Explained: Compulsory Insurance

Compulsory insurance, also known as insurance mortgage, is a subordinate real right that can be documented in the real records for borrowers with or without their approval. A subordinate real right is established in subordination to a personal right and affirms that such right will be fulfilled. This right gives its holder direct authority over their real estate property. 

Article 1081, paragraph three of the Civil Code defines the five different cases for compulsory insurance as follows: 

First: When the guardian or executor of a property behaves in a manner that harms assets belonging to incapacitated individuals or those with reduced capacities. Legally, a guardian is in charge of an individual and their assets and does not require appointment by judicial decree. An executor presides only over someone’s assets and requires a judicial decision to be appointed. An incapacitated person is someone lacking discernment, such as a child under seven years of age or a severely mentally ill person. A person with reduced capacities is anyone who is under 18 years of age or banned from such transactions due to improper actions, such as being a spendthrift. In all of these cases, the court may decide to put a compulsory insurance sign on the land records for the guardian or executor to ensure that they pay off any debts incurred due to managing the incapacitated or redacted capacity individual’s assets and real estate. The court places the compulsory insurance sign based on a request from those who contributed the assets to the incapacitated or reduced-capacity individual. 

Second: A compulsory insurance mark can be placed on a husband’s land records for ba’ineh payment if disputes occur between the spouses. Ba’ineh is a form of dowry given by the wife’s family to the husband in Christian sects to assist him with the burdens of marriage and differs from the maher given to a wife in Islamic law. In the marriage contract, it is possible to stipulate placing a compulsory insurance sign for the wife’s benefit. In cases where the marriage contract has no such stipulation, the Civil Court of First Instance makes a ruling based on a request from the wife. 

Third: This is when a compulsory insurance ruling is made for the state or public administration. For example, the state may put compulsory insurance signs for real estate properties belonging to accountants, by the decision of the Minister of Finance, to insure any potential accounting errors that lead to losses of state assets. The state may also impose a compulsory insurance sign on the real estate properties of the borrowers from the state, per Article 1086 of the Civil Code. 

The state’s debts have general lien rights under Legislative Decree No. 70 of 1949, which is stronger than compulsory insurance because it takes precedence over all other forms of debt without registration. Meanwhile, compulsory insurance must be registered in the borrower’s land records. 

The law also requires some employees to provide a financial warranty to insure any damages they may cause. The warranty includes what is stipulated in Article 47 of Real Estate Fees System Law No. 426 of 1958–namely, that employees authorised with calculating fees must provide a financial warranty whose amount is determined by the general director of Cadastral Affairs. 

There is also compulsory insurance that may be assigned to insure the 

Agricultural Cooperative Bank’s debts. The bank may place compulsory insurance signs to guarantee any insurance unpaid by debtors. This can occur when there are emergencies, such as earthquakes or floods, that damage the insurance otherwise provided by debtors, according to Article 34 of the Agricultural Cooperative Bank Law of 1958. 

Notably, the state’s debts dissipate after an extended statute of limitations 15 years, according to Court of Cassation jurisprudence in Decision No. 624, Basis No. 228 of 1990. 

Fourth: Compulsory insurance may also be put in place for real estate buyers, barterers or sharers. A barter occurs when two individuals swap their real estate properties, while sharing is when a property is co-owned by several people. The original owner of such properties may require that a buyer, barterer or sharer provide compulsory insurance to ensure that they will pay all their dues or complete the transfer of ownership process. 

Suppose the contract does not stipulate such a requirement. In that case, the seller, barterer, or sharer may request that the Civil Court of First Instance, in whose jurisdiction the property is located, place a compulsory insurance mark on that property’s Land Registry page. 

The reason for such a request is that the seller, barterer, or sharer has relinquished the property and allowed its ownership to be transferred to another individual. Therefore, judicial principles necessitate that the Civil Code grant them the right to place a compulsory insurance mark on the property transferred to another person, entitling them to precedence over other debtors. 

Fifth: In this case, compulsory insurance may be decreed for creditors and recipients of estate inheritances. Such individuals are entitled to place compulsory insurance signs on the real estate bequeathed to ensure that they remain separate from the assets given to the other inheritance recipients. In such cases, the compulsory insurance must be registered within six months of the person’s death, with the decision issued by the decision of the Civil Court of First Instance. The aim of compulsory insurance here is to protect creditors of the deceased person, and the recipients of wills or bequests, from any disposal the other heirs may conduct of the estates left to them. 

After registration of the compulsory insurance in such cases, disposal of those estates may not be executed against such creditors and recipients of bequests. This process is also meant to protect creditors of the deceased person from the creditors of the heirs who are entitled to transfer the estate from the deceased person to the heirs to execute the inheritance and collect their debts under Article 25 of the Real Estate Fees System Law No. 429 of 1948.