage

Feature	Execution based on a Judgment (EBL Article 150/i)	Execution without a Judgment (EBL Article 148 et seq.)
Legal Basis	Mortgage Deed (Unconditional Acknowledgement) or Judgment	General Mortgage Registration (Proof of Debt Amount Required)
Document Sent	Writ of Execution	Order of Payment
Right to Object	Restricted (Objection path is closed except for Request for Suspension of Execution)	7-Day Right to Object to Order of Payment (Limited Grounds for Objection)
Competent Execution Office	Any Execution Office in Turkey	Exclusively the Execution Office where the Immovable Property is Located

3. Execution Parties and Procedural Errors: The Critical Role of the Third-Party Owner

The formation of parties in enforcement proceedings is crucial, especially when the mortgaged immovable property belongs to a third party other than the debtor. Supreme Court jurisprudence has definitively established that there is a formal compulsory joinder of parties (zorunlu takip arkadaşlığı) between the third party granting the mortgage and the principal debtor.

This means that when initiating the execution, the creditor must include both the principal debtor and the third party who owns the mortgaged property as debtors in the execution and serve the Writ of Execution duly. The Supreme Court considers the service of a Writ of Execution that does not list the third party as a debtor to be irregular and emphasizes that execution carried out with this procedural error, even if it has reached the sale stage, must be considered ex officio as a reason for the annulment of the auction.

This procedural requirement indicates that the formation of parties in execution law is an absolute validity condition, independent of substantive law. Even if the existence of the collateral is undisputed, the failure to duly serve notice on the third party violates the person’s right to a fair trial and defence. This violation can annul the most critical stage of the execution, the auction, even after the sale is completed, leading to a high operational risk for creditors.

Part III: Key Lawsuits and Judicial Review Mechanisms in Mortgage Law

The processes of initiating and completing execution proceedings are subject to various judicial review mechanisms. These mechanisms aim to balance the interests of the creditor and the debtor.

1. Action for Cancellation (Discharge) of Mortgage (Terkin)

The cancellation (discharge) of a mortgage is the deletion of the pledge annotation from the land registry when the debt terminates or when the mortgage right has been registered unjustly (irregularly) in the land registry.

1.1. Grounds for Discharge and Procedure

The mortgage right may terminate upon the termination of the claim or the expiration of the security period. If the mortgage was not established for a fixed term, the Land Registry Directorate completes the transaction upon the written request for discharge by the mortgage creditor. If it was established for a fixed term, it can be discharged upon the owner’s request within 30 days from the end of the term.

1.2. Disputed Discharge Procedure (EBL Article 153)

A frequently encountered situation in practice is when the creditor’s address is unknown or the creditor refuses to discharge the mortgage despite collecting the claim. The legislator has provided a procedure for the debtor in such cases: by applying to the execution office, depositing the claim amount, and then requesting the cancellation of the mortgage from the Execution Court (EBL Article 153).

1.3. Statute of Limitations and Competent Court

The action for the cancellation of a mortgage based on irregular registration is, as a rule, not subject to any preclusive period or statute of limitations, as it is filed for the protection of property rights; it can be filed at any time. The competent court in these actions is the Civil Court of First Instance where the immovable property is located.

2. Request for Annulment of the Auction (EBL Article 134)

The annulment of the auction is a special legal institution that allows the judicial review of the legality of the sale conducted as a result of execution proceedings. In terms of its legal nature, this is not a lawsuit procedure but a special complaint application filed before the Execution Court under Article 134 of the Execution and Bankruptcy Law, subject to strict procedural formalities.

2.1. Main Grounds for Annulment

Requests for annulment can only be considered if there are legal irregularities related to the auction process. The main grounds for annulment focus on procedural law:

Irregularities in Service: Failure to duly serve the notice of sale or the Writ of Execution on the debtor, the creditor, or the interested parties (especially the third-party owner of the mortgaged immovable property) violates the right to defence.
Lack of Proper Formation of Parties: The failure to include the third party granting the mortgage as a debtor alongside the principal debtor and to duly involve them in the execution. This omission must be taken into account ex officio (by the court itself).
Appraisal and Publication Errors: Showing the value of the property as much lower than its actual value (errors in appraisal) or failing to publish the notice of sale in accordance with legal deadlines and content rules.

2.2. Financial Obligations and Penal Risk

The legislator has introduced financial barriers to prevent malicious or unfounded requests for annulment. Persons who participate in the auction by bidding must provide a guarantee equal to five per cent (5%) of the auction price when filing a request for annulment.

More importantly, if the request for annulment of the auction is rejected and the request is found to be malicious, the Execution Court may impose a disciplinary fine of up to 10% of the auction price on the applicant under EBL Article 134/5. This high guarantee and penalty risk show that the legislator protects the reliability of the sale—the final outcome of the execution—more highly than the supervision of procedural errors. This mechanism is a strategic choice aimed at increasing market confidence and preventing malicious interventions that slow down collection processes.

3. Action for Objection to the Schedule of Distribution (EBL Article 142)

Following execution by liquidation of the mortgage, the execution office prepares a schedule of distribution to allocate the proceeds of the sale among the creditors. Objections to this schedule constitute an important judicial review method that can affect the order and rate of payment for all creditors, not just individual ones.

3.1. Term, Scope, and Competent Court

To file an action for objection to the schedule of distribution, the plaintiff must have a legal interest in opposing the claim or the rank of another creditor listed in the schedule. The period for filing the action is a 7-day preclusive period (EBL Article 142) starting from the date the schedule of distribution is served on the creditor.

The competent court varies depending on the nature of the execution. While the competent court is the Civil Court of First Instance in execution by attachment, it is the Commercial Court of First Instance in the case of bankruptcy liquidation. This jurisdictional division confirms that the action is a complex substantive law dispute affecting the legal status of competing creditors, rather than a mere complaint about execution procedure.

3.2. Legal Consequences

The filing of an objection action generally halts the distribution processes to be carried out according to the schedule of distribution. However, EBL Article 142/a allows the creditor facing the objection to be paid their share if they submit a definitive letter of guarantee. If the objection is found justified, the schedule of distribution is partially or completely re-drafted in accordance with the court’s decision.

Part IV: Consequences of Execution and Legal Effects of Pledge Deficiency Certificates

1. Distribution of the Sale Proceeds

The proceeds from the sale of the mortgaged property are primarily used to cover the mortgaged creditor’s claim. If the sale proceeds exceed the amount of the claim, the remaining portion is returned to the immovable property owner.

2. Legal Nature and Function of Pledge Deficiency Certificates

If the sale proceeds of the immovable property are insufficient to cover the pursued claim, or if the immovable property cannot be sold, a pledge deficiency certificate is issued to the creditor for the remaining claim.

2.1. Condition for Issuance and Types

For a pledge deficiency certificate to be issued, the debtor must be personally liable for the debt. The EBL provides for two types of certificates:

Temporary Pledge Deficiency Certificate (EBL Article 150f): Issued when the immovable property cannot be sold because there are no buyers offering a price higher than the claims of the secured creditors having priority.
Definitive Pledge Deficiency Certificate (EBL Article 152): Issued for the remaining claim if the sale takes place but the amount is insufficient to cover the pursued claim.

2.2. Legal Effect

The Definitive Pledge Deficiency Certificate is a critical tool that expands the creditor’s risk from the mortgaged immovable property to the debtor’s entire assets (personal liability). With this certificate, the creditor can initiate execution against the debtor, who then becomes liable with their other assets. This document opens the door for the creditor to general execution by attachment against the debtor’s general assets for the remainder of the debt once the “Rule of Prior Application to the Pledge” ends.

Conclusion and Current Legal Developments

The procedures for real estate pledges and foreclosure cases present a complex and procedurally rigid structure that combines the proprietary right guarantee of the Turkish Civil Code with the compulsory enforcement effectiveness of the Execution and Bankruptcy Law.

Key Takeaways and Risk Management:

Mandatory Procedural Rigour: Mortgage law requires a high degree of formality. Specifically, the inclusion of the third party who granted the mortgage in the execution and the proper service of the Writ of Execution are absolute conditions for the legal validity of the execution. This necessity, explicitly stated in the landmark Supreme Court rulings (compulsory joinder of parties), makes non-compliance a risk for the annulment of the auction.
Strategic Selection of Execution Method: For creditors, the choice of execution method (based on a judgment/without a judgment) determines the speed and flexibility of the collection process. A mortgage deed containing an unconditional acknowledgement of debt grants the creditor the advantage of initiating execution based on a judgment throughout Turkey.
Active Protection of Collateral: Instead of merely waiting for the debtor’s default, the mortgaged creditor has the authority to actively protect the value of the pledged immovable property against the owner’s culpable actions by filing a Preventive Action under TCC Article 865. This is a vital mechanism for minimizing risk in long-term financial relationships.
Balance of Legal Consequences: The heavy financial obligations imposed on applicants in the annulment of the auction process (the risk of collateral and disciplinary fines) demonstrate that the primary purpose of execution law is swift and definitive collection, where even judicial review is balanced by high cost.

Legal Analysis of Real Estate Liens and Mortgage Cases. In conclusion, for real estate pledge transactions, the key to minimizing legal risks is for the parties to consider the fundamental principles (especially specificity and accessory) during the establishment of the proprietary right and to exercise utmost diligence regarding the rules of service and the formation of parties under the EBL during the compulsory enforcement stage. Expert legal consultation is critical for the correct management of these processes and the protection of rights.

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