Mortgage on Superficies in Turkish Law
Abstract
In Turkish Civil Law, superficies, also known as the right of construction, which provides the right to build a construction or to preserve the existing construction on the immovable assets (also referred to as property) of someone else has been regulated. In the same provision of the Civil Code, the concept of mortgage, which can be established on immovable assets and functions as a pledge or a security of a particular real property for the payment of a debt for the creditors, is also regulated. Despite being servitude, it is possible to establish a lien on superficies when it can be processed as a real estate. In this article we will examine how superficies may be processed as a real estate and furthermore, under what circumstances a lien can be established on the right of construction.
I. INTRODUCTION
Due to modernization, urbanization rate has increased and therefore the need for housing reached its peak in Turkey. Inevitably, the importance of construction sector has increased day by day. Together with the developments in the construction sector and increasing number of investors in this sector, the need for a property for the projects to be realized by investors has also increased.
An investor might hold sufficient financial resources to construct a building on a property or to own an already existing construction on that property, but might not be the landowner of that property, or might not have sufficient financial resources to own that property. Likewise, a landowner might desire to generate an income from the land without disposition of the land. The compromising point for the landowners and the investors in such situations are legally provided with superficies.
While the right provided by superficies ensures some financial benefits to landowner, such as owning the construction in the long run (with the termination of superficies relationship), acquiring continuous rental income and so forth, it provides potential project field and economic facilities regarding the realization of the project to the investor. The increase of the value of the land, due to having a structure under or onto, is also inevitable. At this point, payment issues may occur in potential obligatory relationships both between the landowners and the investors as well as between the third parties and the investors. The concept of regarding superficies as collateral gains importance for reasons such as ensuring a feeling of security for the commitments that are made or proving the cash flow in trade relations. As a result, the importance of the mortgage to be built on superficies concept comes to light.
In this article, our main goal is to elaborate on the concept of mortgages on superficies and the problems that may erupt while using mortgages on superficies. The problems that may arise with regard to the parties of the superficies agreement mostly occur in situations where the right can be processed as a real estate. As an example when an investor is willing to construct a shopping mall on a private land, the landowner may accept the superficies, whereby the landowner will establish a lien on superficies in order to guarantee the committed payments.
For this reason, first, we will examine the superficies and their legal nature, later on, we will elaborate on the concept of mortgages and their main functions and subsequently, we will address on in which situations the superficies can be established as immovable in land register and examine the mortgage types that can be established on superficies and their basic conditions.
II. LEGAL NATURE OF SUPERFICIES
A. Superficies as Servitude
Within the scope of the provisions as set out in the Turkish Civil Code1 (“TCC” or “Code”), in general, the servitude is defined by the Code as a real right2, which provides the right holder to benefit from a property or a right. As it is also mentioned in the Code3, this right is also a liability on specified property and burdened on the proprietor “endurance” and “evasion”4 obligations. In order to have a real right attribution, servitudes depend on title deed registration, because fulfilling the condition has an absolute effect that can be brought forward publicly, providing limited domination to the owner of servitude on specified property. According to the provisions of the TCC, in order to establish the servitude5, an official formed agreement should be registered to land registers.
B. The Establishment and Termination of the Superficies in Accordance with the Civil Code
Superficies are particularly regulated in the TCC6. Immovable assets constitute the subject-matter of the superficies. Situated as servitude, this right is a transferable servitude that gives a right to own a structure by constructing a structure under or onto a land owned by a third party or to preserve an existing structure.
Superficies may only be established with an official bond and the enrollment should be fulfilled by the Title Deeds Registration Office. In the formal deed, the content and scope of the superficies, matters concerning especially the location, shape, quality, dimensions, purpose of allocation of structure and the right to benefit from the areas that do not have structures are covered. These formal deed provisions are obligatory for everyone that acquires the superficies or the land.
After the expiration of three fourths of the designated time period, parties might extend the duration of the right, obeying the procedure specified for its establishment, at most for another one hundred years7. Early promissory transactions regarding the extension of the deadline are void (not binding) and will be terminated. Termination types of the superficies are indicated below;
i. Expiration of the Contract: Superficies expire automatically after the period that is agreed on the contract. Superficies can only be established for a period of a hundred years.
ii. Termination with Approval: Superficies might come to an end before the expiration date along with the right owner’s approval.
iii. Termination due to Disappearance of the Real Property: Superficies will also be terminated automatically when the property on which the superficies lie vanishes.
iv. Termination with Expropriation: The superficies that is established on the expropriated property shall expire ex-officio with the expropriation.
v. Termination in Accordance with the Contract: If the property owner’s right of authorization of termination is reserved in the formal deed, the superficies may be terminated with the usage of the right.
vi. Termination as a result of Acting against the Contractual Obligations: If the owner of the superficies exceeds the limits of the right or acts against his obligations, the property owner may reclaim the superficies and all binding rights and obligations before its time.
C. Varieties of Superficies
Superficies can be divided in two categories based on their establishment and land registration. The first type of superficies to be mentioned is the easement superficies, which is regulated in restrictions regarding the real property ownership part of the Code8. This first type of superficies indicates that the right holder shall be in possession of the construction that is under or onto the land which belongs to a third party. Furthermore, it is also indicated, referring to the Property Ownership Law, that superficies shall not be established on independent sections that are dependent on the property ownership.
Another type of superficies other than the “easement superficies” is “superficies as an independent and continuous right”, which is also regulated by the Code9. The distinction is based on the dependence and the duration of the superficies. The continuous quality of the superficies depends on establishing the right for at least thirty years and the independence depends on being able to be transferred to a third party, not being imposed to any restriction provisions to transfer to a third party. Subsequently, if not determined otherwise by the agreement, it can be said that the superficies are independent rights that are transmissible to a third party and transferable to the heirs.
The distinction related to the superficies is essential in considering superficies as a real estate. Superficies which are independent and permanent can be accepted as an immovable and be recorded to the land registration on its own upon the request of the owner of the superficies. On the other hand, superficies shall only be considered as an “easement” and recorded to column of servitudes to land registers, if the right has not been established for thirty or more years since superficies, which has any restriction regarding transferring to the third parties, claiming real right on superficies, transmissibility to heirs or the fact that these kinds of dispositions can only be made with a permission during the establishment of the right, cannot be presumed detached.
D. Superficies as Easement
Superficies can be established on behalf of an immovable or a person. As mentioned above, one type of superficies is considered as an immovable, i.e. a property. This easement superficies is regulated under the article of TCC titled as “Superficies”. According to the subsequent provision, the ownership of structures that are constructed permanently on or under an immovable that belongs to someone else, shall belong to the easement owner. In the light of the explanations above, the superficies which are not independent and permanent shall only be accepted as an easement. In this case, superficies shall be recorded to the column of servitudes as regard to the official bond formed by the Real Estate Registration Office. Even this type of superficies can be established by an official bond10. This indicates that the superficies can be established only on real estates that have land registration.
E. Superficies with Independent and Continuous Qualities
The second type of superficies differs from the superficies of easement in the sense that it is not under the limitations of a right but rather regulated independently as a right. Unless otherwise agreed on, the superficies that is transmissible to the third parties and heirs is regulated under Article 826 of the Code “Superficies – Subject and Registration to the Real Estate Registers”. This type of superficies has more specifications compared to the other types of superficies, and according to this article, servitude shall be established by the landowner, who authorizes the right holder to construct a new structure or to preserve an existing structure under or onto the land. Superficies which are established for at least thirty years are defined as continuous (permanent) by the same article. Such registration is not possible for easement superficies. However, it is not obligatory to register the superficies that are independent and permanent as an “immovable” to the land register. Only with the permission of the right holder, the right can be registered as an “immovable” to the land register. However, this registration shall be made upon request, and only the beneficiary, the rightful owner, has the right to demand this registration. On the other hand this registration allows the right to be possessed only as an immovable, which also means that the registration shall not entitle the right as an immovable in other aspects. For example, alienation of the recorded superficies shall be fulfilled pursuant to the rules regulating the alienation of the immovable. In this context, superficies might be a subject to real rights. According to the Article 826 of TCC, assignment, alienation and devolvement of superficies are possible. In addition to these, establishments of all kinds of real and personal rights on superficies as well as establishment of construction servitude, property ownership and new superficies are also executable.
As mentioned above, with the termination of the superficies, existing structures on the immovable land will become an integral part (essential component) of the encumbered immovable and alienate to the landowner. Unless agreed otherwise, landowner is not obligated to pay any compensation for the constructions. If the superficies are recorded as an immovable, the page shall be closed at termination date. As a result, actual present liens, other rights, restraints and obligations on superficies should also be terminated11.
The Turkish legislations12 regulate that all manners of real and personal rights might be established on the superficies, which are registered as immovable. Furthermore, in order to consider the superficies as an immovable, it is not necessary to have an already existing construction. In other words, registered superficies can be treated as an immovable, even if the structure on the land is yet to be constructed. This also means that the superficies which are registered as immovable could be mortgaged.
III. MORTGAGE
Mortgage, in the simplest term, is a legal agreement that conveys the conditional right of the ownership on a property to the owner, to secure a loan; pledging of a particular immovable for a debt. This term is prescribed as a “property lien”13. Mortgage is a limited real right established on a guaranteed immovable. There is no valid mortgage without an effective claim. Likewise, the existence and validity of the mortgage depends on existence and validity of the fundamental claim. To establish a mortgage, the immovable should be registered at the register of title deeds.
To establish the right of mortgage, an agreement between the creditor and the proprietor, which should contain an undertaking of the proprietor to pledge his immovable as collateral to the particular claim, is required. Concluding the agreement before the land registrar, in other words as a formal deed is a condition for validity. A registration request made by the proprietor and a valid legal reason are also required. Pledge contract, court decision, letter of law or testamentary disposition can constitute the legal reason. Since the mortgage secures the claim, an independent base relationship, in other words a definite claim is primarily needed, which means that in case of an invalid claim, the mortgage is considered to be void.
This lien does not provide the creditor the rights of utilization or benefit from the immovable. On the other hand, the property rights of the pledger are protected. In addition to this, alienation of the immovable shall not affect the mortgage, which means that the transferee shall obtain the property of an immovable with its mortgage. Mortgage is an accessory right affiliated to the principal debt. Thus, the termination of the principal debt means the termination of the lien as well.
Although the termination of the mortgage is associated with the principal debt, primary obligation might eventuate because of the lapse of time, fulfillment, renovation, impossibility, while the mortgage can be terminated only by cancellation. The mortgagee, as the holder of the lien, has the right to demand the cancellation. The mortgage can also be terminated by the request of the creditor, in case of the parties’ consensus or by the complete demolishment of the immovable.
IV. ESTABLISHING LIEN ON SUPERFICIES
A. Establishment of Mortgage
As stated above, establishing a mortgage on the superficies are independent and continuous, and will be in question in terms of the superficies that are recorded in a separate registry page. If the superficies are registered as an immovable, the request of superficies owner is sufficient to establish the mortgage and the approval of proprietor of encumbered immovable is therefore not necessary. The mortgage can be established temporarily and indefinitely. It can be established as the “definite debt mortgage”, which appears if the amount is determined, or the “maximum liability mortgage” for dormant claims, which entails the establishment of the superficies. Mortgaged superficies contain integral parts and accessories of the real estate. On the other hand, pursuant to the circular of the General Directorate of Land Registry and Cadasters dated 15.06.2010 and numbered 1705, if the official bond belonging to the superficies has any limitation on disposal, the superficies shall not be deemed as independent; it should not be registered as an immovable to the real estate registers and cannot be a subject to the mortgage.
B. Legal Liens Inflicted from Superficies and Imperative Provisions of TCC
There are two types of legal mortgage rights generating from the superficies. They can be defined as “the legal mortgage of the landowner” and “the legal mortgage of the superficies owner”. The legal mortgage of the landowner is regulated by Article 834, titled “Right to Demand Mortgage”. In order to guarantee the loan performances in revenue format in return for superficies, the landowner may demand mortgage of the superficies in return for utmost three-year-revenue. This special condition does not impose any restriction in terms of establishing another mortgage on the superficies. The right to demand the registration of this mortgage belongs to the superficies owner, not the proprietary.
As for the latter type of mortgage, it can be established as either limited or unlimited depending on the request of the owner of the superficies, without the approval of the landowner. The established mortgage will be limited within the terms of the records which are taken place in the formal deed about the content and the scope of superficies, such as the specified conditions with regard to duration. For instance, in the event that the mortgage is limited, it can be established utmost for the time period of the superficies. On the other hand, if the superficies owner and the landowner are to make an amendment on the formal deed which might affect or damage the rights of the mortgage holder, the acquiescence of the mortgage holder becomes necessary, since in case of a dispute between superficies owner and the landowner, the mortgage holder should not be affected.
If the guaranteed debt has not been repaid, the mortgage holder has the right to demand the execution for foreclosing of the superficies. In such situation, legal proceedings will be conducted by means of foreclosure of the pledged property. The asset to be foreclosed as a consequence of the execution proceedings is the independent and permanent superficies, not the real estate that has superficies. After the judicial sale of the superficies, the new beneficiary of the superficies and the landowner can conclude a new agreement or the initial agreement can be applied. Even if a new agreement is concluded, it is considered as the continuation of the previous agreement in terms of time frame. As an example, if the superficies are established for 50 years and sold to a third party at the 20th year with judicial sale, a new agreement between the landowner and the new benefiter can be concluded for the remaining 30 years.
C. End of Superficies and the Effect of Ending the Established Mortgage
In this study, after having examined the definition of superficies and their legal nature and the varieties, we have analyzed the notion of mortgage and the mortgages established on superficies. At this point, one might question the issue of the mortgage, in case the superficies cease to exist. Certainly, the termination of the superficies shall influence the restrictions and liabilities on the superficies.
As regulated by the Code14, the separate page shall be closed with the termination of the superficies that are recorded independently as an immovable. As a result, the rights of the mortgage established onto the superficies that are recorded to land registry as immovable, all other rights, restrictions and liabilities should also eventuate. Finality of superficies shall denote to the termination of the mortgage.
The cancellation of the superficies takes place with a written request of the right owner. However, if there is an established mortgage on superficies, the cancellation can only be actualized with the consent of the mortgage holder. If the mortgage holder refrains from giving consent to cancellation, the cancellation of the superficies can only take place after the termination of the superficies.
As regulated by the Code, superficies established for a definite duration will end ex officio when that duration ends. In other words, after the end of the duration, the cancellation is done through the Official Title Register by the request of the landowner. On the termination date, the mortgage established on the superficies will come to an end automatically; and as stated above, the mortgage can only be established during the time of the superficies. Another way of cancellation of the mortgage takes place when the immovable disappears, and as regulated in the Code, both the superficies and the mortgage will be terminated.
The superficies on immovable will cease to exist in case of expropriation of the property while the mortgage on the superficies will remain valid with the expropriated price until the superficies expires. Apart from the expropriation, it is also possible for the superficies to come to an end with a court decision. In that case, the superficies will expire without the consent of the right holder and the mortgage established on the superficies will also end ex officio.
If a price to be paid to the right owner after the expiration date is recognized by the mortgage holders, the amount cannot be paid without their consent. However, in the event that the amount is paid to the right holder, the immovable owner will be accountable to the mortgagee for the related amount.
Lastly, if the superficies owner exceeds the limits of the right or acts contrary to the obligations arising from the contract, the landowner can reclaim the transfer of superficies with all of its rights and obligations prior to its expiration date. However, the dispute between the owner of the superficies and the landowner should not affect the mortgagee. If the superficies alienate to the landowner before the designated date, the lien shall not be affected from this transaction, and the mortgage shall be effective as long as it is designated.
V. CONCLUSION
In conclusion, the superficies is a transmissible right, which grants a person to build a construction and become the owner of it or to maintain an existing construction on or under another person’s property. This right might be recorded in the land registry as a servitude or as an immovable if it is qualified either as independent or permanent. The superficies, which enables a structure to be a property of someone else other than the landowner, can also be utilized as a warranty. If the independent and permanent servitude is recorded as an immovable, superficies can also become a subject of property lien. It becomes possible to establish two types of mortgage on superficies. The first one is a legal mortgage established on the superficies, which is vested in the Law. In return for utmost 3-year-revenue, in situations where the payments of deeds are made in the form of revenue and the superficies are registered as an immovable. This mortgage develops with registration and upon the request of the landowner, the right owner shall become liable to register the lien to the land registry. This legal mortgage can be established and registered as long as the superficies lasts and might not be a subject to judicial sale. Furthermore, it can be propounded against the both total and singular successors of superficies. On the other hand, the superficies owner can utilize the right as collateral and third parties can establish mortgage on superficies. This type of mortgage can be liquidated within the scope of the legal enforcement proceedings of the Bankruptcy and Enforcement Law that are initiated with the foreclosure of pledged properties.
Footnote
1 4721 numbered Turkish Civil Code (TCC).
2 Real rights are defined as an absolute right that gives immediate authority on movable or immovable assets and can be asserted to every person. These rights were separated into two parts as limited and unlimited. Unlimited real rights merely contain the right of property, nonetheless limited real rights include right of mortgage, right of incumbrance and easement.
3 TCC, Art. 779: “Easement in favor of immovable, being an incumbrance put on an immovable in favor of another immovable, renders owner of encumbered immovable obliged to avoid to exercise some powers that right of immovable ownership provides or to bear beneficiary immovable owner to use incumbered immovable in a certain manner. Obligations of performance may not be subject to easement individually; may solely be connected to it as a subsidiary act.”
4 Obligation of endurance and evasion means owner of encumbered immovable has to endure of right owner’s interventions or has to avoid his/her legal authorities inflicted from ownership.
5 TCC Art. 780 : “It is essential to be recorded to real estate registers in order for the easement to be established. In acquisition and registration of easement, provisions regarding immovable ownership shall apply unless provided otherwise. Acquisition of easement through prescription shall only be possible in immovable assets which their ownership can be acquired in this way.”
6 TCC Art. 726, 826 to 836.
7 TCC Art. 836/2.
8 TCC Art. 726 : “Ownership of the structures that have been constructed based on right of construction under or onto a land belonged to another person so as to stay permanently, shall belong to the easement owner. Establishment of condominium or construction servitude over independent sections of a building which are convenient to be used individually, is subject to the Law of Property Ownership. There may not be established superficies additionally over independent sections.”
9 TCC Art. 726 and 826 to 836.
10 Decision of the Supreme Court Assembly of Civil Chambers dated 08.10.2008 and numbered 2008/14- 620, 2008/615.
11 The Supreme Court 6. Civil Chamber’s decision dated 21.01.2008 and numbered 2007/13277- 2008/323 also includes full information about superficies.
12 TCC Art. 704, 826 ff. and 998; See also Art. 10 of Guideline of Official Title Register.
13 TCC Art. 881-897.
14 TCC Art. 828.
