Joint ownership is the form of ownership in which the powers to use property, to derive benefit from it and to dispose of it belong collectively to an entire community arising from the law or from a contract permitted by law. This form of ownership may be created only in a limited number of situations, and its most typical manifestation is the community of heirs. In an immovable held under joint ownership, the shares of the owners, or which part of the property each of them holds, are not determined in advance; each co-owner is deemed to hold equal and common rights over the whole of the immovable.
Where compulsory enforcement is pursued against an immovable subject to this ownership regime because of the debt of one of the co-owners, and a sale becomes necessary, no direct sale of a share can be carried out as it can under co-ownership in shares; the joint ownership over the immovable must first be brought to an end. Since the co-owners have no determined share that they may transfer independently, the only thing creditors may do is to request that the joint ownership be liquidated, that the share falling to the debtor co-owner be determined, and that the debt be satisfied out of that share by way of compulsory enforcement. The process therefore necessarily passes through the stages of dissolution of the joint ownership and liquidation.
In this briefing note we examine the legal framework of joint ownership, how the undivided share is attached, the sale procedure to be followed under Article 121 of the Enforcement and Bankruptcy Act No. 2004, and the points that give rise to the greatest uncertainty in practice.
The Concept of Joint Ownership
Joint ownership is defined in Article 701 of the Turkish Civil Code No. 4721 as follows:
Turkish Civil Code No. 4721, Art. 701
“The ownership of those who own property together by reason of a community formed pursuant to the law or to contracts provided for by law is joint ownership. In joint ownership the co-owners have no determined shares, and the right of each of them extends to the whole of the property forming part of the community.”
As the definition makes clear, under this regime the co-owners have no separated shares; the right of each co-owner extends to the whole of the assets forming part of the community. In other words, even if the entitlement of the rightholders appears in proportional form in the registers, each co-owner stands in an equal position in relation to the immovable. For this reason those who own property under joint ownership are regarded not as shareholders but as co-owners; in practice the right held by these persons is referred to as the “undivided share”.
Situations Giving Rise to Joint Ownership
Joint ownership describes the situation in which persons between whom a relationship of community exists own an asset together by reason of that relationship. This is also where it differs from co-ownership in shares: the community is inherent in the very structure of the ownership. That community, however, has no legal personality. Joint ownership arises essentially as a consequence of the relationship of community in question.
Such a community can be said to exist only in those situations in which the law permits it or allows it to be created by contract. Joint ownership may be brought about by the legal events provided for in the law or by contracts concluded between the parties.
The best-known example of this is inheritance. Where a person dies leaving more than one heir, those heirs hold the assets in the estate under joint ownership within the framework of the “community of heirs”. That structure serves as a means of resolving the administration and distribution of the estate.
The Legal Position of the Co-owners
Under joint ownership no co-owner has a share over which it may dispose on its own; the ownership right of each owner extends to the whole of the asset. For this reason none of the co-owners may carry out an independent transaction in respect of the assets concerned. Each co-owner is, on the other hand, entitled to obtain a specific share should the assets of the community be liquidated; that is to say, the co-owners hold a right of a prospective nature.
Because the co-owners have no transferable share, what creditors may demand is likewise limited: they may request that the community be liquidated, that the share falling to the debtor co-owner be determined, and that the debt be satisfied out of that share by way of compulsory enforcement. Before any sale, therefore, the joint ownership over the immovable must without exception be dissolved and the liquidation completed.
Attachment of the Undivided Share
Article 94 of the Enforcement and Bankruptcy Act No. 2004 governs the manner in which assets held in joint ownership are to be attached and the procedure applicable to that step. Under that provision, where an undistributed estate, a company or a share in an asset held in joint ownership becomes the subject of enforcement proceedings, the enforcement office notifies those third parties whose places of residence are known to it. Where the debtor’s share in a particular immovable has been attached, the enforcement officer serves notice on the land registry directorate so that the attachment may be recorded in the registers.
In joint-stock companies, where no share certificate or interim certificate has been issued, the debtor’s share in the company is attached by the enforcement office by way of service of notice on the company. The attachment must be recorded in the share ledger; even if no entry is made, the attachment is deemed to have taken effect on the date of service. The step is notified to the Trade Registry for registration. In that case the transfer of the attached shares is invalid to the extent that it prejudices the rights of the creditor. In converting the attached shares into money, the procedure applicable to the sale of movables applies. As regards other movable assets, the enforcement office takes the measures necessary to prevent a transfer.
Undivided shares and the subject matter of the attachment. Since no disposal may be made over shares held under joint ownership, what is attached at the enforcement stage is not the share itself but the share that will emerge once the joint ownership relationship comes to an end.
Notification of the other shareholders. Where the enforcement office makes the debtor’s undivided share the subject of an attachment, it notifies the other shareholders of the position at their addresses. That notification states that the amount falling to the debtor’s share must be delivered to the enforcement office, that from then on all service of notice will be effected on the enforcement office, and that joint dispositions requiring the debtor’s consent are henceforth subject to the permission of the enforcement office.
Delivery of the fruits to the debtor. If, notwithstanding that notification, the shareholders deliver the fruits to the debtor rather than to the enforcement office, they become liable to pay the same amount over again, this time to the enforcement office.
Annotation on the title deed in attachments over immovables. Where the debtor’s share in an immovable held under joint ownership is attached, the land registry officer records that fact in the register as an annotation.
Procedure for Sale by Compulsory Enforcement
Where one of the co-owners of an immovable subject to joint ownership is in the position of debtor, the creditor may request a sale of that immovable or immovables by way of compulsory enforcement. In practical terms that request means the following: the creditor brings an action for the dissolution of the joint ownership in respect of the immovable held jointly by the debtor, and upon the conclusion of that action obtains the opportunity to recover its claim out of the share falling to the debtor.
The manner in which immovables subject to joint ownership are to be sold by way of compulsory enforcement is set out in Article 121 of the Enforcement and Bankruptcy Act No. 2004:
Enforcement and Bankruptcy Act No. 2004, Art. 121
“If property of a kind other than that specified in the preceding articles must be sold, such as a usufruct, an undistributed estate, a company or a share in an asset held in joint ownership, the enforcement officer shall ask the enforcement court how the sale is to be carried out. The enforcement court may, after summoning the interested parties whose places of residence are known and hearing those who attend, order a public auction, or appoint an officer for the sale, or take such other measure as may be required.”
Under that provision the enforcement director asks the enforcement court by what method the sale is to be effected. The enforcement court, having summoned the interested parties whose addresses are known and heard those who attend, may then decide in one of three directions:
- it may appoint an officer to conduct the sale;
- it may order that the rights be sold by public auction;
- it may resort to such other measure as it considers necessary in the particular case.
Because a sale conducted by public auction carries the risk that the share will change hands at a price below its true value, that route often serves the interests of neither the debtor nor the creditor. The solution widely preferred in practice is therefore to grant authorisation to bring an action for the dissolution of joint ownership (izale-i şuyu) in respect of particular assets in the estate, with a view to bringing the joint ownership relationship to an end. As one of the measures provided for in Art. 121(2) of the Enforcement and Bankruptcy Act No. 2004, the enforcement court grants the creditor who has attached the debtor’s share, or the enforcement office, authorisation to bring that action in respect of one or more assets in the estate. It should be emphasised here that, for actions for the dissolution of joint ownership brought after 1 September 2023, recourse to mediation has been made mandatory.
The creditor or the enforcement director, relying on the certificate of authorisation it has obtained (and provided that the mediation stage has also been completed), brings the action for the dissolution of joint ownership in respect of the asset concerned before the Civil Court of Peace. If, at the end of the proceedings, division in kind is found not to be possible and a sale is ordered, the asset is sold; the amount of the sale proceeds falling to the debtor co-owner is paid into the enforcement file and the claim is satisfied out of that money. Until these stages have been completed, it is not legally possible for an immovable subject to joint ownership to be sold by way of compulsory enforcement and registered in the land registry in the name of the creditor.
For details of the procedure and conduct of the action, reference may be made to the note entitled Action for the Dissolution of Co-ownership (İzale-i Şuyu).
Frequently Asked Questions
Is the action brought only for as many immovables as the debt requires?
In this situation the value falling to the debtor co-owner’s share in the immovables must be determined as at the date of the action, taking the amount of the debt subject to compulsory enforcement as the basis. On the strength of that determination, dissolution of the joint ownership is ordered in respect of as many immovables as are sufficient to meet the debt; claims exceeding that limit are dismissed. The underlying purpose here is, after all, to ensure that the creditor recovers its claim.
Who must be parties to the action?
In an action for the dissolution of joint ownership, all of the co-owners, including the debtor co-owner, must be joined to the proceedings. There is mandatory joinder of parties between the co-owners.
Does a division agreed among the co-owners prevent a sale?
Although an immovable subject to joint ownership may be divided among the owners in fact or by contract, that division does not amount to a transaction of disposal, since the owners hold no share over which they may freely dispose. In other words, such an arrangement between the owners brings about no change in the land registry records. It therefore does not prevent the sale of the whole of the immovable by way of compulsory enforcement. The division in question binds the owners only as between themselves and provides a basis for assessing unjust occupation in relation to any claims for compensation for unjust occupation that they may raise. For further information, reference may be made to the note entitled Action for Compensation for Unjust Occupation (Ecrimisil).
Who may request conversion of joint ownership into co-ownership in shares?
Actions to this effect may be brought by the heirs. Alongside the heirs, creditors also have the possibility of bringing the same action, provided that they obtain a “certificate of authorisation” from the enforcement judge under Article 121 of the Enforcement and Bankruptcy Act No. 2004.
Is bringing the action sufficient for the one-year period to request a sale?
Under the Enforcement and Bankruptcy Act No. 2004, if no sale is requested within one year of the attachment becoming final, the attachment lapses. Whether an action for the dissolution of joint ownership brought in respect of an immovable subject to joint ownership takes the place of a duly made request for sale is not regulated in the Act. According to the view adopted in the case law of the higher courts, where the creditor, within the statutory one-year period running from the date on which the attachment was placed on the immovable held jointly by the debtor, brings an action for the dissolution of joint ownership before the Civil Court of Peace having subject-matter and territorial jurisdiction, relying on authorisation obtained from the enforcement court, it is deemed to have requested the sale of the attached immovable as at the date of the action; if that action is not brought within the period, the attachment over the immovable lapses.
Independent Legal Assessment
In immovables subject to joint ownership, the recovery process proceeds differently from a conventional attachment-and-sale cycle and requires the enforcement file and the action before the Civil Court of Peace to be conducted in a coordinated manner. The point at which creditors most often suffer loss in practice is the failure to obtain a certificate of authorisation within the one-year period following the attachment, or the failure to bring the action in time on the strength of the authorisation obtained. The addition of a mandatory mediation stage to the process for actions brought after 1 September 2023 makes scheduling all the more important.
When drawing up a road map in a particular file, the following headings should be brought to the fore:
- entering the date of the attachment and the one-year period in the diary when the file is opened;
- obtaining a certificate of authorisation from the enforcement court under Art. 121(2) of the Enforcement and Bankruptcy Act No. 2004 and setting out its scope expressly;
- completing the application for mediation in due form before the action is brought;
- framing the claim in respect of a number of immovables proportionate to the amount of the debt, so as to reduce the risk of partial dismissal;
- naming all co-owners as parties and observing the mandatory joinder of parties;
- following up the transfer into the enforcement file of the share of the sale proceeds falling to the debtor co-owner.
Independent Legal provides advisory services and conducts litigation throughout the entire process in relation to immovables subject to joint ownership, from the attachment of the share to the conduct of the action for the dissolution of joint ownership and the recovery of the sale proceeds.