One of the methods of securing the right to claim is the establishment of a pledge on tangible goods or rights to claim. Mortgage is also a kind of lien on immovable property. If the debtor does not pay the debt, the creditor collects the receivables by selling the pledged property. In this respect, the right of mortgage, which is considered a kind of guarantee in kind, is a type of guarantee preferred by the creditors and especially the banks.
In this bulletin, we will focus on how to proceed with enforcement proceedings against the debtor and, if any, the person who pledges (mortgage) for the debt, in the event that immovable properties such as house and land are mortgaged as collateral for the debt. and on the sale of the mortgaged property and the payment of the money to the creditor, and the rights of the creditor and debtor in this process.
1. Some Things to Know About Mortgage
A mortgage is a kind of real estate pledge. Just as the surety guarantees that he will pay this debt in case the debtor does not pay his debt, the immovable property on which the mortgage is established also guarantees to the creditor that this debt will be paid out of its sales price if the debtor does not pay the debt. While surety is a type of personal guarantee, mortgage is a type of in-kind guarantee.
Since the mortgage is a kind of real right, it is established by being registered in the title deed.
The immovable to be mortgaged does not necessarily belong to the debtor. Someone else can have a mortgage on their real estate for the debt of the debtor.
The debtor’s mortgage right does not have a right to lien on the asset.
A receivable secured by a mortgage does not expire. Therefore, it is not possible for the debtor to object to the statute of limitations.
2. Enforcement Proceedings by Foreclosure of Mortgage
Enforcement proceedings through the conversion of the mortgage into cash is the first way the creditor should apply in our law. The creditor, whose right of receivable is secured by the right of pledge, must take action for the sale of the pledged property and initiate an enforcement proceeding in order to collect the right to claim, as required by the “obligation to apply for the pledge first”.
Two types of enforcement proceedings can be initiated through the liquidation of the mortgage. These; enforcement proceeding with a judgment through the conversion of the mortgage into cash, and enforcement proceedings without judgment through the conversion of the mortgage into cash. The subject of which the creditor can apply varies depending on the type of mortgage and the documents in the hands of the creditor.
3. Determining the Tracking Path According to the Type of Mortgage
Mortgages can be established for existing debts with a certain amount, as well as for receivables that do not exist yet but are certain or probable to arise in the future. If a mortgage is established for debts whose amount is certain and definite, it is called principal mortgage. The principal mortgage covers interest and other expenses along with the principal debt.
In the upper limit mortgage, there is no current and certain amount of debt. Here, the amount of debt that the mortgage secures is determined hypothetically. This value is a ceiling value that shows how much of the mortgaged real estate will meet the maximum amount of this debt. Therefore, if the sum of the principal debt, interest and expenses exceeds this value, the mortgage does not constitute a guarantee for the excess.
In the principal mortgage, since the mortgage is established for an existing and specific debt, if the mortgage contract table contains an unconditional acknowledgment of money debt, the creditor must apply for a judgmental proceeding through the liquidation of the mortgage.
In the upper limit mortgage, the creditor will only be able to follow up without judgment by converting the mortgage into cash.
4. Determination of the Tracking Way According to the Documents in the Hand of the Creditor
If one or both of the receivables or mortgages are attached to a judgment or a document in the nature of a judgment, a judgmental proceeding can be made by converting the mortgage into cash. It is a court decision or documents that are clearly equivalent to it in the Law, which should be understood from the writ or writ-like documents. For example; bails of execution and appeal, and promissory notes containing an unconditional acknowledgement of money debt in the form of a notary arrangement are documents in the nature of a verdict. If the creditor has documents of such strength, she/he initiates a criminal proceeding.
If the mortgage contract drawn up by the land registry officer contains an unconditional acknowledgment of money debt, the creditor may apply for a judgmental proceeding by converting the mortgage into cash.
In case the creditor is a bank or a credit institution, pursuant to a special arrangement, a notarized document showing that the account statement to be sent to the borrower through a notary public has been notified to the debtor, can be followed up with a verdict by converting the mortgage into cash.
These proceeding paths are explained in detail below.
5. Procedural Proceeding by Foreclosure of Mortgage
5.1. Initiation of enforcement proceedings if the creditor has a judgment or a document in the form of a judgment
If one or both of the receivables or mortgages are attached to a judgment or a document in the nature of a judgment, a judgmental proceeding can be made by converting the mortgage into cash. It is a court decision or documents that are clearly equivalent to it in the Law, which should be understood from the writ or writ-like documents.
If this procedure is chosen, an enforcement proceeding with judgement request can be filled, and a vigorous proceeding can be initiated from the enforcement office by adding the writ or writ-like documents to the proceeding. Any enforcement office in Turkey is authorized for criminal proceedings. Following the creditor’s request for proceeding, an enforcement order is sent to the debtor and, if any, the owner of the mortgaged property to pay the debt.
The debtor has no right of appeal against this enforcement order. The debt must be paid within 7 days. However, the debtor can prevent the proceeding to the sale stage by requesting the postponement of the execution. Otherwise, the creditor may request the sale of the mortgaged real estate.
5.2. The mortgage contract statement contains an unconditional acknowledgment of money debt
This situation, which is specifically regulated in article 149 of the EBL, has elevated this table, prepared by the land registry officer, to the same position as the notary bills.
If this way of proceeding is chosen, a proceeding request is filled and the enforcement office is requested to initiate a judgmental proceeding. An official copy of the mortgage contract must be attached to the proceeding request. If the bailiff determines that the conditions are met and is satisfied that the receivable is due, he sends an execution order to the debtor and, if any, to the owner of the mortgaged immovable.
The debtor has no right to object to this enforcement order. The debtor must pay the debt within 30 days. If he/she does not pay, he/she must apply for the postponement of the execution within the same period so that the mortgaged immovable is not sold. In case the enforcement court rejects the request for postponement of execution, an appeal can be made against this decision. Since the debtor’s application to appeal will not stop the enforcement proceedings, the debtor or, if any, the owner of the mortgaged immovable must deposit a security of 15%.
5.3. Situations where banks and credit institutions are creditors
As the lender, the legislator has envisaged regulations that ensure that these institutions can follow up against the debtor in almost all cases, regarding the liquidation of the mortgages, which are given as collateral from the debtor for the credit debt. According to this regulation in article 150/I of the EBL, if the debtor has used a cash and non-cash loan from a bank or credit institution operating in the form of a current account or a short, medium or long-term loan, when the debtor’s current account statement regarding the deduction of the current account or the demand for compensation from the debtor due to the fact that the non-cash loan has been paid, or the notice regarding the payment of the debt is notified to the debtor via a notary, proceeding with judgement may be initiated. In practice, this is called a notice of closure. For this, notification should be made to the address of the debtor, which is written in the loan agreement or registered in the mortgage contract table. It is possible to request a proceeding request by submitting a notarized copy of this notification to the licensing office, showing that this notification has been made or that it has been deemed to have been served pursuant to article 68/b of the EBL.
The executive director, receiving the proceeding request, sends an executive order to the debtor. The debtor, who has received the execution order, may object to this statement of account or the notice of payment of the debt or the demand for compensation through a notary public within 8 days from the notification. The debtor, who can prove that she/he has made this objection in due time, can use her/his right to complain in the enforcement court. In order to continue the proceedings, the creditor bank will have to prove its receivables in accordance with article 6(8/b) of the EBL. Otherwise, the proceeding cannot be continued. Likewise, the debtor is expected to prove with official documents that the debt has been paid or postponed. Proceedings are not suspended unless such a document is presented.
6. Proceedings Without Judgment Through Foreclosure Of Mortgage
If the creditor does not have a judgment or a document in the form of a judgment, if the mortgage is a type of upper limit mortgage, the creditor can file a proceeding without judgment by foreclosure of mortgage. In this proceeding type, the process starts with a proceeding request from the enforcement office. Documents held by the creditor, if any, are attached to the proceeding request. The execution office of the place where the immovable is located is also authorized in the proceedings without a judgement.
The bailiff, who receives the proceeding request, issues a payment order, not an execution order, and notifies the debtor and, if any, the owner of the mortgaged real estate. The debtor is obliged to pay the amount specified in the payment order within 30 days. If there is a reason for non-payment, she/he has the right to object to the payment order within 7 days. If the debtor or the second person who owns the mortgaged property does not object to the payment order within 7 days and does not pay the debt within 30 days, the creditor may request the sale of the mortgaged property.
7. If the Owner of the Mortgaged Property Is Other than the Borrower, the Procedure to be Followed
If the mortgage is established on an immovable property belonging to someone other than the debtor, or if the right of ownership has passed to another person, this person must also be included in the proceeding request. because in such a case, there is a compulsory proceeding friendship between the debtor and this person. If the owner of the mortgaged immovable is not responsible for this debt, the payment or execution order sent by the creditor to have consequences for him depends on the fact that these demands are also addressed to him.
“As a rule, in cases where the acceleration of the receivable is dependent on the making of a notice, it is not possible for the creditor to carry out enforcement proceedings against both the principal debtor and the mortgaged immovable owner, who is not personally responsible for the debt, without giving a notice of acceleration. (M.K. 802 art., TCP. 887 art.) Because, the day for performing the debt (maturity date) specified in Article 117/2 of the Code of Obligations is not included in the contract. In this case, in determining when the debtor’s default occurred, Article 117/2 of the Code of Obligations (Article 101/1 of the Code of Obligations No. 818); The provision that “the debtor of a due debt becomes default with the warning of the creditor” should be taken into consideration.
In the concrete case, it is understood that due to her own debt, the immovable that belongs to her has been mortgaged to the creditor in the form of a definite debt mortgage, and the aforementioned mortgage has been established indefinitely. In this case, it is obligatory for the creditor to notify the debtor before proceeding, and it is against the procedure and the law to initiate a legal proceeding based on a mortgage against the debtor without notice. … in terms of the owner of the mortgaged immovable, it should be decided to cancel the execution order, but the provision in writing was inaccurate and necessitated breaking it.”[1]
“Although there is no obligation to send an account statement to the third person, who is the mortgager, pursuant to article 150/ı of the EBL; Pursuant to Article 887 of the Turkish Civil Code, in order to be able to follow up on the third person giving the mortgage, it is necessary to request the receivable from him/her, that is, to send notice of maturity. In other words, pursuant to the regulation in question, the owner of the mortgaged immovable property cannot be prosecuted for enforcement unless the third party is notified, since the debt will not be due on her/his part. It should also be noted that the last sentence of article 150/ı of the İİK; It includes the provision that “The notification of the statement of account, the claim for compensation or the notice to the third party, the owner of the mortgaged immovable, or the notification of the notice shall replace the payment request stipulated in Article 887 of the Turkish Civil Code”.
Pursuant to the aforementioned article, in order to send an execution order to the owners of the mortgaged immovable, a notice of account must be sent by the creditor to the addresses written in the loan agreement or specified in the mortgage contract, through a notary public. This issue is a condition of public order and following with a verdict, 16/2 of the İİK. It is subject to an indefinite complaint pursuant to the article and must be taken into account by the court ex officio.
According to the above-mentioned legal regulations, in order to be able to follow up with a mortgage and send an enforcement order within the scope of article 150/ı of the EBL, the notification regarding the notice to the third parties, the principal debtor and the mortgage lender, must be deemed to have been made under the 68/b conditions of the EBL.”[2]
8. Sale of Mortgaged Real Estate
The creditor, who has completed the proceeding process with or without a verdict mentioned above, may request the sale of the mortgaged immovable if no payment is made to her. The creditor must make the sale request within 1 year from the notification of the payment or execution order. If sales are not requested within 1 year, the proceeding will be expired. However, this does not mean that the right to a mortgage has disappeared. The creditor may initiate proceeding by re-emerging the mortgage on the basis of the same mortgage right.
Conclusion
In our law, the person who has a mortgage-secured receivable has to request this receivable first through the liquidation of the mortgage (unless the receivable is also tied to a check or bond). The procedure to be followed and the proceedings to be initiated in the enforcement proceedings made by converting the mortgage into money vary according to the nature of the mortgage and the documents in the hands of the creditor. In case of applying for proceeding with a judgment or without judgment, the documents to be attached to the proceeding request by the creditor and the payment and objection periods given to the debtor also differ.
The proceeding of the sales request period and the finalization of the sales request authorization requires special attention and expertise. You can request legal support from the expert legal staff of the Solmaz Law and Consultancy team for your legal questions and problems regarding the mortgage conversion procedure.
References
PEKCANITEZ, Hakan/ATALAY, Oğuz/SUNGURTEKİN ÖZKAN, Meral/ÖZEKES, Muhammet, 2015, İcra ve İflas Hukuku, Yetkin Yayınları, Ankara, s.343-350.
ERCAN, İsmail, İcra ve İflas Hukuku, Kuram Kitap Umuttepe Yayıncılık, Kocaeli, s.249-256.
BULUR, Alper, 2020, İcra ve İflas Hukuku, Monopol Yayınları, Ankara, s. 152-154.
12nd Civil Chamber of the Supreme Court, 2020/4486 E., 2021/548 K., 19.01.2021.
12nd Civil Chamber of the Supreme Court, 2020/878 E., 2020/8858 K., 20.10.2020.
The Enforcement and Bankruptcy Law.
[1] 12nd Civil Chamber of the Supreme Court, 2020/4486 E., 2021/548 K., 19.01.2021.
[2]14th Civil Chamber of the Supreme Court 2020/878 E., 2020/8858 K., 20.10.2020.