Pehlivan & Güven Law FirmPublished:
In its simplest definition, simulation (muvazaa) is an agreement between the parties to a contract, made in order to deceive third parties by concealing the true situation from them, on a matter that does not reflect their real intentions and is not valid between themselves.
In practice, people leaving an estate sometimes try to keep assets away from their heirs. The reasons may be social or family-related, or they may rest on factors such as favouring sons.
A sham transfer by the deceased (muris muvazaası) is a secret agreement made by the deceased with a third party in order to keep assets away from his or her heirs. In reality, the other party either does not pay the deceased the price of the asset taken over, or pays a price far below its value. In this way, the other party takes over the deceased's assets without paying for them.
Heirs who cannot obtain their rights because of a sham transfer by the deceased have legal remedies. By using these remedies, heirs who have not received their inheritance shares will be able to obtain their rights. In this article, we give brief information on one of the actions that can be brought on the basis of a sham transfer by the deceased: the “action for cancellation of title deed and registration based on a sham transfer by the deceased”.
Sham transfers by the deceased are not regulated by statute; the concept emerged through the case law of the Court of Cassation (Yargıtay), and its principles have been laid down by the Court of Cassation.
The concept of sham transfers by the deceased entered our law through the Unification of Jurisprudence Decision No. 1/2 of the Grand General Assembly for the Unification of Jurisprudence of the Court of Cassation, dated 01.04.1974. The principles of the 1974 Unification of Jurisprudence Decision were confirmed (except for additions concerning procedure) by Decision No. 4/5 of the Grand General Assembly for the Unification of Jurisprudence of the Court of Cassation, dated 22.05.1987. In Unification of Jurisprudence Decision No. 1/2 dated 16.03.1990, it was also held that there was no need to change the case law, and the concept of “sham transfer by the deceased” became institutionalised. The explanations below are therefore based on Court of Cassation decisions.
Sham transfers by the deceased can arise for different reasons depending on each case. Some of these are illustrated below.
✦ In our society, a culture of favouring sons still persists. For this reason, assets are often kept away from daughters, and sham transfers are made in favour of sons.
✦ Most transfers of the deceased's assets take place very shortly before the deceased's death or in old age. In such cases, the deceased is often unable to resist pressure from the people he or she lives with, and those around the deceased can more easily influence him or her by taking advantage of illness and old age.
✦ Another reason for transferring the deceased's assets to one heir is to strengthen an heir who is in a weak position. For example, the deceased may wish to protect another heir who has not yet established a career. In this case, the deceased may make sham transfers in favour of the weaker heir.
✦ If the deceased married more than once, the later spouse may put pressure on the deceased, wanting more assets to be left to him or her. Accordingly, the deceased may wish to keep assets away from former spouses and their children in order to put the last spouse in a better position.
Although the conditions for a sham transfer by the deceased vary according to each case and action, the Court of Cassation has set certain main criteria. Settled Court of Cassation case law emphasises that, in order to characterise a transaction as a sham transfer by the deceased, the true intention of the deceased must first be thoroughly investigated.
✦ The Court of Cassation holds that, to establish whether a sham transfer by the deceased exists, it must be examined “whether the deceased, in the sham transaction, had the intention of keeping assets away from the heir.
✦ There must be a knowing and deliberate discrepancy between the parties' real purposes and the transactions they carry out,
✦ There must be an intention to deceive third parties,
✦ The parties must have agreed between themselves to carry out the sham transaction.
The Court of Cassation Assembly of Civil Chambers ruled on this point as follows in its decision dated 07.10.2021, E. 2018/1-533, K. 2021/1189: “…..In Unification of Jurisprudence Decision No. 1/2 dated 1.4.1974, it was decided that: “Where it is established that a person, with the aim of depriving his heir of his inheritance right, declared his will before the land registry officer in the form of a sale in respect of immovable property registered in the land register which he in fact wished to donate, all heirs whose inheritance rights have been violated, whether or not they hold a reserved share, may bring an action claiming, on the basis of Article 18 of the Code of Obligations, that the apparent sale contract is simulated and that the concealed donation contract lacks the required form, and that this right of action shall not affect the rights provided by Articles 507 and 603 of the Civil Code, which apply to valid contracts…..”
A sham transfer by the deceased may be proven by any kind of evidence. In an action based on a sham transfer by the deceased, the claimant must prove matters such as that the deceased had no need to sell the property, that the transferee lacked the means to buy it, that nothing corresponding to the sale price is found in the estate, the relationship between the so-called buyer and the deceased and, in lifetime care contracts (ölünceye kadar bakma sözleşmesi), that the deceased had no need of care.
In addition, matters such as personal relationships, anger, estrangement, unwanted marriages, the parties' particular circumstances, and social and family order should be examined. In general, situations such as presenting the transfer of a registered property to one of the heirs as a sale, selling a registered property through an intermediate owner, or using a lifetime care contract as the apparent transaction are regarded as sham transactions.
Heirs who cannot obtain their inheritance rights may be able to secure them by bringing an action for cancellation of title deed and registration based on simulation, relying on the reasons explained above. In these actions, the court with subject-matter and territorial jurisdiction is the Civil Court of First Instance (Asliye Hukuk Mahkemesi) in the place where the property in dispute is located.
In a sham transfer action, if the simulation is proven, the court orders the title deed record of the property in dispute to be cancelled in full and the property to be registered in the names of all heirs. Depending on the claim in the action, a cancellation and registration order may also be given only in proportion to the claimant's inheritance share.
If the heir who received the property in dispute has since transferred it to a third party, the value of the property may be claimed instead of cancellation of title deed and registration.
