Establishing a pledge is the most common way to secure a receivable that arises from a legal relationship. The regulation of real estate mortgages can be found in Articles 850 and onwards of the Turkish Civil Code.
In order to establish a mortgage on real estates, there must be a receivable that can be secured. A mortgage agreement must be made, and then the registration process must be completed.
In many cases where a pledge is used to secure a receivable, insurance becomes involved.
The definition of an insurance contract can be found in Article 1401 of the Turkish Commercial Code. Insurance contracts are agreements in which the insurer undertakes, in exchange for a premium, to compensate for a measurable benefit of the insured person that is at risk of being damaged by the occurrence of a peril, or to make a payment or perform other obligations if one or more persons' life spans or dangerous events occurring in their lives cause financial loss.
Compulsory earthquake insurance is required for real estate covered by DASK. In accordance with the Authorization Law on Precautions to be Taken Against Natural Disasters and Regulations to be Made for the Elimination of Damages Arising from Natural Disasters No. 4452, after the Marmara earthquake on August 17, 1999, and the Bolu-Düzce earthquake on November 12, 1999, a decree-law numbered 587 on Compulsory Earthquake Insurance was drafted and put into effect on December 27, 1999.
The regulation on Compulsory Earthquake Insurance took its current form with the publication in the Official Gazette numbered 27933 dated May 13, 2011.
This insurance covers independent sections within the scope of Condominium Law No. 634, buildings constructed as residential areas on privately owned real estate registered in the land registry, independent sections used for commercial purposes such as offices and shops located in these buildings, and dwellings built with credits provided by the state or due to natural disasters.
Under this insurance, damages caused directly by earthquakes and damages that earthquakes may cause in insured buildings, such as fire, explosion, tsunami, or landslide, are guaranteed by the Natural Disaster Insurance Institution (DASK) up to the insurance amount.
As such, many real estates are covered by DASK. If a pledge is established on these real estates and an insurable damage occurs, the pledge will be enforced based on the insurance compensation.
The Turkish term for a second mortgage is "secured debt," which is a system commonly used in DASK policies to ensure creditors are protected in case a debt cannot be paid due to a risk event. Once a risk event occurs, the insurance compensation falls within the scope of the mortgage. Typically, the compensation is paid to the insured party. However, if a limited real right holder's benefit on a limited property is insured, their right on the insurance compensation continues, and if one of the parties is identified as the second mortgagee in the policy, the compensation is paid to them. This is because the second mortgagee is the primary beneficiary of the insurance compensation
If the mortgage right continues on the insurance compensation, the insurer cannot make a payment to the owner without the consent of the creditors whose mortgage rights continue on the insurance compensation. Otherwise, the insurer cannot be exempt from their debt. In such cases, the owner can request payment of the insurance compensation by providing a guarantee and returning the pledged item to its former condition.
Furthermore, Article 1456 of the Turkish Commercial Code regulates that if the benefit belonging to the owner of a limited property right is insured, regardless of whether it is movable or immovable property, the right of the limited property right holder continues over the insurance compensation, unless otherwise provided by law.
Since the right granted to the mortgage right holder arises from the law, there is no need to make a special agreement in the mortgage contract regarding the continuation of the mortgage right on the insurance compensation (Court of Cassation 17th Civil Chamber 2016/11751-8379 ).
The Court of Cassation has ruled that owners cannot obtain insurance compensation without the consent of mortgagees and lien creditors, as the right to claim compensation primarily belongs to the mortgagee, who is also the insured. Insurers can only claim compensation with the explicit consent of the property owner and in cases where their own interests are damaged. If the insurance amount is required to be paid to the mortgagee, the insurer can only pay it to the insured with the mortgagee's consent, and the right to file a lawsuit belongs primarily to the mortgagee. The Court of Cassation has established that the insurer's right to file a lawsuit depends on obtaining explicit consent from the mortgagee
In the event of an earthquake damaging a mortgaged property, the right to claim insurance compensation specified in the policy belongs to the mortgagee. The insured can only receive the insurance amount if the mortgagee consents. The insurance amount is the maximum amount that the insurer pays in the event of the insured risk, limited to the insured value specified in the policy. If the loss suffered by the insured exceeds the insurance amount, the insurer's liability is limited to the insurance amount. Therefore, in case of an earthquake damaging a mortgaged property, the insurer (DASK) is obliged to pay the insurance amount specified in the mandatory earthquake insurance policy to the creditor or the insured with the creditor's consent.
In conclusion, to continue a property lien on insurance compensation, the property owner's interests must be insured, the property must be mortgaged, and the insured risk must occur. In the case of a property covered by mandatory earthquake insurance and mortgaged with a lien, DASK is required to pay the insurance amount to the creditor if the risk occurs.