Creating and Discharging a Mortgage — Conditions, Procedure and Court Remedies

A mortgage is a limited right in rem created over an immovable to secure a claim. Learn about the types of mortgage, the creation procedure, discharge and the action for cancellation of a mortgage under TMK Arts. 881-897.

A mortgage is a limited right in rem created over an immovable to secure payment of a debt. Governed by Articles 881 to 897 of the Turkish Civil Code, a mortgage gives the creditor the right to satisfy their claim in priority from the proceeds of sale of the immovable. An indispensable security instrument in the banking and finance sector, the mortgage is also widely used in debt relationships between individuals and companies. The creation, modification and discharge of a mortgage constitute one of the most technical and important subjects in property law.

Definition and Legal Nature of a Mortgage

Under TMK Art. 881, a mortgage is a type of immovable pledge created over an immovable as security for an existing claim or one that may or is likely to arise in the future. A mortgage does not give the creditor direct dominion over the immovable; it merely confers the right to require its realisation should the debtor fail to pay. In this respect the mortgage falls among pledge rights within the category of limited rights in rem.

A mortgage is accessory to the claim it secures. Once the claim is extinguished by payment, release or another cause, the owner may request deletion; the right in rem continues to appear in the land register until it is deleted. Under TMK Art. 864, once an immovable pledge has been registered no limitation period runs for the secured claim. The immovable subject to the mortgage, the claim secured and the amount of the pledge must be determined or determinable in the register.

Types of Mortgage: Principal-Sum and Maximum-Amount

A principal-sum mortgage secures an existing claim of a determined amount; a maximum-amount mortgage secures a claim that is undetermined or variable, up to the maximum sum shown in the land register. The scope of a principal-sum mortgage is not unlimited: under TMK Art. 875, in addition to the principal it secures the costs of enforcement, default interest, three years' interest that had fallen due at the date of the bankruptcy or of the request for sale, and interest running from the last maturity. In a maximum-amount mortgage, total liability in rem does not exceed the limit in the register.

The Procedure for Creating a Mortgage

A mortgage is created at the land registry directorate by an official deed and registration; statutory mortgages and special electronic procedures are reserved. The application, identity and representation documents, corporate authority, and details of the claim and rank are checked through the Land Registry Directorate's current Web Tapu/land registry system; no closed list of documents can be given for all cases. A third party may mortgage their own immovable for another's debt; unless there is a separate guarantee or assumption of debt, they do not become a personal debtor and their liability is limited to the realisation of the immovable.

Rank of Mortgages and the Practice of Vacant Ranks

Several mortgages may be created over the same immovable. In Turkish law immovable pledges are subject to a system of fixed ranks: priority of security is determined by the rank at which the mortgage is registered in the land register and by its order within that rank (TMK Arts. 870–871). Priority cannot therefore be explained by reference to the date of registration alone; the rank at which the mortgage was registered and, where applicable, its order within that rank are examined.

The fixed-rank system is the mortgage ranking system adopted in Turkish law. Under it, if a mortgage of a higher rank is deleted, a lower-ranking mortgage does not automatically move up. The vacated rank may be used by the owner of the immovable to create a new mortgage. This is known as the practice of vacant ranks and is governed by TMK Art. 871.

An important consequence of the fixed-rank system is that the owner of the immovable can determine the rank of a mortgage. Under TMK Art. 871/2 the owner may leave a higher rank vacant and have a mortgage created at a lower rank. The rank left vacant is then reserved for the owner's future use. In practice this method is preferred so that the owner retains the ability to create a mortgage at a higher rank should they need credit.

Discharge of a Mortgage

Once the claim is extinguished the owner may require the creditor to join in a request for deletion; deletion is effected at the land registry on the creditor's application or by court order. Because a mortgage is indivisible, a partial payment does not automatically give rise to a right to partial discharge; the contract, the position of the immovables or shares and the creditor's consent are examined. The time taken for deletion is determined by the nature of the debt and the security and by the particular process.

Action for Cancellation of a Mortgage

An action for deletion or cancellation may be brought where the claim has been extinguished, where the mortgage agreement is invalid, or in cases of forgery, want of authority or defective registration. Under TMK Art. 864, however, once an immovable pledge has been registered no limitation period runs for the secured claim; the argument that “the claim is time-barred, so the mortgage has automatically ended” is incorrect. Even where the claim is extinguished, the right in rem continues to appear until it is deleted from the register.

Enforcement by Realisation of the Pledge

For a secured claim the rule is that recourse must first be had to realisation of the pledge (İİK Art. 45). Claims for interest and instalments, claims based on a negotiable instrument and the other statutory exceptions are reserved. If the mortgage deed contains an unconditional admission of a monetary debt, enforcement proceeds as on a judgment under İİK Art. 149 et seq.; otherwise pledge enforcement without a judgment applies. The type of proceedings is not determined merely by saying “there is a mortgage”.

Statutory Mortgage Rights

TMK Art. 893 lists statutory mortgage rights such as those of the seller, the heir and the construction creditor. The registration period is not “three months from the accrual of the claim” for all rightholders. A construction creditor in particular may request registration from the time the work is undertaken and must have it registered at the latest within three months of completion of the work. If the owner does not accept the amount or the right, an action and a provisional registration annotation may be required; a direct application to the land registry is not sufficient in every contested case.

Transfer of a Mortgage and Assignment of the Secured Claim

On assignment of the claim, the mortgage attached to it as a rule passes to the assignee; the declaratory registration and documents in the land register are completed. Under TBK Art. 186, notice to the debtor is not a condition of validity of the assignment; if no notice is given, a good-faith payment to the former creditor may discharge the debt. Depending on the nature of the secured claim, the provisions on commercial paper and on registers are reserved.

Sale of a Mortgaged Immovable

An immovable may be transferred together with the mortgage. The purchaser assumes the burden in rem over the immovable; they do not, however, automatically assume the personal debt merely by the transfer of ownership. Where an assumption of the debt has been agreed between the new owner and the former debtor, the one-year mechanism in TMK Art. 888 operates upon the land registry administration's notice to the creditor: if the creditor does not notify in writing within one year that they will hold the former debtor liable, the former debtor is released and the debt passes to the new owner. The provisions on assumption of debt based on the creditor's express consent are also reserved.

Frequently Encountered Mortgage Disputes

Various disputes arise in mortgage practice. Foremost among them are failure to discharge a mortgage despite payment of the debt, an excessively high mortgage sum, attempts to extend the scope of the mortgage, and recourse problems in third-party mortgages. If the mortgage is not discharged despite payment, the owner may require the creditor to join in the request for deletion; if the dispute persists, an action for deletion may be brought, with jurisdiction and venue determined by the nature of the underlying relationship and the land registry request. A request for interim legal protection is assessed if the conditions of prima facie proof, the subject matter of the dispute and irreparable harm under HMK Art. 389 are met; the mortgage is not automatically deleted by way of interim measure as soon as an action is brought.

In a maximum-amount mortgage the sum in the register indicates the maximum extent of liability in rem; it need not equal the outstanding balance of the debt. A partial payment does not as a rule of itself secure a reduction of the mortgage rank. Narrowing the scope of the mortgage or partial deletion is assessed according to the contract, the position of the claim and the security, the principle of indivisibility, and the creditor's consent or the specific cause of action.

In conclusion, the creation and discharge of a mortgage are legal transactions that must be conducted carefully by both owners and creditors. Correctly identifying the type of mortgage, completing the creation procedure in full, effecting discharge promptly upon payment of the debt, and pursuing the correct legal routes in the event of a dispute are all of considerable importance.

This article has been prepared for general information purposes and does not constitute legal advice. In specific disputes, professional legal support must be obtained from a specialist attorney.

Frequently Asked Questions

Does a mortgage-secured claim become time-barred?

After registration, no limitation period runs for the secured claim under TMK Art. 864.

Does a partial payment secure partial discharge automatically?

No; indivisibility, the contract and the creditor's consent are assessed.

Does a third party who grants a mortgage become a personal debtor?

Not unless there is a separate guarantee or assumption of debt; liability is limited to the immovable.

Does the purchaser of a mortgaged immovable automatically assume the debt?

No; the notice and one-year mechanism in TMK Art. 888 applies.