MORTGAGE UNDER TURKISH LAWS

Mortgage under Turkish laws

A mortgage denominated in Turkish Lira or in the event it secures a loan obtained from local or foreign credit institutions in a currency other than Turkish Lira, in such currency, can be created by registering such mortgage at the Registry of Land Titles. Under Turkish Laws, a mortgage is created through a two-stage process: 

- Initially, the contractual terms agreed by the parties, which form the mortgage agreement, are typed by the land title registrar on printed official forms forming the official deed of mortgage.  

The deed of mortgage is signed by the parties before the Land Title Registrar, who also signs and seals such deed.  A copy of the deed is provided to the creditor.

- The deed of mortgage is registered by the Registrar in a specific column in the records for the mortgaged immovable kept at the Registry of Land Titles.    

Turkish Civil Code adopts the "fixed ranks system" in connection with the ranking of secured creditors (mortgagees) among themselves. Accordingly, the debtor may divide the value of its property into "fictional" portions in Registry of Land Titles and he may create security rights on each portion independently. For example, the debtor may keep the first rank reserved and he may grant a security right to a creditor at the second rank. If there exist several mortgagees who possess security rights on the same property, the ranking among these creditors is determined by their fixed ranks. At the stage of foreclosure, the creditor at the first rank is paid first, even though his security right might have been granted at a later date than the security right of the creditor at the second rank. 

In the event that a higher-rank mortgage is canceled by consent of the creditor or because the debt is fully paid, such rank becomes vacant. Lower rank mortgages do not automatically move upwards, but it is possible to move to the vacant rank if the mortgage agreement so provides by virtue of an escalation clause and the mortgage is registered accordingly. In other words, an option to upgrade the mortgage to a vacated higher rank if so provided in a specific clause at the time of registration is available.



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