Property Transfers as Security

Abstract

Under Turkish law, property transfer is a common type of security used an alternative to collaterals. Accordingly, reservation of title and fiduciary transfer are two types of mechanisms to use property transfer as a security. Reservation of title is a security mechanism only for the movables and codified in articles 764-765 of the Turkish Civil Code. Accordingly, transferor and transferee may agree on a reservation of title, so that the ownership of the movable shall remain with the transferor until the transferee fulfills his obligations. Agreements for reservation of title may be made either with conditions precedent or conditions subsequent. Both are subject to special form requirements. Fiduciary transfer is a security mechanism for both movables and immovables in order to guarantee a monetary debt. It is not regulated under the law, but developed in Turkish practice upon the influence of Swiss law. Accordingly, transferor and fiduciary may agree on the transfer of the assets to the fiduciary while usually the possession of the assets remain with the transferor until the transferor fulfills his obligations. Agreements for fiduciary transfer are subject to conditions subsequent.The aim of this paper is to analyze the necessities and the advantages for and the risks of invoking such mechanisms in comparison to collaterals. Furthermore, this paper aims to compare these mechanisms with their equivalents in Swiss, German and French laws and especially compare fiduciary transfers with trusts in common law.