Termination of Ship Mortgage

The termination of a ship mortgage is a critical legal stage in maritime commercial law, directly affecting both the collateral relationship and the ship registry records. In the Turkish Commercial Code, the termination of a ship mortgage is linked to various reasons such as the extinguishment of the debt, deletion from the registry, and the creditor's consent. These reasons are regulated under two main groups in the Turkish Commercial Code.

1. Reasons that Cause the Mortgage to Be Forfeited Along with the Debt 

Debt Reduction

According to Article 1044 of the Turkish Commercial Code, a ship mortgage automatically terminates when the secured debt is extinguished. This provision is a natural consequence of the ancillary nature of the mortgage. When the debt is extinguished due to reasons such as payment, release, set-off, or statute of limitations, the reason for the existence of the mortgage also ceases to exist.

The law also considers the merging of the creditor and debtor roles in the same person as a condition for the payment of the debt. Thus, the mortgage is extinguished upon the termination of the debt relationship.

If a debtor who is not the ship owner pays a portion of the debt, the portion of the ship mortgage remaining with the creditor takes precedence over the portion transferred to the debtor. This provision is intended to protect the priority of the pledge.

Furthermore, if the debtor, who is not the ship owner, acquires the mortgage as a result of payment or has a legal interest in the correction of the ship's registry for the same reason, he/she may request the creditor to provide the necessary documents for the correction of the registry.

Finally, if the owner has undertaken to have the ship mortgage cancelled in the event of a debt being extinguished to a third party, it is possible to have an annotation made in the ship register to secure this cancellation request.

Merger of Creditor and Owner Statuses

According to Article 1045 of the Turkish Commercial Code, a mortgage on a ship is terminated if the ownership and the mortgage are combined in the same person. This is because in this case, both the creditor and the ship owner are held by one person, and the mortgage's security function ceases.

However, if the debtor is someone other than the ship owner, or if there is a lien or usufruct right on the debt, the mortgage does not terminate and remains in effect. In this case, however, the ship owner, as the creditor, cannot demand the liquidation of the ship; furthermore, the ship does not constitute collateral for interest claims.

Payment by the Owner to the Creditor in a Joint Ship Mortgage

Article 1046 of the Turkish Commercial Code regulates a special termination procedure specific to joint ship mortgages. According to this provision, the ship owner who makes a payment to the creditor acquires the mortgage right on that ship to the extent that he has a right of recourse against the owner of another mortgaged ship or his legal predecessors.

In this case, pursuant to the second paragraph of Article 1045, the ongoing mortgage and the mortgage transferred to the owner together acquire the nature of a ship mortgage.

In the case of partial payment, the mortgage remaining with the creditor takes precedence over mortgages transferred to the owner. Furthermore, the transfer of the debt to the owner, or the merging of the creditor and debtor roles in the person of the owner, is considered equivalent to payment of the debt by the owner.

The same principles apply to the owner's right of recourse if the creditor collects their due from one of the mortgaged vessels through compulsory execution.

Transfer of Mortgage to the Debtor in a Joint Ship Mortgage

According to Article 1047 of the Turkish Commercial Code, in a joint ship mortgage, if the debtor has a right of recourse only against the owner of one of the mortgaged ships or their legal predecessors, as stipulated in the sixth paragraph of Article 1038 of the Code, the mortgage shall only apply to that ship. Mortgages on the other ships shall be extinguished.

The Statute of Limitations on the Creditor's Claim Against the Shipowner

According to Article 1048 of the Turkish Commercial Code, contractual mortgages that have been wrongfully removed from the ship registry, as well as unregistered statutory mortgages, lapse upon the expiration of the creditor's claim against the ship owner. This provision aims to ensure the security of the registry and the concept of prescription are considered together.

2. Reasons that Only Lead to the Forfeiture of the Mortgage

Agreement of the Parties

According to Article 1049 of the Turkish Commercial Code, a mortgage is terminated when the secured creditor and the ship owner agree on the cancellation of the mortgage in the manner stipulated in the second paragraph of Article 1015 of the Code, and the mortgage registration is removed from the ship register in accordance with this agreement.

However, if third parties have rights over the mortgage, their consent is also required to remove the mortgage.

Creditor's Waiver

According to Article 1050 of the Turkish Commercial Code, a mortgage terminates upon the creditor's waiver and the subsequent removal of the mortgage registration from the registry. The consent of the persons holding rights over the mortgage is also required in this case.

If the property owner has a defense that makes the enforcement of the mortgage permanently impossible, they may request the creditor to waive the mortgage.

The waiver statement must be made with a notarized document or directly at the registry office. Furthermore, the debtor is released from their debt to the extent that the creditor eliminates the debtor's ability to benefit from the collateral by relinquishing the mortgage or giving priority to another mortgage.

Mortgage Expiration

According to Article 1051 of the Turkish Commercial Code, a ship mortgage established for a specific period automatically terminates upon the expiration of that period. However, a cancellation process is required to reflect this termination in the ship registry.

3. Common Problems Encountered in Practice

Creditor's Refusal to Request Cancellation

Sometimes the creditor may not file a cancellation request or may delay it. In this case, the ship owner can obtain a court order for cancellation to ensure the request is made. In practice, it is very common for banks, in particular, to be indifferent to this process; therefore, resorting to legal action is frequently used.

Obtaining Documents in Mortgages with Foreign Elements

In international credit relationships, obtaining, translating, and notarizing/legally verifying the necessary documents can be time-consuming when the creditor is a foreign entity. The registry office may evaluate these documents as legally binding or requests for unlawful deletion ; this can lead to delays.

Physical Absence and Conflict of Undergraduate Studies

The vessel may have physically disappeared (e.g., sunk), but may not have been removed from the official register. This overlap leads to a practical delay between the legal termination of the lien and the deletion of the registration.