One of the frequently encountered situations in practice is the registration of immovable property (land, house, etc.) belonging to the borrower (or their relatives) in the name of the lender (or another person designated by them) through a purchase and sale agreement for the purpose of securing a debt.
“Elchi” reports that the Supreme Court has issued a statement regarding this matter.
It is stated that instead of using mechanisms provided by law such as pledges or mortgages, the borrower formally sells their real estate to the lender, while the actual purpose is to provide security for the debt.
Although this method may seem convenient for the parties at first glance, it can subsequently lead to serious legal problems.
The main risk is that since the contract is formally concluded as a purchase and sale, the property legally passes into the ownership of the other person. When a dispute arises, the debtor usually claims that this contract was not actually concluded for sale but as security for the debt, while the other party denies this. In such cases, the burden of proof falls on the claimant. The claimant must provide credible evidence that the contract was not concluded with the intention of a purchase and sale, but as security for the debt. This, in most cases, creates a sufficiently heavy burden of proof for the claimant.
Detailed
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To avoid facing such risks, citizens are advised to follow these recommendations:
– do not use purchase and sale agreements to secure a debt;
– instead, prefer the pledge or mortgage mechanisms provided for in the legislation;
– specify all terms in the contract in writing and in a detailed form;
– seek legal advice when necessary.
In conclusion, concluding a purchase and sale agreement for the purpose of securing a debt can create serious and sometimes irreversible legal consequences for the parties.
A safer way is to use the legal mechanisms provided for in the law. This approach both protects the rights of the parties and prevents future disputes.