Pledge (rehin)

Scope

Under the Turkish Civil Code (TMK), a pledge over immovable property can be created only in the form of a mortgage, a mortgage certificate (ipotekli borç senedi) or an annuity certificate (irat senedi) (Art. 850); the mortgaged immovable need not belong to the debtor (Art. 881). Movables, apart from the exceptions in the Code, are pledged by transfer of possession to the creditor (Art. 939); for movables whose entry in a register is mandatory by law, a pledge may be created by entry in that register without transfer of possession (Art. 940). Receivables and rights that are transferable may also be pledged (Art. 954). In commercial transactions, a non-possessory pledge over assets such as stock, receivables, machinery or a commercial enterprise is created under Law No. 6750 on Pledges of Movables in Commercial Transactions by registration in the Register of Pledged Movables (Rehinli Taşınır Sicili) (Arts. 4, 5).

Practical significance

In a pledge created under the Turkish Civil Code, a contractual provision under which ownership of the pledged property would pass to the creditor if the debt is not paid is invalid (Arts. 873, 949); the creditor, as a rule, obtains payment from the proceeds of the realization of the pledge. In a pledge under Law No. 6750, by contrast, a first-ranking creditor may request the enforcement office to transfer ownership of the pledged movable to the creditor; the Law also provides other routes such as leasing, licensing and proceedings under the general provisions (Art. 14). For a claim secured by a pledge, enforcement is, as a rule, first pursued through realization of the pledge, and if the pledge is insufficient, attachment or bankruptcy may be resorted to for the remainder (Law No. 2004 on Enforcement and Bankruptcy (İİK) Art. 45). In credit transactions, therefore, the form of creation, registration and ranking of the pledge and the maximum amount secured determine to what extent collection can be made in the future.

Concepts often confused

A pledge is a real security; in suretyship, by contrast, the surety is personally liable for the consequences of the debtor’s failure to perform the debt (Turkish Code of Obligations (TBK) Art. 581). Security (teminat) is the broader concept that also covers instruments such as suretyship and guarantees in addition to the pledge. A right of retention (hapis hakkı) is also a security that allows realization, but it requires no separate pledge agreement, delivery or registration: the creditor may retain a movable or negotiable instrument that is in the creditor’s hands with the debtor’s consent and is connected with the claim until the due claim is paid, and, if the debt is not paid, may have it realized according to the provisions on possessory pledge (TMK Arts. 950, 953). A pledge does not always arise from contract either; there are also pledge rights arising from law, such as the statutory mortgage (Arts. 892, 893). Attachment, on the other hand, is not a previously created security but a compulsory enforcement measure applied during proceedings.