Although not explicitly regulated as a general typology under a positive statutory provision in Turkish private law, the fiduciary transaction (inançlı işlem)—which possesses a deeply rooted tradition in doctrine and judicial practice—is a complex institution situated at the intersection of the law of obligations and property law, characterized by its dual structure based on mutual trust. As a natural manifestation of the principle of freedom of contract (Article 26 of the Turkish Code of Obligations No. 6098 / TCO), a fiduciary transaction is a set of legal acts whereby a person designated as the "fiduciant" (inanan), in order to achieve a specific economic or legal purpose, transfers ownership of a good or a right belonging to their assets to a person designated as the "fiduciary". The fiduciary undertakes to exercise this right in accordance with the limitations agreed upon in the obligatory fiduciary agreement (inanç sözleşmesi) concluded between the parties, and to re-transfer the right back to the fiduciant or to a third party upon the realization of the intended purpose or the expiration of the stipulated period.
The historical origins of fiduciary institutions trace back to the institution of fiducia in Roman Law. In Roman Law, fiducia manifested in two primary forms depending on the purpose pursued by the parties: fiducia cum amico, where property was transferred within the framework of friendship or companionship for the purposes of custody, administration, or representation; and fiducia cum creditore, where a debtor transferred property to a creditor for the purpose of securing a claim. This structure, enriched by the institution of Treuhandschaft in Germanic Law, transitioned into Continental European legal systems and found application in Turkish-Swiss Law. However, rather than being regulated by the legislator as a general contract type, it has been shaped through doctrinal principles and high court precedents.
Although the legal nature of fiduciary transactions remains disputed in doctrine, according to the prevailing view, fiduciary transactions are sui generis (unique) operations combining an obligatory transaction and a dispositional transaction within their structure. To the underlying obligatory contract between the parties (the fiduciary agreement), the provisions of the Turkish Code of Obligations governing contracts of mandate (TCO Arts. 502 et seq.) are applied by analogy, to the extent compatible with its nature.
A fiduciary transaction incorporates two distinct legal stages and transactions:
· Obligatory Transaction (Fiduciary Agreement / Pactum Fiduciae): A relative obligatory agreement established between the fiduciant and the fiduciary, governing the rights and obligations of the parties, the purpose of the fiduciary transfer, the boundaries of the fiduciary's exercise of ownership powers, and the conditions for the return of the transferred right to the fiduciant.
· Dispositional Transaction (Real/In Rem Transfer / Disposition): A dispositional act that ensures the legally valid transfer of ownership of the movable/immovable property or right subject to the trust from the fiduciant to the fiduciary, executed for the purpose of fulfilling the obligation arising from the fiduciary agreement.
Regarding the acquisition of the right in rem, two fundamental theories stand out in doctrine. According to the "Limited Right Theory" (Two-Stage Theory), although the fiduciary holds full rights against third parties, they possess only limited authority in the internal relationship with the fiduciant. Conversely, under the "Full Right Acquisition Theory" (Unitary Theory)—which is strictly adopted in Turkish-Swiss Law and Court of Cassation practice—ownership or the right passes as an indivisible whole to the fiduciary in both internal and external relationships through the fiduciary dispositional transaction. The fiduciary becomes the full owner or right-holder of the subject matter against third parties as well as in the internal relationship between the parties; however, due to their personal obligation arising from the obligatory fiduciary agreement, they are bound to exercise this right solely within the scope of the contractual purpose and to return it when the time arrives.
To correctly establish the legal regime governing fiduciary transactions, it is mandatory to set forth their qualitative differences from institutions such as simulation, nominee arrangements, and evasion of law, with which they are frequently confused in practice.
Simulation, regulated under Article 19 of the Turkish Code of Obligations No. 6098 occurs when parties create an ostensible legal transaction that does not reflect their true intentions in order to deceive third parties, while simultaneously agreeing that this ostensible transaction shall have no binding effect between themselves. The primary distinctions between simulation and a fiduciary transaction lie in the alignment between intent and declaration, as well as the genuine intention to execute the dispositional transaction:
· In a simulated transaction, the parties do not genuinely intend for the ostensible dispositional transaction (e.g., a sale registered at the land registry) to generate legal consequences or transfer ownership; therefore, the land registration is void ab initio (corrupt registration).
· In a fiduciary transaction, the parties seriously intend for the ownership or right to genuinely pass to the fiduciary, integrating into their assets so that they acquire full title as owner. The transfer of ownership is real and valid; the only invalid/unlawful element is the fiduciary's attitude should they exercise the right outside contractual limits or refuse to return it.
As emphasized in decisions of the General Assembly of Civil Law Chambers of the Court of Cassation, where parties do not conceal themselves behind an ostensible transaction without intending legal consequences, but rather accept the transfer of a right while circumscribing it with an obligatory fiduciary contract, the case involves a fiduciary transaction, not a simulation.
A nominee arrangement occurs when a person, wishing to conceal their identity, executes legal transactions on their own behalf and account using another person's name. By its nature, a nominee arrangement functions either as a specific fiduciary transaction based on an indirect representation/mandate relationship or as a party-level simulation between the ostensible owner and the true right-holder. The fiduciant (the hidden principal) uses the fiduciary (the nominee) to purchase an immovable from a third party in the nominee's name, while stipulating that ownership shall subsequently be transferred to the principal. In Court of Cassation practice, nominee cases are subjected to the same legal regime as fiduciary transactions in terms of procedural and evidentiary law.
Evasion of law refers to the circuitous use of an unprohibited legal route or transaction by parties in order to prevent the application of a mandatory provision of law. Although fiduciary transactions may initially give the impression of being executed to evade mandatory rules, the parties fully intend the entirety of the legal results they bring about. A fiduciary transaction remains valid as a legitimate legal transaction as long as it does not violate a mandatory statutory provision, public policy, or public morals (TCO Art. 27).
|
Legal Criterion |
Fiduciary Transaction |
Simulation |
Nominee Arrangement |
|
Intent to Transfer Ownership |
Genuine; ownership passes to the fiduciary. |
Ownership transfer is not intended; registration is void ab initio. |
Genuine; the right passes ostensibly to the nominee. |
|
Legal Nature of the Transaction |
Mixed / Sui Generis (Obligatory + Dispositional Transaction). |
Deliberate mismatch between intent and declaration. |
Characterized as indirect representation / specific fiduciary relation. |
|
Ostensible Transaction |
Valid; subject to contractual limitations. |
Absolutely null and void. |
Valid; imposes an obligation to return. |
|
Primary Evidentiary Regime |
Written evidence pursuant to Joint Grand Chambers Decision dated 05.02.1947. |
Written evidence (in party simulation). |
Written evidence pursuant to YİBK dated 05.02.1947. |
The fiduciary relationship between the fiduciant and the fiduciary manifests in different types depending on the needs of the parties and the economic/social objectives they seek to achieve.
In fiduciary transfers for security purposes, the debtor (fiduciant) transfers ownership of property or an assigned claim to the creditor (fiduciary) to secure an existing or future debt owed to the creditor. The fiduciary (creditor) undertakes to re-transfer the subject matter back to the debtor upon full payment at maturity, or to liquidate their claim out of the subject matter if the debt remains unpaid. Security transfers are frequently favored to circumvent the formal requirements and physical delivery constraints associated with statutory pledge/mortgage rights.
These occur when a fiduciant, unable to personally manage their assets due to advanced age, illness, long-term residence abroad, or a lack of legal/technical experience, transfers ownership to a trusted individual to ensure the management, operation, or leasing of the property. The fiduciary manages the property for the benefit and according to the instructions of the fiduciant, remits generated income, and returns the property upon expiration of the agreed term.
Where a creditor faces difficulties in personally collecting a claim from a third party or seeks to avoid the expense and bureaucratic hurdles of litigation and enforcement proceedings, they transfer the claim to a fiduciary. The assignee (fiduciary) collects the claim in their own name but for the account of the fiduciant, delivering the collected amount to the fiduciant in accordance with the fiduciary agreement.
These are fiduciary transactions resorted to when an individual wishes to conceal ownership of an asset from the public and third parties due to commercial reputation concerns, non-compete restrictions, market speculation avoidance, or personal reasons. The individual remains hidden by causing the property to be acquired from a third party not in their own name, but in the name of a trusted fiduciary.
The most fundamental disputes encountered in practice regarding fiduciary transactions concentrate on the validity form of the fiduciary contract and the evidentiary regime applicable to land registry cancellation and registration lawsuits based on such contracts.
Under Article 706 of the Turkish Civil Code (TCC), Article 237 of the Turkish Code of Obligations, and Article 26 of the Land Registry Law, the validity of contracts concerning the transfer of immovable property is contingent upon execution in official form (before a land registry officer). In fiduciary transactions involving real estate transfers, while the transfer at the land registry is performed in official form, whether the underlying obligatory fiduciary contract must also be executed in official form gave rise to significant historical debate.
The fundamental source settling this debate was the Decision of the Joint Grand Chambers for the Unification of Precedents of the Court of Cassation dated 05.02.1947, numbered 20/6. The following core principles were adopted by said decision:
· In Terms of Validity: A fiduciary contract involving a real estate transfer is an obligatory transaction independent of the dispositional transaction executing the ownership transfer, and is not subject to official form requirements. An underlying fiduciary contract executed in simple written form between the parties is legally valid.
· In Terms of Proof: Written form is not a condition for the validity of a fiduciary contract, but a condition of proof. After the immovable is registered under the fiduciary's name at the land registry, if the fiduciant claims that the registration was based on a fiduciary transaction and demands the return of the property, they must prove this claim exclusively by written evidence.
One of the most critical principles established by the YİBK dated 05.02.1947 relates to the timing of the document's execution. According to the consistent jurisprudence of the Court of Cassation, it is of no legal consequence whether the written document demonstrating the fiduciary agreement or obligatory commitment was executed before or after the transfer at the land registry. The essential requirement is that a written document signed by the defendant (fiduciary) acknowledging the fiduciary relationship can be submitted to the court.
In the event that the plaintiff (fiduciant) lacks a signed contract/instrument directly and fully proving the fiduciary relationship, their claim is not summarily dismissed. The mechanism of "beginning of written proof" (yazılı delil başlangıcı) comes into play under Article 202 of the Code of Civil Procedure No. 6100 (CPC / former HUMK Art. 292).
For a document to qualify as a beginning of written proof pursuant to CPC Art. 202, three conditions must concurrently exist:
· The document must be insufficient on its own to fully prove the disputed legal transaction (the fiduciary relationship),
· The document must originate from or have been issued by the party against whom it is asserted (the fiduciary) (e.g., an unsigned letter in the fiduciary's handwriting, text/drafts containing their initials, unauthenticated thumbprinted instruments, etc.),
· It must render the alleged fiduciary transaction probable or point toward its occurrence.
In practice, bank receipts regarding money remitted by the plaintiff to the fiduciary or payments made toward the fiduciary's bank debts are frequently submitted as evidence. According to Court of Cassation decisions, bank receipts lacking reservation clauses but demonstrated to relate to mortgage installments, purchase prices, or debts associated with the subject immovable are accepted as a beginning of written proof originating from the opposing party.
Upon establishing a beginning of written proof, the existence of the fiduciary contract becomes provable by all forms of evidence, including witness testimony, under CPC Art. 202. In this scenario, the court must hear the witnesses of the parties and evaluate the gathered evidence as a whole within the framework of TCO Art. 97.
One of the most intensely debated normative conflicts in civil procedural practice is whether the rule in CPC Art. 203/1-a—permitting witness testimony against documentary evidence in legal transactions between close relatives (ascendants-descendants, siblings, spouses, etc.)—applies to fiduciary transactions.
A segment of legal scholars and certain local courts argue that general statutory provisions (CPC Art. 203) take precedence over precedents-unification decisions, asserting that fiduciary claims between siblings or spouses should be provable by witness testimony without requiring any written document.
However, the General Assembly of Civil Law Chambers and the relevant Civil Chambers of the Court of Cassation (1st, 8th, and former 14th Civil Chambers) consistently maintain the opposing view. The solidified rationale of the Court of Cassation is as follows: The YİBK dated 05.02.1947, No. 20/6 established a special evidentiary rule (özel hüküm) concerning fiduciary transactions, nominee arrangements, and party simulation to protect the integrity of the land registry. Because a special rule overrides a general rule (lex specialis derogat legi generali), even if the parties are siblings, spouses, or parent and child, claims in land registry cancellation and registration lawsuits based on fiduciary transactions must strictly be proven by written evidence or at least a beginning of written proof. The existence of a close family relationship does not negate the binding written proof requirement mandated by the 1947 YİBK.
|
Evidentiary Instrument |
General Civil Procedure Regime |
Legal Validity in Fiduciary Transactions (YİBK 05.02.1947) |
Status Between Relatives (CPC Art. 203 vs. YİBK) |
|
Written Fiduciary Agreement / Signed Instrument |
Conclusive Evidence |
Provides Full Proof. |
Provides Full Proof. |
|
Beginning of Written Proof (CPC Art. 202) |
Supplements Discretionary Evidence |
Enables Hearing of Witness Testimony. |
Enables Hearing of Witness Testimony. |
|
Witness Testimony Alone |
Valid Below Statutory Monethary Limit |
Strictly Invalid (Lawsuit Dismissed). |
Inadmissible / Ground for Dismissal (YİBK is a Special Rule). |
|
Bank Receipts / Payment Documents |
Discretionary Evidence / Document |
Unreserved Payments Count as Beginning of Written Proof. |
Qualifies as Beginning of Written Proof. |
|
Party Oath (CPC Arts. 225 et seq.) |
Conclusive Evidence |
Oath May Be Tendered If Written Evidence Is Lacking. |
Oath May Be Tendered. |
Fiduciary transfers for security purposes represent one of the most sensitive topics in real security law. The legal boundaries of these transactions are demarcated by their relationship with the Prohibition of Lex Commissoria (the prohibition against the pledgee acquiring ownership of the pledged asset), recognized since Roman Law.
Paragraph 2 of Article 873 of the Turkish Civil Code No. 4721 mandates in respect of real estate mortgages: "Any contractual provision stipulating that ownership of the mortgaged property shall pass to the creditor in the event of default is void." This mandatory rule applies equally to pledges over movables pursuant to TCC Art. 949.
The socio-legal rationale underlying the lex commissoria prohibition is categorized into three main grounds:
· Protection of the Debtor: Preventing a distressed debtor in urgent need of credit from losing property worth far more than the debt under pressure from the creditor.
· Prevention of Exploitation and Unjust Enrichment: Disallowing a creditor from capitalizing on default to appropriate property whose value greatly exceeds the outstanding loan balance.
· Publicity of Rights In Rem and Principle of Liquidation: Ensuring that pledged property is converted into cash through public enforcement and auction mechanisms under market conditions, with any surplus refunded to the debtor.
A group of scholars in doctrine argues that transferring ownership of real estate for security purposes—with an agreement that title shall remain with the creditor upon default—constitutes an evasion of law designed to bypass the lex commissoria prohibition, rendering such transactions void.
However, the General Assembly of Civil Law Chambers (e.g., HGK, 14.07.2010 T., E. 2010/14-394, K. 2010/395) and the 1st Civil Chamber of the Court of Cassation established in settled precedents that fiduciary transfers for security do not violate the lex commissoria prohibition. The technical reasoning relied upon by the Court of Cassation rests on the following premise:
In pledge law, the debtor retains title to the property and grants the creditor merely a limited right in rem (a pledge right). A clause in a pledge agreement stating "if unpaid, ownership passes to the creditor" contains a promise of future ownership transfer that has not yet occurred, which the law invalidates. By contrast, in a fiduciary transfer for security purposes, the dispositional transaction (transfer at the land registry) is executed as legally valid ab initio, transferring full ownership to the creditor (fiduciary). Because the fiduciary already possesses full title, there is technically no scenario involving "ownership subsequently passing to the creditor upon default." Consequently, TCC Art. 873/2 cannot be applied to fiduciary transfers.
Upholding the validity of fiduciary security transfers does not accord the creditor unlimited exploitation rights. The Court of Cassation and doctrine invoke the principle of good faith (TCC Art. 2) and the doctrine of lesion/unconscionability (TCO Art. 28) once the debt becomes due.
If the debt is not paid at maturity, the fiduciary (creditor) is obligated to liquidate their claim by selling or obtaining a formal valuation of the fiduciary property. If the property's value exceeds the debt amount, the creditor is bound to return the remaining surplus balance to the debtor (fiduciant). Contractual clauses purporting to allow the creditor to appropriate the fiduciary property directly without any liquidation procedure are deemed null and void under TCO Art. 27 for violating public morals and mandatory provisions.
While a fiduciary transaction creates a personal obligatory relationship (internal relationship) between the parties, it produces absolute consequences (external relationship) regarding third parties due to the in rem effect of the dispositional transaction.
Between the parties to a fiduciary contract, duties of loyalty, care, and performance arise:
· Obligations of the Fiduciary: The fiduciary must preserve the fiduciary property, manage it in accordance with the fiduciary purpose, refrain from exceeding contractual limits, and re-transfer title to the fiduciant once the purpose is realized.
· Obligations of the Fiduciant and the Court-Ordered Deposit Mechanism (Depo Kararı): In fiduciary transfers for security purposes, the fiduciant must first perform their obligation to pay the debt to the fiduciary before demanding re-registration of the property. If the fiduciant files a lawsuit without repaying the debt, the court does not immediately dismiss the action. Under Article 97 of the Turkish Code of Obligations (defense of non-performance / ödemezlik def'i), the court assumes an adjudicative role and grants the plaintiff (fiduciant) a period to deposit the debt amount into the court's registry. Upon deposit of the debt, land registry cancellation and re-registration are ordered.
The acquisition by a third party who relies on the registration in the land registry in good faith and is unaware of the internal fiduciary agreement between the fiduciant and the fiduciary is protected under TCC Art. 1023. The fiduciant cannot maintain an action for land registry cancellation and re-registration against a bona fide third party; the right in rem is permanently lost.
If the third party knew of the fiduciary relationship at the time of transfer, if such knowledge can clearly be inferred, or if the third party acted in collusion with the fiduciary to harm the fiduciant, their acquisition is not protected under TCC Art. 1024. The registration becomes corrupt (yolsuz tescil), enabling the fiduciant to file a land registry cancellation and re-registration lawsuit against the mala fide third party to recover the property.
Where recovery in rem becomes impossible due to a transfer to a bona fide third party, the lawsuit converts into a personal claim (damages for breach of contract). Under settled Court of Cassation practice, the fiduciant may demand recovery from the fiduciary under TCO Art. 112 based not on the property's historical transfer value, but on its current market value at the date of the lawsuit pursuant to the principle of compensatory justice.
Under the Unitary Theory, because the fiduciary property becomes integrated into the fiduciary's general assets, personal creditors of the fiduciary may place attachments (haciz) on the property, or the property will enter the bankruptcy estate (iflas masası) in the event of the fiduciary's insolvency. The fiduciant cannot assert a right in rem against third-party creditors or file a third-party claim of ownership (istihkak davası - Enforcement and Bankruptcy Law Arts. 96 et seq.). The fiduciant's sole recourse is an action for damages against the fiduciary for breach of contract, presenting a significant legal risk for the fiduciant.
Lawsuits for land registry cancellation, re-registration, and damages based on fiduciary transactions are subject to delicate balances under procedural law.
Decisions of the General Assembly of Civil Law Chambers of the Court of Cassation (e.g., HGK, 2019/395 E., 2019/873 K.) have established decisive rules governing the commencement of the limitation period:
· The statute of limitations does not begin to run on the date the immovable was initially transferred to the fiduciary.
· The limitation period begins to run from the date the obligation to return the property under the fiduciary agreement becomes due.
· If no return date was stipulated, or if the fiduciant continues to actually use/occupy the property, the statute of limitations is tolled/does not run.
· The core criterion accepted in Court of Cassation jurisprudence is the "loss of expectation of transfer" rule. When the fiduciary explicitly refuses the obligation to return, the fiduciant is deemed to have lost the expectation of voluntary transfer, and the 10-year limitation period begins to run from the date of this explicit refusal (notice or objection). If no notice was served, the filing date of the lawsuit is accepted as the inception of the limitation period.
· Subject-Matter Jurisdiction: The court of subject-matter jurisdiction for land registry cancellation, re-registration, and damages claims based on fiduciary transactions is the Civil Court of First Instance pursuant to CPC Art. 2.
· Territorial Jurisdiction: In lawsuits concerning rights in rem over real estate, the court where the property is located possesses exclusive territorial jurisdiction pursuant to CPC Art. 12. If the claim converts purely into monetary damages, exclusive jurisdiction ceases, and general jurisdiction rules (the defendant's place of domicile) apply.
· Preliminary Injunction: When initiating a lawsuit, requesting a preliminary injunction or a "litigious" annotation on the land registry under CPC Arts. 389 et seq. to prevent further transfers is of vital importance. If an injunction is not secured and the fiduciary transfers the property to a bona fide third party, the land registry cancellation lawsuit will be lost, converting the remedy solely to damages.
· Mandatory Mediation Status: Because fiduciary lawsuits for land registry cancellation and re-registration directly concern rights in rem over immovable property, application to mandatory pre-litigation mediation is not a condition precedent to filing a lawsuit.
Fiduciary transactions represent one of the most distinctive legal institutions in Turkish private law, synthesizing freedom of contract, the principle of trust, and practical necessity. Consisting of an obligatory fiduciary agreement coupled with a dispositional transaction, this structure creates a relative obligatory relationship between the parties while executing an absolute transfer of ownership toward the outside world.
The core findings derived from doctrinal and judicial analysis are summarized as follows:
· Evidentiary Discipline: The Court of Cassation Joint Grand Chambers Decision (YİBK) dated 05.02.1947, No. 20/6 instituted a mandatory written proof requirement for fiduciary transactions to safeguard the integrity of the land registry. This rule remains binding even in disputes between close relatives (CPC Art. 203), requiring claims to be substantiated strictly by written documentation or a beginning of written proof under CPC Art. 202.
· Compliance with Lex Commissoria: Settled Court of Cassation jurisprudence excludes fiduciary transfers for security from the lex commissoria prohibition on the grounds that ownership transfers fully from inception, while enforcing safeguards through good faith principles and mandatory liquidation obligations upon debt maturity.
· Balance Between Rights In Rem and Compensation: Should the fiduciary transfer property to a third party, the rights of bona fide acquirers are protected under TCC Art. 1023, while the fiduciant's remedy shifts to monetary compensation based on the current market value of the property at the date of the lawsuit.
· Flexibility of Limitations: The 10-year general limitation period commences not at the initial transfer date, but when the fiduciary relationship breaks down and the fiduciant loses the expectation of voluntary re-transfer.
In conclusion, to prevent irreparable loss of rights, parties intending to execute a fiduciary transaction must execute a simple written fiduciary contract encompassing all terms, return conditions, and debt amounts prior to or concurrently with the transfer. Furthermore, payment descriptions in bank transfers must be drafted with unambiguous clarity, and preliminary injunction mechanisms must be invoked immediately in the event of a legal dispute.
