The right of repurchase on real estate is a special right in Turkish law that provides significant security to property owners, both protecting the rights of real estate owners and providing financial security in property relations. The right of repurchase, which allows the property owner to repurchase their real estate under certain conditions, is of great importance especially in long-term planning and investment relations. In this blog post, we will discuss the definition, legal nature, limits and advantages of the right of repurchase in the framework of the Turkish Civil Code and the Code of Obligations. In addition, we aim to provide comprehensive information in the field of real estate law by detailing important issues such as the annotation of the right of repurchase to the land registry, its relationship with the lex commissoria prohibition and abuse cases.
1. Right of Redemption: What is its Definition and Importance?
The right of repurchase is a right that allows the seller of an immovable property to repurchase the property under certain conditions and for a certain price. A legally innovative right, repurchase is a frequently applied method of security for immovables in Turkish law. This right allows the owner to repurchase the property with his/her unilateral will and usually occurs as a side agreement in a sales contract or as an independent repurchase agreement. The right of repurchase is a valuable tool, especially because it allows the owner to sell without the worry of losing control of the immovable.
2. Why is the Right of Redemption on Real Estate Important?
One of the most important aspects of the right of repurchase is that it provides the owner with the assurance that they can repurchase their real estate under certain conditions when selling it. This right can be used as financial security during the sales process, as well as providing the opportunity to maintain control of the property in certain situations. In the Turkish legal system, the right of repurchase is particularly important in that it can serve as collateral. In this way, the owner of the property has the opportunity to re-possess the property in line with future economic or personal needs. For example, the right of repurchase often provides economic security by allowing the owner to re-acquire the property in financial crisis situations.
3. Legal Basis for the Right of Redemption: Turkish Civil Code and Code of Obligations
The basis of the right of repurchase in Turkish law is determined by the Turkish Civil Code (TMK) and the Turkish Code of Obligations (TBK). These laws regulate the validity, duration and the requirement for annotation in the land registry of the right of repurchase. Article 736 of the TMK and Articles 237-239 of the TBK explain how the right of repurchase is established on real estate. According to these provisions, the right of repurchase can only be established with a formal contract and for a maximum of 10 years. In addition, provided that it is annotated in the land registry, the right of repurchase can be asserted against third parties on the real estate. This allows the property owner to create a legal guarantee for the repurchase of the property during the sale.
4. How to Make a Buyback Agreement?
In order for the right of repurchase to be established, a valid repurchase agreement must be made. A repurchase agreement can be drawn up as an independent contract during the sale of a real estate or after the transfer of the property. According to Article 237 of the Turkish Code of Obligations, the right of repurchase must be made officially. This official condition requires the contract to be drawn up in the presence of a notary or a land registry officer. The repurchase agreement includes the right of the owner to transfer the real estate and to repurchase it under certain conditions. Although it is not mandatory to specify the repurchase price in the contract, if an agreement is reached between the parties, the repurchase price must be stated in the contract. In addition, repurchase agreements made after the property is transferred are considered to be in the nature of a direct purchase and sale contract and are considered to have lost the characteristics of the right of repurchase.
5. Origin of the Right of Redemption: Contract and Testamentary Dispositions
The right of repurchase is usually created through a repurchase agreement, while in Turkish law, this right can also be established through dispositions subject to death in some cases. For example, through a will, the owner of the property may grant the right of repurchase to his/her heir after his/her death. In order for the right of repurchase to be created in this way, the will must comply with the legal form requirements that must be valid. However, according to some views in the doctrine, it is argued that the right of repurchase cannot be established through dispositions subject to death. This view suggests that the right of repurchase is based more on a contractual relationship between the parties. According to another perspective, the right of repurchase can only be transferred after death and that such dispositions should be limited in accordance with the relevant provisions of the Turkish Civil Code.
6. What are the scope and limits of the right of redemption?
The right of repurchase can be applied to movable property as well as to immovable property. However, in the Turkish legal system, the right of repurchase on immovable property has gained more importance and is more widely applied. Issues such as the duration, scope and transferability of the right of repurchase are subject to the legal regulations specified in the TCC and TMK. The maximum period of the right of repurchase on immovable property is limited to 10 years. In addition, if the right of repurchase is not annotated in the land registry, it is only considered valid between the contracting parties. When the right of repurchase is annotated in the land registry, it can also be asserted against third parties. However, it is important that the property owner does not abuse his rights when exercising the right of repurchase, otherwise this may cause the right to exceed its limits.
7. Duration of the Redemption Right: What Does the 10-Year Limit Mean?
According to Article 238 of the Turkish Code of Obligations, the term of the right of repurchase cannot exceed 10 years. This regulation aims to protect the balance of rights between the property owner and the buyer. The right of repurchase under the contract can be used for 10 years from the transfer of the real estate. At the end of this period, the right automatically expires and the property owner cannot benefit from this right. The legal limitation of the 10-year period aims to prevent the right of repurchase from becoming a long-term restriction and excessively restricting the rights of disposition on the property. This time limit also determines the period for which the right of repurchase is annotated in the land registry, and a right of repurchase annotated on the real estate for more than 10 years is deemed invalid.
8. Annotation of the Right of Redemption: Why is it Necessary to Annotate the Title Deed?
The annotation of the right of repurchase in the land registry enables the right to be asserted against third parties. According to Article 736 of the Turkish Civil Code and Article 238 of the Turkish Code of Obligations, the right of repurchase can be valid for a maximum of 10 years by annotating it in the land registry. An unannotated right of repurchase is only valid between the parties to the contract and cannot be claimed against third parties. For example, if the right of repurchase is not annotated in the land registry and the property is sold to a third party, the owner of the right of repurchase cannot claim the property back from the third party based on this right. However, when an annotated right of repurchase is recorded in the name of the owner in the land registry, it allows the owner to repurchase even if the real estate is transferred to a third party. This ensures that the rights on the property are protected even if the property changes hands and ensures the continuity of the obligation on the right of ownership.
9. Differences Between the Right of Redemption and the Right of Pre-emption
The right of repurchase and the right of pre-emption are two of the rights over real estate in Turkish law, but they serve different purposes. The right of repurchase is the right to repurchase the real estate granted to the owner during or after the sale of the real estate. On the other hand, the right of pre-emption or pre-emption gives the other shareholders the right to prevent the sale and to take this share for themselves in the event that a shareholder in a shared ownership decides to sell his/her share to a third party. In other words, the right of pre-emption functions to protect the real estate from being sold to a new buyer, while the right of repurchase allows the sold property to be taken back. The difference between these rights also becomes clear in practice: While the right of pre-emption is a legal protection mechanism between the shareholders, the right of repurchase is a special contractual right that arises after a sales relationship.
10. In what cases can the right of redemption be abused?
Abuse of the right of repurchase occurs when the right is used in a manner contrary to its purpose, solely for the purpose of putting the other party in a difficult situation or causing distress with unfounded demands. The prohibition of abuse in Turkish law stipulates that rights are used in a fair, equitable and reasonable manner. While the right of repurchase allows the property owner to reclaim the property under certain conditions, actions that will cause unnecessary damage or economic hardship to the other party should be avoided during the exercise of this right. For example, failure to exercise the right of repurchase on a real estate for a long time or continuous postponement in a way that will cause distress to the buyer may be considered as abuse of the right. In the Turkish legal system, it is accepted that the right of repurchase may be limited or become unusable in such cases.
11. Legal Nature and Innovation-Generating Feature of the Right of Redemption
The legal nature of the right of repurchase is defined as an innovative right. Innovative rights grant the right holder the authority to create a new legal situation on a specific subject. The right of repurchase also allows the right holder to repurchase the real estate sold with a unilateral declaration of intent and in this respect has the nature of a constitutive right. The right of repurchase is a right that arises only with the conclusion of the repurchase agreement and creates a new sales relationship with its exercise. In this context, the right of repurchase goes beyond simply offering the property owner a right of choice and enables the repurchase of the real estate. Being an innovative right also reveals the difference between the right of repurchase and other rights of purchase; because this right is limited only to the repurchase agreement and can be exercised without any other conditions.
12. Termination and Re-establishment of the Right of Redemption
The right of repurchase ends when the period specified by law expires or when the annotation period of the right expires. The Turkish Code of Obligations regulates that the right of repurchase may be valid for a maximum period of 10 years, and when this period expires, the right of repurchase automatically becomes void. When the right of repurchase expires, all restrictions on the real estate are removed and the real estate becomes a freehold property. However, the right of repurchase may be reestablished if the parties agree. To do this, a new repurchase agreement must be made and the real estate must be re-annotated in the land registry. In this way, the right of repurchase can be renewed continuously; however, a maximum period of 10 years is granted for each renewal. This time limitation aims to prevent the restrictions on the property from becoming permanent.
13. The Collateral Function of the Right of Redemption: Its Role in Financial Security
The right of repurchase is an important financial security tool for property owners. During the transfer of real estate, it provides security by offering the property owner the opportunity to repurchase the property at the end of a certain period or under certain conditions. For this reason, the right of repurchase is often used as collateral in credit relationships. For example, a real estate owner may meet their cash needs by selling their property due to financial difficulties, but when their financial situation improves in the future, they can repurchase the property thanks to the right of repurchase. Thanks to this function, the right of repurchase provides confidence to both the buyer and the seller and supports the sustainability of property relations. The fact that the right of repurchase is accepted as collateral in Turkish law without being contrary to the prohibition of lex commissoria (fraud against the law) is also a result of this function. In this respect, the right of repurchase helps property owners to provide financial security by reducing the risk of losing their property.
14. Right of Redemption and Fraud Against the Law
There are also cases in Turkish law where the right of repurchase may be considered as fraud against the law. The prohibition of lex commissoria limits the arrangements for the transfer of property to the creditor in the event of non-payment of the debt, and such transactions are deemed legally invalid. However, since the right of repurchase is formally regulated and clearly stated in the Turkish Civil Code, it is accepted that it does not violate the prohibition of lex commissoria even if it is used for security purposes. In this respect, the right of repurchase may be used as a legal security tool and ensures the security of property in debt relations. However, in practice, when the right of repurchase is used for purposes other than security, with the intention of harming the debtor or limiting his rights, it may be claimed that this right constitutes fraud against the law. In such cases, the cancellation or limitation of the right of repurchase may be requested by the court.
15. Problems and Solutions Encountered in the Application of the Right of Redemption
The right of repurchase may encounter some problems in practice. One of the most common problems is that the right of repurchase is not used for a long time, which leads to legal disputes between the parties. In particular, repurchase rights that are not annotated to the title deed may cause damages to the right holders in case of changes in ownership, as they cannot be asserted against third parties. In addition, if factors such as economic variables and inflation are not taken into account when determining the repurchase price, the enforceability of the right may decrease. In order to solve these problems in practice, it is important to detail the contracts made between the parties, to annotate the right of repurchase to the title deed, and to foresee the economic conditions. In addition, in cases of abuse of the right of repurchase, the courts may offer solutions such as cancellation or limitation of the right. In Turkish law, the correct and purposeful application of the right of repurchase aims to protect the property rights of the parties and to ensure a fair order.
The right of repurchase is a right that allows real estate owners to repurchase their properties under certain conditions, provides financial security and has a special place in Turkish law. The duration of the right of repurchase, its annotation on the title deed and its structure shaped by agreements between the parties allow for the effective use of this right. The right of repurchase, regulated by the Turkish Civil Code and the Code of Obligations, stands out as an important tool in the protection of property rights with its legal framework. The real estate owner can secure his property by creating a right of repurchase in accordance with the terms of the contract and regain his ownership when necessary. In light of the information we have discussed in this blog post, you can make the most of this right by being aware of the benefits that the right of repurchase offers to real estate owners.