Transferred Your Cooperative Membership? When Are You Free of the Old Debts

Transferring one's membership share in a housing cooperative to another person is a commonly used transaction whose consequences are not always fully understood. Many former members who think "I transferred my membership, so I no longer have any relationship with the cooperative" find themselves years later facing enforcement proceedings initiated by the cooperative.

So does the transfer of cooperative membership really free the transferring party from all debts? In this article, in light of Court of Cassation (Yargıtay) and Regional Court of Appeal decisions, we examine the conditions for the validity of a transfer and when liability actually comes to an end.

Summary of the Situation

A cooperative member transfers their membership share to a third party. At the time of transfer, an agreement is made between the parties, and the independent unit (the flat) may even have been physically delivered to the new owner. However, as time passes, the cooperative may initiate enforcement proceedings against the transferring (former) member for items such as dues, interim payments, or default interest.

At this point the transferring member's defense is clear: "I transferred my membership; I am not liable for these debts." However, whether this defense is valid depends on whether the transfer was completed in accordance with the required procedure.

The Legal Issue

The core basis of the matter is Article 35 of the Cooperatives Law No. 1163. Under this provision, a person who knowingly takes over a cooperative membership is liable, like the other members, for debts that arose even before that person's admission. In other words, the transferee is deemed to have also assumed the debts that existed before the transfer.

In parallel with this, the standard articles of association for housing cooperatives contain, in Article 17, the following provision: "In the event of a transfer, all rights and obligations of the former member toward the cooperative pass to the new member, and the cooperative may not demand any additional payment from the parties on account of this transfer."

The critical point here, however, is that this legal consequence depends on the transfer being completed in accordance with the required procedure and being accepted by the cooperative's management. If the transfer transaction is incomplete or improper, the transferring member's liability continues.

What Does the Court of Cassation Say?

• Istanbul 11th Commercial Court of First Instance (E. 2020/523, K. 2022/381, dated 2022) and Court of Cassation 6th Civil Chamber (E. 2021/4460, K. 2022/5199, dated 2022): Confirmed that, where the transfer has been carried out in accordance with the required procedure, all of the former member's rights and obligations toward the cooperative pass to the new member.
• Ankara Regional Court of Appeal, 23rd Civil Chamber (E. 2020/1701, K. 2024/770, dated 2024): Held that upon the transfer, the former member's liability ends, and the new member who took over is liable for the receivable items subject to enforcement proceedings (dues, interim payments, default interest).
• Bursa Regional Court of Appeal, 5th Civil Chamber (E. 2020/680, K. 2023/401, dated 2023): Held that where the transferring member is a debtor with respect to their share, the provisions on assumption of debt (TBK Art. 195 et seq.) apply, and the debt passes to the transferee.
• Ankara 11th Commercial Court of First Instance (E. 2023/85, K. 2024/361, dated 2024) and Ankara 5th Commercial Court of First Instance (E. 2022/698, K. 2023/443, dated 2023): Emphasized that for the transfer of a membership share to have effect vis-à-vis the cooperative, it must be approved by a resolution of the board of directors, and that where there is no such approval or a resolution in accordance with the required procedure, the transferring party's liability continues.
• Bakırköy 1st Commercial Court of First Instance (E. 2021/703, K. 2022/820, dated 2022) and Ankara 11th Commercial Court of First Instance (E. 2020/135, K. 2021/394, dated 2021): Held that the mere sale of the independent unit (the flat) to a third party does not, by itself, mean that the cooperative membership has been transferred; unless the membership transfer is additionally carried out in accordance with the law and the articles of association, the person who sold the property remains liable to the cooperative for dues and expense debts.
• Ankara 12th Commercial Court of First Instance (E. 2021/208, K. 2022/839, dated 2022): Held that, under certain provisions of the articles of association, the liability of a member whose relationship with the cooperative has ended may continue for a further two years from the date of separation. The same decision also emphasized that private internal agreements made between the transferring and the transferee party do not bind the cooperative unless expressly accepted by it.

Points to Watch

Important points to be noted by those considering transferring their cooperative membership, or who have already transferred it:

• Approval of the transfer by the board of directors is essential. A contract made merely between the parties, or the physical delivery of the flat, does not by itself end liability toward the cooperative. The transfer must be formally approved by a resolution of the cooperative's board of directors.
• The notification obligation must not be forgotten. A person transferring their share is required to notify the cooperative's management in writing of the transfer. The former member's liabilities may continue until the transferee also notifies that they have taken over the share.
• The transferee is also liable for past debts. A person who knowingly takes over a cooperative membership is also liable for debts that arose before their admission; the transferring member's existing debts do not constitute an obstacle to the transfer or its acceptance by the cooperative.
• Pay attention to any special time-period provisions in the articles of association. Some cooperatives' articles of association may provide that a departing member's liability will continue for a certain further period (for example, two years).
• The right of recourse is reserved. If a former member is required to make a payment on account of the cooperative's debt, they have the right to seek reimbursement (recourse) of that payment from the person who took over the membership.

Conclusion: What Should You Do?

If you are planning to transfer your cooperative membership, or if you have been faced with a demand for payment of a debt due to a transfer you carried out in the past, it is important to take the following steps:

1. Be sure to obtain and keep the written document showing that the transfer transaction has been formally approved by the cooperative's board of directors.
2. Create a record showing that you notified the transfer in writing to the cooperative's management.
3. If you are faced with a debt claim from the cooperative, document the date of the transfer and the approval process, and assert that the person who took over the membership is liable.
4. Check your articles of association to clarify whether a special liability period is provided for departing members.

Cooperative law is a complex field, both because of the statute itself and because of the articles of association specific to each cooperative. We recommend consulting a lawyer for an assessment tailored to your specific situation.