Foreign real or legal persons can purchase real estate from Turkey. In fact, many restrictions regarding this have been removed, making it easier for foreigners to purchase immovable property from Turkey. However, if the foreigner wants to buy real estate in Turkey, he/she is still subject to some special restrictions. Within the framework of these limitations, the foreigner must fulfill the necessary legal procedures to purchase real estate.

In this bulletin, we share with you the restrictions that foreign real persons, foreign legal persons, and companies with foreign capital are subject to in purchasing real estate in Turkey, the necessary documents, and the application process to be followed in the purchase of the real estate. For different investment alternatives in Turkey; https://www.solmazlaw.com/en/investment-guide-for-foreign-investors-in-turkey/

Keywords: Foreigner, Foreign Investment, Real Estate, Title Deed, Land Registry Law, Foreign Capital Company, Share Transfer.

1. OVERVIEW OF THE TITLE LAW PROVISIONS REGULATING THE PURCHASE OF REAL ESTATE IN TURKEY

In our law, foreign investors are grouped as follows:

  • Foreign real person investor,
  • Foreign legal person investor,
  • International organizations.

In Articles 35 and 36 of the Land Registry Law, regulations have been made in parallel with this limitation of foreign investors.

  • In Article 35, the conditions for the purchase of the real estate by foreign real persons and legal entities established in accordance with the law of a foreign country are regulated separately.

Turkish companies with foreign capital are formed when foreign real persons and legal entities invest through the acquisition of the shares of a Turkish company. This situation is also regulated in the Land Registry Law. In line with this:

2. FOREIGN REAL PERSONS PURCHASE REAL ESTATE IN TURKEY

2.1. Which Restrictions Are Subject to the Purchase of Real Estate by a Foreign National?

Foreign real persons can purchase any type of real estate in Turkey, provided that they comply with legal restrictions. The immovable in question may be land, residence, workplace, field, building, etc.

With Law No. 6302 adopted on 03/05/2012, the requirement of reciprocity for foreign real persons to purchase real estate from our country has been abolished. In other words, even if it is forbidden for a Turkish citizen to acquire real estate from the foreigner's country, the foreigner can purchase real estate from Turkey.

Another important issue is that foreign investors do not need a residence permit to purchase real estate in Turkey.

For a foreign real person to buy real estate from Turkey:

  • The foreigner needs to be a citizen of the country determined by the President (As of today, citizens of a total of 184 countries can purchase real estate from our country.),
  • The immovable must not remain within the military forbidden zone, military security zone, or the zone determined within the framework of Article 28 of Law No. 2565.
  • The foreigner needs to obtain an opinion from the Ministry of Agriculture and Forestry if it is agricultural land, or from the Ministry of Culture and Tourism or the Ministry of Environment and Urbanization, if it is an immovable property located in the protected area, that the immovable is suitable for acquisition.1
  • If it is desired to purchase a real estate that does not have a building (like land, field, etc.), a project should be developed in accordance with the nature of the real estate and this project should be submitted to the approval of the relevant Ministry within two years.
  • The total area of the immovables purchased by real persons of foreign nationality cannot exceed ten percent of the district area subject to private property and thirty hectares per capita throughout the country. The President is authorized to double the amount that can be obtained throughout the country per capita.2
  • Apart from these, it is necessary and sufficient to carry out the necessary procedures for the transfer of the real estate on behalf of the foreign real person at the title deed.

2.2. What Are the Documents Required For The Application?

  • Passport and photocopy of the foreign national who will make the purchase,
  • Real Estate Current Value Certificate to be obtained from the municipality where the real estate is located,
  • A valuation report showing the market value of the real estate must be prepared in all sales transactions where foreign real persons are a party, both as buyers and sellers, and this report must be prepared and approved by the valuation company in accordance with international valuation standards,
  • Compulsory earthquake insurance policy if the real estate is a building,
  • 1 passport photo of the seller and 2 passport photos of the buyer.
  • Sworn forensic translator if the buyer does not know Turkish,
  • If the transfer process is carried out with a power of attorney issued abroad, the original or certified copy of the power of attorney and its Turkish translation.

The application must be made to the Land Registry Office with these documents.

3. FOREIGN LEGAL PERSONS' PURCHASE OF REAL ESTATE IN TURKEY

Only commercial companies can buy real estate in Turkey from legal entities established in foreign countries and in accordance with the laws of these countries. It is not possible for all legal entities (foundations, associations, cooperatives, etc.) other than foreign trade companies to purchase real estate in our country or to register limited real rights in their favor.3

Foreign trade companies, on the other hand, can buy real estate from Turkey only if there is a special provision in the law. Thanks to the special regulations in the Turkish Petroleum Law, the Law for the Encouragement of Tourism, and the Law of Industrial Zones, foreign trade companies can purchase real estate.

Commercial companies with legal personality, established in foreign countries according to the laws of their own countries, must submit the project to be developed on the real estate they purchased, on which there is no building, for the approval of the relevant Ministry within two years. Whether the approved project is carried out within the period determined by the Ministry is monitored by the relevant Ministry.

In addition to these, the immovable must not stay within the military forbidden zone, military security zone, or the zone determined within the framework of Article 28 of Law No. 2565.

4. PURCHASE OF REAL ESTATE IN TURKEY BY TURKISH COMPANIES WITH FOREIGN CAPITAL

4.1. Which Companies Are Considered with Foreign Capital?

Every company that has foreign capital is not legally considered as a company with foreign capital. If the majority shares of the company with foreign capital are in the hands of foreigners or if foreigners dominate the management staff; the company is considered a company with foreign capital. In order for a Turkish company to be accepted as a Turkish company with foreign capital within the meaning of Article 36 of the Land Registry Law:

  1. Foreign real persons, legal entities established under the laws of foreign countries, and international organizations must have 50% or more of the shares.
  2. Foreign real persons, legal entities established under the laws of foreign countries, and international organizations must have the authority to appoint or dismiss the majority of the persons who have the right to manage.
  3. The companies mentioned above; In case of being a direct or indirect shareholder of another company established in Turkey, the foreign investor's shareholding ratio in the partner company must be 50% or more.
  4. Foreign investors must directly or indirectly acquire 50% or more of the shares of the domestic capital companies that own the real estate, and one of the conditions must be fulfilled when the partnership ratio of foreign investors reaches 50% or more as a result of the share transfer in the existing foreign capital companies that own the real estate.

General rules apply to companies with foreign capital that do not meet these conditions and are treated like Turkish companies.

NOTE: The company, which has become a foreign capital company as a result of the share transfer, will not be able to submit the information regarding the transfer of shares in Article 5 of the Foreign Direct Investments Law Implementation Regulation. Within one month following the share transfer, it must notify the Ministry of Commerce. The notification obligation applies to subsidiaries only if they own real estate.

Companies included in Article 36 of the Land Registry Law are companies with a legal personality only. Partnerships such as an ordinary company, consortium that is treated as an ordinary company, business partnership, joint venture, etc., are not within the scope of Article 36 of the Land Registry Law, as they do not have legal personality under Turkish Law. On the other hand, in investments made through joint ventures, a distinction should be made according to the type of joint venture.4

4.2. What Restrictions Are There in the Acquisition of Real Estate by Foreign Capital Companies?

  • The immovable must not remain within the military forbidden zone, military security zone, or the zone determined within the framework of Article 28 of Law No. 2565. If it remains, it is subject to permission.
  • Companies with foreign capital must obtain permission from the Governor's Office to acquire real estate.
  • Companies with foreign capital can only purchase real estate in Turkey to carry out the activities specified in their articles of association. It is regulated in the articles of association of joint-stock companies5 and in the articles of association of limited liability companies6 that "the subject of the operation of the company" is one of the mandatory elements of the contract. According to the law, companies with foreign capital must be specific to the fields of activity included in the company contracts when immovable is purchased. If they acquire immovable property for a purpose other than their field of activity, these immovables are liquidated.7

4.3. Where Should Companies Apply for Real Estate Purchase Transactions?

  • Companies with foreign capital must include the phrase "Company with Foreign Capital within the Scope of Article 36 of the Land Registry Law No. 2644" and apply to the Provincial Planning and Coordination Directorate of the Governorship with the necessary documents.
  • In the certificate of authorization for companies that are not legally considered to be a foreign-owned company although there is a foreign capital element in their structure, the phrase "Company with Foreign Capital outside the scope of Article 36 of the Land Registry Law No. 2644" should be included. It is treated like Turkish companies of this type and applications are made directly to the land registry directorates.8

4.4. What Are The Documents Required For The Application?9

  • Application petition.
  • Title deed registration information and coordinated diameter sample of the real estate.
  • A letter of undertaking stating that the ownership of the immovable or limited real rights on the immovable is requested to carry out the activities specified in the articles of association of the company and that the immovable will be used for this purpose, and the circular of signature of the company official who signed the undertaking.
  • Authorization document showing that the company is authorized to dispose of immovable and its representative.
  • In case the company shares are not traded in the stock exchange, the document showing the current situation obtained from the trade registry office where the company headquarters is registered, including the names or10 titles, citizenships, and partnership ratios of the foreign partners.
  • In case the company shares are traded on the stock exchange, the document showing the current situation from the Central Registry Agency, which includes the names or titles, citizenships, and partnership ratios of the foreign investors holding 10% or more of the company's capital from the stocks traded in the stock exchange and the foreign investors holding the shares not traded in the stock exchange.
  • In companies where foreign investors have the power to appoint or dismiss the majority of the directors, even though the partnership ratio is below 50%, a copy of the articles of association approved by the trade registry where the company headquarters is registered.
  • In case the company shares are not traded on the stock exchange, the document showing the current situation in the last month from the trade registry office where the company headquarters is registered, including the names or titles, nationalities, and partnership ratios of the foreign partners; Within the scope of issuing the document regarding joint-stock companies, notarized copies of the relevant pages of the share book showing the shareholding structure of the company must also be submitted to the trade registry directorate by the relevant company.

4.5. In Which Ways Can the Application Process be Made?

The investor can make the application process in person, by mail, or by e-mail. During the applications made in person, the application documents are examined, deficiencies and mistakes that can be corrected immediately are completed without the need for correspondence. Deficiencies and mistakes detected later are notified in writing to the company or affiliate.

5. TRANSACTION COSTS

In the purchase of real estate from Turkey, the foreigner must pay the title deed fee and revolving fund fee for the title deed transactions.

From foreign real persons and companies with foreign capital; Not less than the declared value of the real estate declared by the municipality, the seller and the buyer are required to pay a title deed fee of 20 per thousand separately over the declared value for sale. If there is a fee exemption, a letter to be obtained from the Tax Office regarding this issue must be submitted.

The revolving fund fee is a small amount (determined as 194.75 TL for 2021).

Footnotes

1. Land Registry and Cadastre Transaction Guide for Foreigners. (access: https://www.tkgm.gov.tr/sites/default/files/2020-12/islem_rehberi-turkce_0.pdf, access date: 10.02.2021).

2. Article 35 of Land Registry Law.

3. Article 35 of Land Registry Law; Land Registry and Cadastre Transaction Guide for Foreigners. (access: https://www.tkgm.gov.tr/sites/default/files/2020-12/islem_rehberi-turkce_0.pdf, access date:10.02.2021).

4. TURANLI, Hüsnü, "Yabanci Sermayeli Türk Sirketlerinin Tasinmaz Mülkiyeti ve Sinirli Ayni Hak Edinimi", YBHD, year:3, issue:2018/2, p.196.

5. Article 339/2-b of Turkish Commercial Code.

6. Article 576/1-b of Turkish Commercial Code.

7. TURANLI, ibid., p.200.

8. Article 4 of Regulation on Real Estate Ownership and Limited Real Rights Acquisition of Companies and Affiliates within the scope of Article 36 of the Land Registry Law No. 2644.

9. Article 4 of Regulation on Real Estate Ownership and Limited Real Rights Acquisition of Companies and Affiliates within the scope of Article 36 of the Land Registry Law No. 2644.

10. Article 4/10 of Regulation on Real Estate Ownership and Limited Real Rights Acquisition of Companies and Affiliates within the scope of Article 36 of the Land Registry Law No. 2644.

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.