ABSTRACT
In this article, the establishment of a collective pledge on immovable properties will be examined in the context of Turkish law, and the conditions for the establishment of a collective pledge under the Turkish Civil Code will be explained: (i) pledging more than one immovable property, (ii) pledging for the same debt, and (iii) the immovable properties belonging to the same owner or to owners jointly and severally liable for the debt.
I. INTRODUCTION
Under Turkish law, it is not possible to establish a general pledge right over immovable properties. However, especially for debts such as loan debts, there are situations where the value of a single property is insufficient as collateral for the receivable. As a result, Turkish Civil Code No. 47211 permits the establishment of collateral on multiple immovable properties for the purpose of constituting collateral for a single receivable, either by distributing the burden of collateral over the immovable properties or without distributing the burden of collateral over all immovable properties for a single receivable. Thus, the creditor has a stronger collateral in their possession and can resort to more than one immovable properties in case they are unable to secure their receivables. The type of pledge where the collateral burden is distributed over more than one immovable properties is called “multiple pledge”, and the type of pledge where all immovable properties constitute collateral for the same receivable without distributing the collateral burden is called “collective/ joint pledge”. The Law prevents the emergence of complex recourse relationships by providing for collective pledge exceptionally and subjecting it to certain conditions2.
II. ESTABLISHMENT OF COLLECTIVE PLEDGE IN GENERAL
The main legal regulation regarding the establishment of a collective pledge on immovable properties is Article 855 titled “If there is more than one immovable properties” in the Turkish Civil Code:
“The pledging of more than one immovable properties for the same debt depends on these immovable properties belonging to the same owner, or owners who are jointly and severally liable for the debt.
In other cases where more than one immovable property is pledged for the same receivable, the amount for which each immovable properties constitutes security for the receivable shall be specified when the pledge is established.
Unless there is an agreement to the contrary, the land registry office shall ex officio distribute the security to each immovable property in proportion to its value”.
In the first paragraph of the article, the conditions of collective pledge, where the burden of pledge is not distributed among the immovable properties and all immovable properties collectively secure the receivable, are regulated. In the second paragraph, the situation of multiple pledge arising when multiple immovable properties constitute collateral for the receivable by distributing the burden of pledge, is regulated3. In the case of a collective pledge, since all immovable properties provide protection for a single receivable without distributing the pledge burden, when establishing a collective pledge, information regarding the pledge is recorded on the pages of the title deed of each immovable property, while the entire receivable is written in the receivable section4.
In exchange for the collective pledge right, which provides the creditor with a broad protection, the creditor’s ability to choose which of the immovable properties to liquidate is restricted. Pursuant to paragraph of Article 873 of the Turkish Civil Code, the creditor must request the liquidation of all immovable properties in case of a joint pledge. The decision on which immovable properties will be sold is at the discretion of the director of enforcement. If this issue is not taken into consideration and a sale decision is made in case of initiation of proceedings for certain immovable properties, this situation is accepted as a reason for complaint in the practice of the Court of Cassation.
In the case of multiple pledges as stipulated in the second paragraph, the conditions required for a collective pledge are not required and independent pledge rights are established on each immovable property for the same receivable. As a result, there is no obligation to request a joint sale in contrary to the collective pledges, and the beneficiary of the pledge right can start enforcement proceedings regarding each immovable property separately5.
In the establishment of a collective pledge, since there is an establishment of a right in rem and a pledge right, in terms of its nature, the general principles regarding rights in rem and the rules stipulated by the pledge law will be applicable. In this context, within the scope of the principle of speciality, the receivable protected by the collateral and the immovable property on which the collateral is established must be specific6. As a matter of fact, Article 32 of the Land Registry Regulation7, while regulating the manner of registration of the collective pledge, requires the pledge column for each immovable property to indicate the entire amount of the receivable and the immovable properties with which it is jointly pledged. On the other hand, if more than one immovable property is pledged for the same receivable without fulfilling the conditions of collective pledge, it is required to specify the amount for which each immovable property or share is pledged.
When establishing a collective pledge agreement, as in other agreements subject to formal form, the official deed of the collective pledge agreement must contain the objective essential points and subjective essential points of the collective pledge agreement. In other words, the identity of the creditor, the identity of the pledgor, the immovable properties subject to the pledge, the type of pledge chosen, the right of receivable to be secured, the amount of collateral, the degree of establishment should be specified in the agreement.
In cases where collective pledges are established in favour of banks for loan agreements, it is observed that pledges are established in favour of more than one bank by establishing more than one sub-degree within the same degree. This type of pledge is called “pro-rata pledge” in practice. In this type of pledge, the portion of the sale price corresponding to that degree is divided among the creditors of the same degree in proportion to their respective shares8.
III. CONDITIONS FOR THEESTABLISHMENT OF A COLLECTIVE PLEDGE
A. Pledging More Than One Immovable Property
Article 855 of the Turkish Civil Code, which allows the establishment of a collective pledge, requires that the subject of the pledge be more than one immovable property. In order for a collective pledge to be established, the number of immovable properties on which a pledge is established must be at least two. In this context, to fulfil this condition, each independent section must qualify as an immovable property according to the Turkish Civil Code9.
Article 704 of the Turkish Civil Code specifies the things that can be registered in the land registry as immovable property. According to this article, immovable properties consist of lands, independent and permanent rights on immovable properties and independent sections subject to condominium ownership. Within this scope, if two or more immovable properties, which are immovable and registered in the land registry under the Turkish Civil Code, are used as collateral for the same receivable, it will be possible to establish a collective pledge within the scope of Article 855 of the Turkish Civil Code.
All of the goods subject to collective pledge must be immovable property. It is not possible for an individual movable to be subject to collective pledge together with immovable properties. However, the inclusion of movable property as an attachment to immovables is a unique situation depending on its attachment nature, as Article 862 of the Turkish Civil Code includes the integral parts and attachments of immovable properties in the scope of immovable pledge10.
While it is possible to establish a collective pledge on immovable properties subject to condominium, if independent sections were subject to condominium easement before the establishment of condominium, the right of pledge cannot be established on these independent sections, making the establishment of a collective pledge impossible11.
Shares in joint ownership also qualify as immovable property for the establishment of acollective pledge. In this case, it is possible for the debtor or joint debtors to establish a pledge for the same debt on the joint ownership shares they own. These shares may be related to different immovable properties, or they may be shares belonging to the same immovable property. In other words, provided that the other conditions of collective pledge are met, collective pledge may also be established in the event that different shareholders in the same immovable pledge their shares for the same debt, or in the event that an immovable property on which a pledge right has been established is subsequently converted into shared ownership12.
Article 1000 of the Turkish Civil Code enables multiple immovable properties whose owners are the same person to be registered on a common page in the land registry upon the request of the owner, without the condition that their boundaries are adjacent to each other. If more than one immovable property is registered on a common page, it is possible to establish a collective pledge through this page, provided that all of these immovable properties will be pledged and the other conditions of the collective pledge are met13. However, the immovable property that is subsequently removed from the common page upon a court decision or the owner’s request will continue to be covered by the collective pledge, as article 1000 of the Turkish Civil Code stipulates that the registered rights shall be reserved in case the immovable property is removed from the common page14.
In case of a collective pledge, it is possible that these immovable properties may be under the jurisdiction of different land registry offices since a single pledge right is established on multiple immovable properties without seeking a physical proximity. In this case, pursuant to the Regulation on the Procedures and Principles Regarding the Execution of Title Deed Transactions Regarding the Immovable Properties Registered Outside the Jurisdiction of the Land Registry Directorates15, the land registry directorates, which are authorised to carry out the title deed transactions regarding the immovable properties registered outside the jurisdiction of the Land Registry Directorates, upon the request of the right holder, by obtaining authorisation from the land registry directorate where the immovable properties is registered and determining that there is no legal obstacle, will issue the pledge official deed after obtaining the necessary authorisation from the land registry directorates where other immovable properties are registered.
B. Pledging For The Same Debt
In order to establish a collective pledge, all immovable properties subject to the collective pledge must constitute collateral for the same receivable. The concept of “same receivable” means that the receivable is based on the same legal ground. In this context, it is accepted that if there are multiple contracts within the scope of the same debt relationship, the requirement of the same debt required by Article 855 of the Turkish Civil Code is considered to be met. In this context, in divisible performances, each part of the performance will not be considered as a separate debt, and all performances with a legal cause will be considered as the same debt. For example, in a money debt divided into installments, each instalment will not be considered as a separate debt, but all instalments will be considered as a single debt and can be secured by a collective pledge. However, based on the same example, if certain instalments are subject to collateral and certain instalments are excluded from the collateral, the part subject to collateral will be deemed as “the same debt” and the other part will not be secured16.
It is possible to have receivables with different qualifications within the scope of the same receivable. In other words, a collective pledge may be used to secure the main receivable as well as the secondary receivables. Principal receivables, interest receivables, litigation and trial expenses and other receivables arising from the same legal cause may be included in the scope of the collective pledge17.
The customary practice in the banking and credit sector is to conclude a general framework agreement between the credit institution and the borrower and to make many credit facilities to the borrower within the scope of this framework agreement. Since these credit facilities are within the scope of the same framework contractual relationship, they are considered as the same debt and can be secured by collective pledge18. However, if different guarantors are involved in each of these credit utilizations, the immovable property owned by a guarantor may be subject to a collective pledge for a utilization for which she/he is the guarantor, but will not meet the necessary condition for the remainder. In this case, if the immovable property owned by the guarantor is subject to collective pledge covering all credit utilisations, the conditions for collective pledge will not be met.
The receivable arising from the current account agreement is also considered a single receivable and may be secured by a collective pledge. However, it is possible for one of the receivable items recorded in the current account to be subject to a separate collateral. The fact that it is recorded in the current account does not have any consequences for the collateral of that receivable item, and that collateral remains valid as collateral for that part of the receivable when the account is accepted19.
If there are joint creditors of the same receivable, the pledge does not have to be established in favor of all of these joint creditors. A collective pledge may be established in favor of one or more of the joint creditors. This is because, in the case of joint creditors, the debtor can get rid of his debt by fulfilling his debt to one of the joint creditors, and since the legal source of the debt is the same, the debtor’s claim to each joint creditor is the same receivable.
C. The Immovable Properties Belonging To The Same Owner Or Owners Jointly Responsible For The Debt
Normally, the pledgor is not obliged to be the debtor of the secured debt. The owner of an immovable property may establish a pledge on his immovable property in favor of the creditor of that debt in order to secure a debt for which he is not liable in any respect. However, in order to establish a collective pledge, the immovable properties must be owned by a single owner or, in the case of pledges on immovable properties owned by more than one owner, the owners of these immovable properties must be persons who are jointly and severally liable for the same debt. This limitation for the establishment of a collective pledge prevents the formation of complex recourse relationships and the establishment of very extensive collective pledges.
In cases where the immovables belong to the same owner, this person does not have to be the debtor of the debt subject to the collateral. This is because the condition of joint and several liability for the debt stipulated in the article is valid in cases where the immovable properties belong to different owners. When the immovables belong to the same owner, the condition of “belonging to the same owner” is met, not the condition of “belonging to the owners jointly and severally liable for the debt”.
According to one opinion in the doctrine, joint guarantors fulfill the condition of “belonging to the owners who are jointly responsible for the debt” required for a collective pledge, while according to another opinion, they do not. The view that the immovable properties owned by the joint guarantors may be included in the scope of collective pledge together with the immovable properties belonging to the principal debtor is based on the fact that the joint guarantors are jointly liable for the debt with the debtor and that the joint guarantors may be applied to without the obligation to apply to the actual debtor. According to this view, the legal regulation is based on the relationship between the pledgee and the debtors and does not give any effect to the differences in the internal relationship between the debtors20. On the other hand, the view that the immovable properties owned by the joint guarantors cannot be included in the scope of collective pledge together with the immovable properties belonging to the actual debtor argues that the debt of the joint guarantors is not the same debt as the debt of the actual debtor, but a separate debt based on the personal guarantee agreement. According to this opinion, immovable properties owned by joint guarantors may be subject to same collective pledge since the debts of each joint guarantor arising from the personal guarantee agreement; however, immovable properties owned by the principal debtor and the guarantors may not be subject to same collective pledge21. The practice of the Court of Cassation on this issue, in parallel with the first opinion, is that the immovable properties belonging to the joint guarantors may be subject to collective pledge together with the immovable properties belonging to the debtor22.
If immovable properties belonging to owners who are jointly and severally liable for the debt are subject to collective pledge, the owner of each immovable property subject to collective pledge must be responsible for the entire debt. That is, the fact that the owner of one of the immovable properties is partially liable for the debt affects the validity of the collective pledge. However, if a receivable is secured by a collective pledge, all debtors who are jointly and severally liable for that debt are not required to provide collateral23.
If this condition regarding the owner of the immovable properties is not met in a collective pledge, the pledge established on more than one immovable properties may not be a collective pledge, but only a shared pledge.
When establishing a collective pledge, it will be necessary to prove to the land registry office that the immovable properties belong to the same owner or that the immovable property owners are jointly and severally liable for the debt.
In a situation where the owners of the immovable properties are not jointly liable for the debt, it is possible that the creation of joint and several liability within the pledge agreement may be considered as an unusual provision within the general terms and conditions. In the preamble of Article 21 of the Turkish Code of Obligations, it is stated that “In a decision of the Swiss Federal Court, a guarantorship implicitly included in the text of the pledge in a credit transaction operating in the form of a current account was found to be unusual”, and thus, a situation similar to the creation of joint and several liability within the pledge agreement is given as an example of general transaction terms that are foreign to the nature of the contract and the nature of the transaction, and is subject to the sanction of being deemed unwritten24. However, in order for a contractual provision to be considered a general transaction condition, it must (i) be drafted with the intention of being used in a large number of similar contracts in the future, (ii) be unilaterally drafted by one of the parties to the contract, (iii) be abstract and general in nature, and (iv) be in the nature of general provisions within the scope of the contract25.
In cases where the immovable properties subject to pledge belong to different owners and these owners are not jointly and severally liable for the debt, it will not be possible to establish a collective pledge. This is because the principle of numerus clausus and principle of adherence to type apply. However, if such a contract is made, the contract will not be considered completely void and will be divided into immovable properties in proportion to the security values provided by the pledge by conversion26.
In cases where a collective pledge is established on the condition that the owners of the immovable properties are the same person, and then one or more of the immovable properties are transferred to a third party who does not have joint liability for the debt, according to a view in the doctrine, the burden of the pledge must be distributed among the immovable properties since the conditions of the collective pledge are no longer met27. However, accepting that the registration of the collective pledge has become void on the basis of this opinion would result in the ineffectiveness of the collective pledge, which constitutes a strong security for the creditor, by the transfer of the immovables to third parties by the debtor.
IV. CONCLUSION
Within the scope of financing contracts, there is a need to provide a wider range of collateral based on immovable properties. In order to meet this need, multiple immovable properties may be subject to a collective pledge pursuant to Article 855 of the Turkish Civil Code in order to constitute collateral for a single receivable. In these complex structures where there may be many debtors and creditors, in order for a collective pledge to be validly established, it is necessary to ensure that multiple immovable properties are pledged for the same debt, i.e. that the debt arising from the same legal cause is secured by the pledge, and that the immovable properties all belong to the same owner or to owners who are jointly and severally liable for the debt.
BIBLIOGRAPHY
AZİM ÖNCÜ, Türk Hukukunda Taşınmazların Toplu Rehni, 1st Edition, Ankara 2023.
BİLGEHAN ÇETİNER, “Reel Teminatlar”, in: Teminat Hukuku, Ankara 2023. FARUK ACAR, Rehin Hukukunda Taşınmaz Kavramı ve Özellikle Belirlilik İlkesi, 1st Edition, Ankara 2008.
FERİDE DEMİRBAŞ, Toplu İpotek, 1st Edition, İstanbul 2023.
FİKRET EREN, Borçlar Hukuku Genel Hükümler, 28th Edition, Ankara 2023.
TÜRKİYE BÜYÜK MİLLET MECLİSİ, Türk Borçlar Kanunu Tasarısı ve Adalet Komisyonu Raporu (1/499), (Erişim: 15.01.2024). https://www5.tbmm.gov.tr/tutanaklar/TUTANAK/TBMM/d23/c050/tbmm23050003ss0321.pdf.
YAĞMUR ESİN ÇELİK, Türk Hukukunda Üst Sınır İpoteği ve Uygulaması, 1st Edition, Ankara 2021.
FOOTNOTE
1 Official Gazette (OG) dated 8/12/2001 and numbered 24607 art. 855.
2 Feride Demirbaş, Toplu İpotek, İstanbul 2023, p. 52-54.
3 Bilgehan Çetiner, “Reel Teminatlar”, in: Teminat Hukuku, Ankara 2023, p. 190-196.
4 Faruk Acar, Rehin Hukukunda Taşınmaz Kavramı ve Özellikle Belirlilik İlkesi, Ankara 2008, p. 250.
5 Çetiner, p. 191.
6 Acar, p. 255; Yağmur Esin Çelik, Türk Hukukunda Üst Sınır İpoteği ve Uygulaması, Ankara 2021, p. 33-35.
7 Official Gazette (OG) dated 17/08/2013 and numbered 28738.
8 Çetiner, p. 190.
9 Azim Öncü, Türk Hukukunda Taşınmazların Toplu Rehni, Ankara 2023, p.126.
10 Demirbaş, p. 39.
11 Öncü, p. 112-113.
12 Öncü, p. 127.
13 Öncü, p. 126.
14 Demirbaş, p. 51.
15 The Regulatıon On The Procedures And Prıncıples Regardıng The Executıon Of Tıtle Deed Transactıons Regardıng The Immovables Regıstered Outsıde The Jurısdıctıon Of Land Regıstry Directorates.
16 Demirbaş, p. 54-55.
17 Demirbaş, p. 56.
18 Demirbaş, p. 55.
19 Demirbaş, p. 56.
20 Acar, p. 249.
21 Demirbaş, p. 57-59.
22 Yargıtay 12. H.D., T. 06.03.2017, E. 2016/21696, K. 2017/3243: “In the examination of the pledge agreements regarding the immovables subject to the proceedings; it has been seen that a upper limit pledge has been established in favor of the bank on the immovables belonging to two different persons, as a guarantee based on the general loan agreement relationship of the …Co. Ltd. with the bank, and it has been stated that (those who pledged their immovables) are also responsible as a joint guarantor up to the amount of the pledge in addition to the pledge established. In this case, it should be accepted that there is a collective pledge in the concrete case”.
23 Demirbaş, p. 53-54.
24 Grand National Assembly of Turkey, “Draft Turkish Code of Obligations and Justice Commission Report (1/499)”, https://www5.tbmm.gov. tr/tutanaklar/TUTANAK/TBMM/d23/ c050/tbmm23050003ss0321.pdf (Date of Access, 01.15.2024).
25 Fikret Eren, Borçlar Hukuku Genel Hükümler, Ankara 2023, p. 230- 232.
26 Acar, p. 246.
27 Acar, p. 248.
