TÜRKIYE Law and Practice Contributed by: Serkan Gül, Nazım O Kurt and Türkay Avanaş, Hergüner Bilgen Üçer Attorney Partnership
workload of the execution offices and courts, and on whether the borrower challenges the proceedings, these proceedings can take from six months 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 -
in order to stop the pollution or decrease the effects of the pollution. The same law explic - itly states that polluters have strict liability with respect to environmental pollution. Therefore, lenders holding or enforcing security over real estate should not be liable under environmen- tal laws, as any pollution to the real estate is regarded as being caused by the borrower. 3.9 Effects of a Borrower Becoming Insolvent In principle, securities established in favour of a lender do not become void by a borrower’s insolvency. However, securities guarantee the creditors’ position in such cases. Declaration of Bankruptcy In the event of a borrower’s insolvency, creditors can ask a court to declare the bankruptcy of the borrower. Bankruptcy results in the total liqui - dation of the bankrupt entity’s assets and the satisfaction, pro rata, of its creditors. An impor - tant exception to this rule is mortgagees as their receivables are guaranteed by a specific secu - rity, so the bankruptcy rules require that they be repaid first, in full, before other unsecured creditors. Composition of Debts On the other hand, when borrowers become insolvent, they can seek bankruptcy protec - tion in the form of composition of debts. Under this mechanism, debtors reach an agreement with their creditors regarding the extent of the deduction to be made in outstanding debts and the deferment of payments. Mortgagees are given exceptional rights under the composition of debts mechanism as well. Even under the composition regime, mortgagees may initiate proceedings for the sale of mortgaged assets to have their debts repaid but may not realise
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 - ing up of pollution. The applicable law requires that – where environmental pollution is a pos - sibility – parties must take the necessary meas - ures in order to prevent pollution, and, if pollu - tion occurs, they must take the required actions
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