Mortgage Not Removed Despite Repayment of the Debt

General Overview

A mortgage established over an immovable property is one of the limited real rights created for the purpose of securing a specific receivable of the creditor. Where the debt is not paid, a mortgage gives the creditor the possibility of collecting the receivable through the sale of the immovable property.

In practice, however, there are cases in which the mortgage is not removed from the land registry even though the debt secured by it has been paid in full. This situation makes it difficult for the owner of the immovable property to exercise their right of ownership, and may give rise to problems with respect to the sale of the property, its use as collateral for financing, or the establishment of new real rights over it.

For this reason, it is important to determine which legal remedies the owner of the immovable property may resort to where the mortgage continues to exist despite the extinction of the debt.

The Legal Nature of a Mortgage

Article 881 et seq. of the Turkish Civil Code No. 4721 contain provisions on immovable pledges and mortgages. A mortgage is, as a rule, a real right established over an immovable property for the purpose of securing a specific receivable, which comes into existence upon registration in the land registry. One of the fundamental characteristics of a mortgage is its legal connection with the secured receivable. A mortgage should not be assessed independently of the receivable. Nevertheless, the extinction of the receivable does not result in the automatic deletion of the mortgage entry in the land registry.

For this reason, after the debt has been paid in full, the necessary cancellation procedure must be carried out in the land registry.

Can a Mortgage Remain in Place Despite Repayment of the Debt?

Pursuant to Article 883 of the Turkish Civil Code, once the receivable has been extinguished, the owner of the mortgaged immovable property may request the creditor to cancel the mortgage.

Where the mortgage creditor declines to carry out the cancellation without a justified reason despite the full repayment of the debt, a need for legal protection arises for the owner of the immovable property. However, in order to request the removal of the mortgage, it must first be determined which receivable or receivables the mortgage secures. Particularly in maximum-amount mortgages, the payment of the amount stated in the mortgage deed may not, in every case, by itself demonstrate that the security relationship has come to an end.

Sale of the Mortgaged Immovable Property to Another Person

In practice, it is possible for a mortgaged immovable property to be transferred to third parties. A person who purchases an immovable property subject to a mortgage, as a rule, acquires ownership while also accepting the existing real encumbrance on the property. However, the purchase of a mortgaged immovable property does not in itself mean that the new owner becomes the personal debtor of the debt secured by the mortgage.

Pursuant to Article 884 of the Turkish Civil Code, an owner of an immovable property who is not personally liable for the debt may request the removal of the mortgage on the property by paying the debt under the conditions applicable to the debtor. In this case, the owner who makes the payment may also be subrogated to the rights of the creditor. Accordingly, an owner who subsequently purchases a mortgaged immovable property also has the right to request the removal of the mortgage where the necessary conditions are met.

How Is an Action for Release of Mortgage Filed?

Where the mortgage creditor does not consent to the cancellation of the mortgage despite the extinction of the debt, the owner of the immovable property may file a lawsuit for the cancellation of the mortgage. The main point of dispute in such a lawsuit is whether the receivable secured by the mortgage has been extinguished and whether there is a valid legal ground requiring the mortgage to continue.

The court particularly assesses the following matters:

• The contract and the official deed forming the basis for the establishment of the mortgage,
• The scope of the debt secured by the mortgage,
• Whether the payment has been made,
• Bank receipts and payment documents,
• Protocols between the parties,
• Whether the creditor has any other receivable that would justify maintaining the mortgage.

The competent court is determined according to the nature of the dispute. Although the court of general jurisdiction is the civil court of first instance, the commercial court of first instance may have jurisdiction over disputes of a commercial nature.

How Is Payment of the Debt Proven?

One of the most important issues in disputes concerning the removal of a mortgage is proving that the debt has been extinguished. Particularly in payments made through a bank, the description sections of the receipts, the payment dates, and the debt to which the amounts relate are of importance.

Can Compensation Be Claimed Because the Mortgage Was Not Removed?

The unjustified failure to remove a mortgage despite the extinction of the debt may, in some cases, cause the owner of the immovable property to suffer economic loss. For example, it may be claimed that damage occurred because the sale of the property did not take place or because its use as collateral for a loan was prevented. However, in order to claim compensation, unlawfulness, damage, adequate causal connection, and the other conditions required by the applicable liability regime must be proven. For this reason, the request for release of the mortgage and the claim for compensation must be subject to separate legal assessments.

Conclusion

Although a mortgage is a real right created to secure the creditor's receivable, its continuation without a justified reason after the extinction of the debt may lead to legal disputes.

The owner of the immovable property may request the removal of the mortgage pursuant to Article 883 of the Turkish Civil Code and, where the conditions are met, may resort to judicial remedies.

MCG Law Firm