Turkey: A Quick Peek on the Novation or Assignment of Leases at a Glance

Last Updated: 5 March 2015
Article by Serap Zuvin and Melis Oget Koc

Charge of Lessor in Cross-Border Financial Lease Agreements

Under Turkish law, cross-border financial lease agreements must be registered by the Association of Financial Leasing, Factoring and Financing Companies ("Association"). The same authority registers any amendment made to the prior registered leases. The Association recently changed the practice of their legal predecessors, namely, Banking Regulation and Supervision Agency ("BRSA").

Last year, the registration of "Novation and Amendment Agreements of cross-border leases", which only changed the lessor of existing registered cross-border financial lease agreements was rejected by the Association. The Association established a new practice and started seeking for the submission of those agreements with the title "Assignment, Assumption and Transfer Agreements."

How to Identify Whether It is a Novation?

Under the Turkish Code of Obligations'1 ("TCO"), the term "novation" (novatio) stands for ending an existing obligation by replacing it with a new one. Termination of an existing obligation by establishing a new one, can only take place with the explicit statement of wills of the parties to a contract. The term "novation" of a contract, which basically terminates an existing obligation by starting a new one is used for the cases where the subject matter of the obligation, its term or the parties thereto, i.e. the essential parts of an agreement, are amended.

Novation and amendment of an existing agreement, by changing either one or more of its parties is actually quite similar to the concept of assignment of receivables or debts under Turkish law. In case of a novation and amendment of an agreement, the existing debtor-creditor relationship between the parties comes to an end and an entirely new legal relationship between the existing debtor/creditor and the new one is established.

What is the Main Distinction between the Novation and an Assignment?

In case of a novation, upon termination of the existing contractual relationship, any associated/ancillary rights in relation to the existing legal relationship, such as a mortgage, personal/corporate guarantees, penalty clauses, etc. come to end as well. Thus, the new party, entering into the subject contractual relationship, will not be able to enjoy those associated/ancillary rights. Any agreements/arrangements providing for the continuation of them will not be valid under Turkish law. However, this is not the case for assignment of contracts. In case of an assignment or transfer of an agreement, any ancillary rights/obligations of the assignor (except for individual rights) are also assigned/transferred to the transferee pursuant to Article 189 of the TCO. This is the most important difference between the assignment of agreements to third parties and novation and amendment of them.

Where Can We See the Effects of this New Practice?

The foregoing distinction becomes especially important in case of high-volume financing transactions and common demand of requiring solid securities, to be established in the form of mortgage, assignment of insurance or receivables, corporate or personal guarantees, issuing L/Cs, promissory notes, etc.

To give an example, if an agreement providing for a lessor change is made in the form of an "assignment and transfer agreement", then the securities attached to the underlying primary legal obligation will be deemed to have automatically assigned to the new party. In practice, this kind of an assignment requires complementary legal steps to be taken, in case of for instance the assignment of a mortgage. Under Turkish law a brand new mortgage agreement must be signed between the mortgagor and the new mortgagee and registered with the pertinent registry, e.g. title deed registry, Aircraft Registry, etc.

Therefore, in case of a change of lessor, if the intention of the parties is not to continue the ancillary obligations attached to an existing lease relationship, then a novation agreement must be executed among the parties. Because, essential element of an existing agreement is being amended, a brand new legal relationship is being established and automatic assignment/transfer of ancillary rights to the new agreement party is not the intended outcome.

How About Tax?

There is not difference between the two transaction types in terms of their stamp tax and transactional charge consequences. Pursuant to Article 37 of the Financial Leasing, Factoring and Financing Companies Law2 ("FLL"), documents which are issued for financial leasing, transfer or amendment of the same are exempt from stamp tax and applicable charges. Therefore, amendment agreements amending an existing financial lease agreement to change the lessor thereof must enjoy the stamp tax and exemption. In parallel with this understanding, the Advance Ruling as issued by the Ministry of Finance3 provides that the novation and amendment agreement which provides for the change of the lessor with the condition that the financial lease agreement will continue with all the rights and duties thereunder must be exempt from stamp tax and charges as well. Thus for both transaction types the applicable stamp tax rate will be 0% and no different tax implementations should occur between change of a party of a financial lease agreement, be it made by means of a novation and amendment; or an assignment/transfer agreement.

What Will the Parties Do in Practice?

It is the parties mutual commercial decision whether the ancillary rights attached to an underlying obligation shall survive or not, following a replacement of the lessor with a new one. Especially in the case of asset financing transactions, change of a party usually requires for a novation, given the fact that the security package designed to be obtained in favour of the lessor from a lessee is not likely to be same with the security package that the same lessor may seek from another lessee. Needless to say, the assignment/transfer transaction will be preferred if the parties aim for the continuous of the ancillary rights with the new transaction party. Therefore, the transaction type to be used must be determined considering the commercial desire of the parties.


1 Turkish Code of Obligations dated January 11, 2011 and numbered 6098 and published in the Official Gazette dated February 4, 2011 and numbered 27836.

2 Financial Leasing, Financial Factoring and Financing Compenies Law; dated Nowember 21, 2012 and numbered 6361 and published in the Official Gazette dated December 13, 2012 and numbered 28496.

3 Advance Ruling as issued by the Ministry of Finance dated 16/03/2011 and numbered B.07.1.GİB.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Serap Zuvin
Melis Oget Koc
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions