A person’s transfer of immovable property during his or her lifetime is, as a rule, an ordinary exercise of the right of ownership. Where the true purpose behind the transfer is to exclude some of the heirs from the estate, however, and the gift intended to be made without consideration has been dressed up in the land registry as a sale, nothing remains that merits protection. The action for annulment of title deed and registration on the ground of concealing assets from the estate is precisely the type of action that brings the gap between appearance and reality before the courts. The claim is for a declaration that the simulated conveyance produces no effect, together with the deletion of the entry in the land registry and the re-registration of the property in the names of the heirs.
In practice the picture is most often constructed in a similar way: the deceased transfers his or her most valuable immovable property to only one of the children, or to a third party close to him or her; a purchase price is shown in the land registry, yet there is no trace whatever of that price having changed hands. Learning of the position after the death, the remaining heirs bring an action, contending that the transaction was in truth aimed at depriving them of their inheritance rights.
In this briefing note we examine, in turn, the legal basis of simulation by the deceased, the factual patterns in which it arises, the elements required, the parties to the action, the debate over limitation, and the conduct of the proceedings together with the consequences they produce.
What Is Concealing Assets from the Estate (Simulation by the Deceased)
The Definition of Simulation by the Deceased
The concept of simulation by the deceased describes the disposal by the deceased of immovable property with the idea of depriving particular heirs of their inheritance rights, and the entry of that property — which he or she in fact wished to give away — in the land registry as a sale. In transfers of this kind the transaction reflected in the official record and the outcome the parties inwardly desired do not coincide; there is a deliberately created discrepancy.
For a detailed framework of the concept, reference may be made to the note titled What Is Simulation by the Deceased?
The Difference Between the Ostensible Transaction and the True Intention
The distinguishing feature of simulation is that the contract appearing in the land registry has become detached from the parties’ real intention. Although on paper a sale appears to have been concluded, the parties wished the property to change hands without consideration, that is, to be given away. The sale, regular in outward appearance, is treated as simulated because it does not carry the true intention.
For that reason the court does not confine itself to what is recorded in the title deed. It weighs as a whole the outcome the parties were aiming at, the circumstances prevailing at the time of the transfer, and the particular features of the case.
The Legal Character of Simulation by the Deceased
Both scholarship and judicial practice treat this institution under the heading of relative simulation (qualified simulation). There are not one but two transactions here: the contract of sale presented to the outside world, and the gift that the parties wished to carry out behind the curtain. Since the contract that appears outwardly does not carry the parties’ real intention, it cannot acquire validity.
Because the purpose of such an arrangement is to circumvent the heirs’ reserved portions or their inheritance rights, the transaction cannot be reconciled with the rule of good faith. The heirs may therefore rely on that invalidity to seek annulment of the entry in the land registry and registration of the property in their own names to the extent of their shares in the estate.
Provisions of the Turkish Civil Code and the Rule of Good Faith
Disputes arising from simulation by the deceased cannot be reduced to a single article; the solution is sought in the general provisions of the Turkish Civil Code No. 4721 and in particular in the rule of good faith. That principle, laid down in Article 2 of the Code, requires that rights be exercised and obligations performed in a manner consistent with good faith.
The transfer by the deceased, in the guise of a sale, of immovable property he or she wished to give away in order to keep certain heirs away from the estate is regarded as conduct in conflict with that principle. Even where the transaction has been fitted into a legal form, it therefore cannot come under the protection of the legal order.
The Code’s provisions on succession and ownership likewise underpin these actions. The legislature has taken the protection of the right conferred on the heirs as its starting point and has not regarded it as legitimate for the deceased to circumvent that right by unlawful transactions. In that respect, actions for annulment of title deed and registration brought against simulated conveyances function as one of the principal legal instruments securing the right of inheritance.
Court of Cassation Decision on the Unification of Case Law (1 April 1974)
One of the strongest foundations in this field is the set of principles established by the decision of the Grand General Assembly on the Unification of Case Law of the Court of Cassation of 1 April 1974. The decision expressly adopted the position that simulated conveyances made with the motive of concealing assets from the heirs produce no effect, and that the heirs may seek the annulment of such transactions through the courts.
The same decision emphasised that the right of action is not tied to entitlement to a reserved portion; the possibility of bringing an action was afforded to all heirs whose inheritance rights have been impaired. The legal footing of actions for annulment of title deed and registration brought against simulated conveyances was in this way established by case law in terms that leave no room for doubt.
That decision is still regarded today as the starting point of practice and is consistently taken as the basis of the Court of Cassation’s judgments.
In Which Cases Does Concealing Assets from the Estate Arise?
Before simulation can be spoken of, it must be shown, within the circumstances of the particular case, that the transfer was in reality in the nature of a gift and pursued the aim of concealing assets from the heirs. The practice of the Court of Cassation establishes the existence of that aim for the most part through defined groups of facts and recurring patterns of conduct.
The principal situations that strengthen a suspicion of simulation in practice are considered below.
A Gift Cast in the Appearance of a Sale or a Contract of Maintenance Until Death
This is the most frequently encountered scenario. The deceased wishes to transfer the property without consideration but, in order to make it more difficult for the other heirs to bring an action later, records the transaction in the land registry in the form of a sale or a contract of maintenance until death.
Legal Consequence:
Since the sale or maintenance contract projected outwardly does not correspond to the true intention, it is simulated. The concealed gift, for its part, is not treated as valid because it does not satisfy the requirement of official form. When these two invalidities are combined, annulment of the entry in the land registry and registration of the property in the names of the heirs may be sought.
A Gross Gulf Between the Price in the Land Registry and the Market Value
Where the purchase price shown in the records falls markedly short of the true market value at the date of transfer, this creates a strong presumption of simulation. Disposal of the property at a figure far below its value indicates that the transaction may in substance be a gift rather than a sale.
A low price does not, however, lead to that conclusion on its own. The courts assess this datum by weighing it together with the other facts on the file.
The Price Never Being Paid, or the Transferee Lacking the Means to Pay
Even where a price has been agreed in the land registry, the fact that the money never actually changed hands, or that the transferee was far from having the economic means to meet that sum, is among the clear indicators of simulation.
For example;
- The transferee’s level of income or assets being such that it could not bear that payment
- No entry relating to the purchase price appearing in the deceased’s bank accounts
facts of that kind are accepted as strong presumptions supporting the conclusion that the transaction was in substance a gift.
The Deceased Having No Reasonable Motive for Disposing of the Property
In the practice of the Court of Cassation, whether there was an economic reason for the transfer, or one consistent with the ordinary course of life, is likewise taken as a criterion. If the deceased’s financial position was comfortable, if he or she was not in debt and had no need of cash, the fact that he or she nonetheless transferred the most valuable of his or her immovable properties may lay the ground for the transaction not being treated as a genuine sale.
For that reason the deceased’s financial position at the date of transfer, his or her living conditions and economic needs are examined in the proceedings on the basis of concrete evidence.
The Transfer Being Made to Only One Heir or to a Third Party in the Close Circle
The transfer of the property to a particular heir, or to a third party having a close connection with the deceased, is likewise an indication that carries weight in the assessment.
In particular;
- Transfers made in favour of third parties with whom there is a relationship of kinship or trust
- Conveyances effected in favour of only one of the heirs
- Conveyances made to the heir who cared for the deceased and which exclude the others entirely
where these are in issue, whether an aim of concealing assets lies behind the transaction is examined within the circumstances of the particular case.
The Elements of Simulation by the Deceased
Whether a transfer may be treated as invalid on the ground of simulation depends on certain elements being present together. The absence of even one of them removes the characterisation of simulation and may lead to the dismissal of the action. The courts therefore address the following elements one by one in every file and verify that they are present.
The Ostensible Transaction (the Contract)
The ostensible transaction is the contract that the parties present to the outside world as though it were genuine. In simulation by the deceased this contract most often appears in the form of a contract of sale or a contract of maintenance until death.
Although it gives the impression that a valid transaction has been carried out in the land registry, this contract does not reflect the parties’ real intention. Since the transaction was recorded in the appearance of a sale or of maintenance while the purpose was to make a gift, the contract that appears outwardly is treated as invalid by reason of simulation.
The Agreement to Simulate
The agreement to simulate is the secret understanding formed between the deceased and the person to whom the property is transferred. By that understanding the parties determine that the transaction they carry out in the land registry will either produce no effect at all or will produce an effect other than the one it appears to have.
Put another way, while the appearance of a sale is given to the outside world, the parties have agreed between themselves on a gift. That secret understanding is one of the basic elements on which simulation by the deceased is built.
The Concealed Transaction (the Intention to Make a Gift)
The transaction the parties actually wish to carry out is a gift. That gift is not, however, constituted openly as a gift in the land registry; it is hidden behind a sale or a similar contract.
Since a gift of immovable property is subject to official form, the transaction must be reflected in the land register as a gift. Where the gift is concealed under the appearance of a sale, the requirement of form is not met and this concealed transaction, too, remains invalid.
The Intent to Deceive the Heirs (the Aim of Concealing Assets)
What distinguishes simulation by the deceased from other forms of simulation is the presence of an intent to deceive the heirs. The deceased aims to deprive some of the heirs of their inheritance rights, or to give particular persons an advantage by affecting the division of the estate.
The point most debated in the proceedings is therefore what the deceased’s true aim was. If the transfer was genuinely made in return for care, if it arose from an economic necessity or rested on a justified reason, there can be no question of simulation.
In short, so long as the intent to deceive the heirs cannot be established, a claim for annulment of title deed and registration founded on simulation by the deceased will be dismissed.
The Parties to the Action for Annulment of Title Deed and Registration
In actions for annulment of title deed and registration brought on an allegation of concealing assets, the accurate identification of the parties is decisive for the sound progress of the proceedings. As a rule the heirs whose inheritance rights have been impaired have the capacity of claimant; the person who acquired the property, or whoever subsequently became owner, stands on the respondent side.
In some cases the action may need to be directed against more than one person, or several heirs may need to act together. In that respect the constitution of the parties is a matter that affects the outcome procedurally as much as on the substance.
Who May Bring the Action?
Heirs whose inheritance rights have been infringed by the simulated transaction may bring this action. The right of action is not tied to entitlement to a reserved portion; every statutory heir whose inheritance rights have been harmed may have recourse to the courts.
Those with capacity to bring the action are principally the following:
- Heirs who have no reserved portion
- Heirs entitled to a reserved portion
- Appointed heirs
- Where a representative has been appointed to the estate, that representative
In simulation actions the heirs may, if they wish, bring the action together, or each may go to court on his or her own.
Since these actions do not require compulsory joinder of parties, an action brought by a single heir produces no effect as regards the others; the judgment given takes effect only in respect of the share of the heir who brought the action.
Against Whom Is the Action Brought?
As a rule the action is directed against the person who acquired the property by the simulated transaction. If the property has subsequently changed hands, the claim must be asserted against the last owner or against the person holding rights over the property.
Within that framework the capacity of respondent may attach to the following persons:
- The owner who subsequently acquired the property
- The person who acquired the property directly from the deceased
- Third parties holding a right in rem over the property
Situations Involving Compulsory Joinder of Parties
In some cases the action must be directed jointly against all those holding rights over the property. In particular:
- Where a right in rem has been established over the property
- Where the property is the subject of co-ownership in shares
- Where the property has been transferred to more than one person
in those situations it is compulsory for the action to be brought against all interested parties. Otherwise the action may be dismissed on procedural grounds.
Is There a Statute of Limitations in an Action Brought for Concealing Assets?
The General Rule: Actions Based on Simulation by the Deceased Are Not Subject to a Statute of Limitations
According to the settled practice of the Court of Cassation, no statute of limitations runs in actions for annulment of title deed and registration founded on simulation. This is because such actions aim at the correction of a register entry that has come into being unlawfully, and the right of ownership does not come to an end with the passage of time.
Accordingly:
- The heirs having failed to take steps for a long period
- The property having been used for years by the transferee
- Many years having passed since the death of the deceased
do not on their own constitute grounds for dismissing the action.
The Course of Proceedings in an Action for Annulment of Title Deed
Because actions for annulment of title deed and registration founded on an allegation of concealing assets concern ownership of immovable property, that is to say a right in rem, they are conducted within a procedural framework of their own.
The Court with Subject-Matter and Territorial Jurisdiction
In these actions subject-matter jurisdiction lies with the Civil Court of First Instance.
As regards territorial jurisdiction, the action must be heard by the court of the place where the property is situated. Since that rule of jurisdiction is mandatory in character, it cannot be altered by the will of the parties. The application must therefore be made to the Civil Court of First Instance at the place where the property is situated.
Request for an Interim Injunction
While the proceedings are pending, an interim injunction may be sought in order to prevent the property from being transferred to third parties. Where the possibility of the property changing hands is apparent, the court may be asked to enter an annotation prohibiting sale and transfer on the land registry entry.
That request may be made when the action is brought, and may equally be raised as the proceedings continue. Once the claimant has made out his or her allegation on a prima facie basis, the court may grant an injunction temporarily halting any transfer.
Proof and Evidence in an Action for Concealing Assets
The claimant who alleges simulation bears the burden of proving that the transfer was made in order to conceal assets from the heirs. Since, however, a written agreement to simulate is generally absent in these disputes, proof rests to a large extent on indirect evidence and on presumptions drawn from the facts.
The evidence most frequently relied on in practice is the following:
- Examination by a court-appointed expert and on-site examination
- The land register and other official documents
- Witness statements
- Data relating to the deceased’s financial position and need for cash
- Bank movements and documents relating to payment
- The relationship of closeness between the parties
The court assesses this evidence as a whole and seeks to determine the deceased’s true intention and the aim of the transaction.
Court Fees and Litigation Costs
These actions belong, as a rule, to the group of actions subject to a proportional court fee. When the action is brought, the fee calculated on the basis of the value of the property in dispute must therefore be paid.
In the course of the proceedings there may also arise:
- Costs relating to witnesses
- Costs of on-site examination
- Fees of court-appointed experts
- Costs of service
and similar items. As a rule these costs are placed at the end of the action on the party who is unsuccessful.
Attorney Fees
In actions of this kind the attorney fee is awarded on a proportional basis over the value determined by the assessment carried out at the court’s direction at the conclusion of the proceedings. It is ordered to be collected from the opposing party in favour of the successful party, within the framework of the Minimum Attorney Fee Tariff.
In addition, an attorney fee arising from the contract between the party and his or her counsel may also be in issue. That item may be claimed separately according to the outcome of the action.
Appeal Routes (Appeal and Appeal on Points of Law)
Judgments given in actions for annulment of title deed and registration are not final and are open to review at a higher level. There is, however, a particular position as regards judgments concerning the substance of immovable property:
- Appeal: An appeal may be lodged with the Regional Court of Appeal within 2 weeks of service of the reasoned judgment.
- Appeal on points of law: Against the judgment of the regional appellate chamber, an appeal on points of law may be brought before the Court of Cassation within 2 weeks of the date of service. The threshold for such an appeal depends on the monetary limit updated each year by the revaluation rate.
Enforceability: Under the Code of Civil Procedure No. 6100 these judgments cannot be enforced before they become final. Even where judgment has been given for annulment, registration in the land registry therefore cannot be effected until the appeal stages have been completed and the judgment has become final.
The Consequences of the Action
If the court concludes that the transfer in dispute was simulated, it orders the annulment of the land registry entry and the re-registration of the property in the names of the heirs. The register entry created unlawfully is thereby removed and ownership of the property is brought into line with the true position as to rights.
Annulment of the Land Registry Entry
Once the existence of simulation has been established in the proceedings, the land registry entry arising from the simulated transaction is annulled. This means the deletion from the register of a registration effected unlawfully.
With the judgment of annulment the conveyance made by the deceased is treated as invalid, and the unlawful state of ownership over the property comes to an end.
Registration of the Property in the Names of the Heirs
Together with the annulment of the entry, the court orders the registration of the property in the names of the heirs. Registration is made on the basis of the heirs’ statutory shares.
For example, where a sale transaction is rendered invalid on the ground of simulation, the property is treated as having returned to the deceased’s estate and is re-registered in the names of the heirs.
Registration in Proportion to Shares
The judgment given in these actions produces effect, as a rule, only as regards the heir who brought the action. Accordingly, where a single heir has brought the action, annulment and registration may be ordered not in respect of the whole property but only in respect of the part corresponding to the claimant’s share.
Where the heirs bring the action together, the property is registered in their names in proportion to the claimants’ shares. This outcome is frequently encountered in practice.
Claiming Damages
In some cases annulment of the land registry entry may not be possible. In particular, where the property has passed to a third party acting in good faith in reliance on the register, a claim for damages arises in place of annulment.
In such situations the heirs may seek:
- Payment of damages based on the value of the property
- Compensation for the loss they have suffered
For that reason the outcome in simulation actions does not always take the form of annulment of the title deed; the features of the case may produce different legal consequences.
The Independent Legal Assessment
The fate of actions based on simulation by the deceased is more often determined by the preparation of evidence than by legal characterisation. In these disputes, where no written agreement to simulate exists, what persuades the court is the body of facts that appear weak when taken one by one but together form a meaningful picture: the market value at the date of transfer, whether the deceased had any need of cash, the transferee’s capacity to pay, and the degree of closeness between the parties.
When the strategy of the action is being framed, it is also important to clarify from the outset the point at which an allegation of simulation departs from claims for abatement and other inheritance claims; the two claims are not interchangeable and their conditions differ.
In a given file the matters to be given priority are the following:
- Documenting, on a comparative basis, the value of the property at the date of transfer against the price shown in the land registry
- Investigating bank and accounting records relating to payment of the price before the action is brought
- Including the request for an interim injunction expressly in the statement of claim, against the risk of the property passing to third parties
- Assessing in advance, where the property has changed hands, the question of good faith and the option of damages
- Constituting the parties in full in situations requiring compulsory joinder
- Planning the timing of the process with regard to the fact that the judgment cannot be enforced before it becomes final
Independent Legal provides advisory services and conducts litigation at every stage of disputes over annulment of title deed and registration arising from simulation by the deceased, from the preparation of evidence to the enforcement of the judgment.