In commercial transactions, the most expensive disputes often arise from one basic confusion: who possesses an asset vs. who owns it. In everyday business, possession and ownership usually align—until they don’t. In Turkey, many financing and trade structures intentionally separate possession from ownership: finance leasing, retention of title, consignment stock, warehouse storage, and pledge structures can all create situations where a company holds goods but does not own them, or owns them but does not physically control them.
This matters because creditors, buyers, and investors often rely on “what they see”: machines in a factory, inventory in a warehouse, goods on a truck, or receivables shown in accounting records. Yet legal ownership (title) can sit elsewhere. When distress, enforcement, or M&A occurs, this gap becomes a litigation magnet—and it can destroy collateral value and deal certainty.
This article explains the most common possession and ownership problems in Turkish commercial practice, why they occur, how they affect collateral and enforcement, and what parties can do to control risk through documentation and operational discipline.
1. Why Possession and Ownership Diverge in Business
Possession is a factual state: who controls the asset in real life. Ownership is a legal right: who has title and can dispose of the asset. In Turkish commercial life, divergence often arises because businesses optimize cash flow and risk:
- suppliers deliver goods but keep ownership until payment (retention of title),
- lessors deliver machinery but keep ownership (finance leasing),
- sellers place goods in buyer premises but ownership remains with seller until sale (consignment),
- companies store assets in third-party warehouses (possession held by the warehouse operator),
- lenders take pledges where control is indirect or registry-based.
The result is a legal landscape where visible assets can be legally unavailable for attachment by creditors or transfer to buyers.
2. Core Dispute Scenarios
2.1. Finance Leasing: “The Machine Is Here, But Not Yours”
Finance leasing is a classic example: the lessee uses the machinery, but title remains with the lessor until contractual conditions are met (or throughout the lease). In enforcement and insolvency, unsecured creditors often assume the machine belongs to the debtor because it is on-site. If the machine is leased, creditors cannot freely seize it as debtor property.
Collateral impact:
- a lender who took “enterprise collateral” may discover key machines are excluded by title,
- enforcement becomes limited to debtor-owned assets only.
Risk control: always run a title check and identify leased assets in collateral schedules; require undertakings to disclose leasing contracts.
2.2. Retention of Title (ROT): Ownership Until Payment
Suppliers sometimes deliver goods under terms that reserve title until full payment. The buyer possesses the goods, may even process or resell them, but title arguments may arise if payment is incomplete.
Practical problem: in distress, suppliers assert ownership while banks assume inventory is collateral.
Risk control: buyers and lenders should map supplier terms, examine invoice/contract conditions, and avoid treating all inventory as freely owned collateral without verification.
2.3. Consignment Stock: Inventory That “Looks Like Yours”
In consignment, goods are placed at the consignee’s premises, but ownership remains with the consignor until the goods are sold to end customers. For lenders and enforcement officers, this is a high-risk zone: goods appear to be the debtor’s inventory, but title is not.
Risk control: segregated storage, clear labeling, and documentation that proves consignment structure; lenders should exclude consignment goods from borrowing base unless ownership is proven.
2.4. Warehouse and Logistics: Possession by Third Parties
Goods stored in bonded warehouses, logistics centers, or ports may be physically controlled by third parties. Even if the company owns them, lack of possession can complicate enforcement:
- the creditor needs access and cooperation,
- release may require documentation,
- disputes may arise over liens or storage claims by warehouse operators.
Risk control: clear warehouse agreements, proof of ownership, insurance, and control over release documentation.
2.5. Pledges and “Apparent Ownership” Problems
A pledge is often taken over assets presumed to be owned by the debtor. If title is defective, the pledge is weakened. This is common with:
- leased machinery,
- ROT goods,
- third-party-owned assets sitting at the debtor site,
- and assets purchased with unclear documentation.
Practical lesson: collateral validity is not only legal—it is documentary. Without proof of ownership, pledges become litigated claims.
3. M&A Deals: When Title Problems Become Closing Failures
In acquisitions, buyers sometimes assume that an asset listed on the balance sheet is owned. But accounting classification does not always equal legal title. Title problems can:
- trigger closing delays,
- force purchase price adjustments,
- require pre-closing releases or novations,
- and create post-closing indemnity fights.
Best practice is to run “title diligence” parallel to financial diligence:
- verify ownership documents,
- identify leased and ROT items,
- confirm registrations for vehicles and certain assets,
- and map encumbrances.
4. Insolvency and Enforcement: The Most Expensive Moment
When a debtor becomes distressed, possession/ownership disputes intensify:
- suppliers try to reclaim ROT goods,
- lessors demand return of leased machinery,
- banks argue that goods are collateral,
- third parties assert ownership or liens.
The practical outcome is that enforcement becomes slower and more litigation-heavy, reducing recovery.
5. Evidence: What Wins Possession–Ownership Disputes
Courts and enforcement practice rely heavily on evidence quality. Key evidence categories include:
- purchase contracts and invoices,
- delivery notes and acceptance protocols,
- leasing contracts and schedules,
- consignment agreements and inventory logs,
- warehouse receipts and customs documents,
- serial-number matching for machinery,
- payment records linked to specific assets,
- registry records (vehicles, certain pledges).
When documents are inconsistent, the party with the clearest chain of evidence typically prevails.
6. Risk Control Checklist (Practical)
For lenders
- perform title verification for key assets (especially machinery),
- exclude leased/consigned/ROT goods from collateral pool unless proven,
- require periodic asset lists and disclosure of leasing/supplier terms,
- build monitoring for inventory and warehouse assets,
- include covenants prohibiting undisclosed disposals and new leasing without notice.
For buyers/investors
- run title diligence, not only financial diligence,
- demand schedules distinguishing owned vs. leased assets,
- require releases/consents for encumbrances pre-closing,
- structure warranties and indemnities around title and possession risks.
For operating companies
- keep clean asset documentation,
- segregate consignment goods,
- maintain serial-numbered machinery lists,
- align accounting records with legal ownership evidence,
- avoid informal “handshake” arrangements in high-value supply and leasing.
Conclusion
In Turkish commercial practice, possession is not proof of ownership. Many legitimate business models intentionally separate the two, which becomes critical in financing, enforcement, and M&A. The cost of ignoring the difference is high: collateral can evaporate, deals can fail, and insolvency recovery can collapse into litigation. The solution is disciplined documentation and operational clarity—title verification, clear asset categorization, registry checks, and monitoring. When these controls are built in early, possession–ownership risks become manageable rather than catastrophic.
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