TÜRKİYE Law and Practice Contributed by: Serkan Gül, Nazım O Kurt and Türkay Avanaş, Hergüner Bilgen Üçer Attorney Partnership
3.6 Formalities When a Borrower Is in Default Under Turkish law, the creditor beneficiary of a mortgage must initiate an execution proceed - ing to liquidate the mortgage. Depending on the workload of the execution offices and courts, and whether the borrower challenges the pro - ceedings, these proceedings can take from six months to two to three years. Priority between claimants is listed as an obligatory rule of the applicable law. By law, a creditor beneficiary of a mortgage has priority over other creditors with respect to mortgaged property. An accelerated foreclosure procedure exists for principal amount mortgages and mortgages granted in favour of banks and financial institu - tions. 3.7 Subordinating Existing Debt to Newly Created Debt In principle, the order of priority between credi - tors is regulated under the applicable law and contractual subordination is not expressly regulated under the law. According to Court of Appeals precedents, execution and bankrupt - cy rules relate to public policy and cannot be changed contractually. Accordingly, a subordi - nation agreement is not enforceable against an execution office. However, parties may freely undertake to pay the respective amounts to other recipients upon collecting receivables. In summary, a subordination arrangement may cre - ate a contractual obligation on the part of the parties but will not have a preventative effect during any enforcement proceedings to be initi -
document or loan agreement are made without any restriction unless repayment constitutes a criminal act (eg, money laundering). 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Stamp tax (0.948% of the amount subject to mortgage) and a mortgage fee (0.455% of the amount subject to mortgage) are paid for the establishment of a mortgage. Foreign finan - cial institutions are exempt from taxes and fees arising out of securities granted over real estate. The fee for enforcement proceedings is approximately 0.5% of the amount subject to mortgage. In accordance with a recent change in the legislation, there is now an exemption for half of the mortgage fee (0.227%) for mortgages established between traders. 3.5 Legal Requirements Before an Entity Can Give Valid Security Under Turkish law, target companies are pro - hibited from providing funds, loans, securities or guarantees to a third party to facilitate the acquisition of its own shares, and such financial assistance transactions will be deemed null and void. This provision does not apply to (i) transac - tions conducted for the purpose of the activity of financial institutions and (ii) securities, advance payments and loans granted to employees of the target company or its parent company in order to acquire the shares of the company. When granting upstream security or guaran - tees for a parent company, it may be difficult for board members to specify a convincing rea - sonable cause for the subsidiary to enter into such an arrangement to the benefit of its holding company or group companies.
ated before execution offices. 3.8 Lenders’ Liability Under Environmental Laws
Under the applicable law, polluters must bear all expenses for the prevention, removal and clean -
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