Real Estate in Turkey for Foreign (non-Turkish) Buyers
Companies with foreign capital and foreign real persons may purchase immovable property in Turkey, even though this possibility has certain legal limitations. Within the framework of this Article, the acquisition of immovable property by foreign real persons shall be discussed.
➢ Legal Grounds
As per the Land Registry Law No. 2644 (“Land Registry Law”), it is possible for foreign real persons to acquire immovable property in Turkey. The reciprocity condition regulated under the former Article 35 of the Land Registry Law was abolished by the amendments brought by Law No. 6302 by the date of 03.05.2012. Therefore, Article 35 of the Land Registry Law reads as follows: “in order to comply with the legal restrictions, foreign real persons, citizens of countries determined by the Council of Ministers pursuant to international relations and the country’s benefits may acquire immovable property and rights in rem in Turkey”.
➢ Legal Restrictions
Pursuant to Article 35 of the Land Registry Law, the total area of the real property and limited rights in rem that a foreign real person may purchase cannot exceed 10% of the total area of private properties within the related district and 30 hectares in Turkey. Therefore, acquisition of immovable property by foreign real persons is subject to a concrete limitation.
In addition to the areal limitation, there is a territorial limitation. As per Law No. 2565 on Military Forbidden Zones and Military Security Zones, foreign real persons are obliged to obtain permission from the military authorities in order to acquire immovable property. Where the area desired for purchase is within the borders of a military forbidden zone or military security zone, foreigners cannot acquire an immovable there.
Moreover, it should also be noted that Article 35/3 of the Land Registry Law states that “in case the country’s benefits necessitate, the Council of Ministers is authorized to determine the acquisition of immovable property or limited rights in rem of foreign real persons with regard to country, person, geographical area, duration, number, proportion, qualification, area meter and quantity, limit the acquisition, cease it entirely or partially or forbid it”.
➢ Real estate title transfer
To purchase real estate in Turkey, a potential seller and buyer must submit an application to the Land Registry Office in the area where the target real estate is registered. There are two stages to this process: a) first the pre-sale approval and b) secondly, the actual title transfer.
There is no difference between Turkish citizens and foreign real person with regard to the documents required during the pre-sale approval process. However, please note that if the purchaser does not speak Turkish, a certified Turkish translator will be required during the title deed transfer (section 3(b) below). OR just simply foreigner will issue a proxy, which is needed to be approved by the notary, which authorizes the representative (attorney) to sign the papers and complete the transaction.
a. Obtain approval for the purchase from the Land Registry Office
Before the property can be transferred, the buyer and seller must apply for and be granted approval for the purchase by the Land Registry Officer. When filing such an application, the seller and the buyer must supply a range of documents and pay certain fees. Depending on the parties’ preferences, they may submit these documents together or separately.
The seller (or his/her authorized representative) must provide the following documents to the Land Registry Officer:
(i) Identification document for the seller
(ii) One photo of the seller taken within the last six months
(iii) Title deed of the property, or information about the village/district, block, building plot, detachment,
(iv) Property Value Statement obtained from the relevant municipality.
(v) Earthquake insurance policy for the buildings
(vi) If the seller makes the application through an authorized representative, documents regarding this authorization In order to proceed, the foreign real person buyer must also obtain a Turkish tax number and then should submit the following documents to the Land Registry Office
(i) Identification document or passport for the buyer, together with its translation
(ii) Two photos of the buyer taken within the last six months
(iii) If a proxy is acting on the buyer’s behalf, the original or certified copy of the power of attorney and its approved translation.
The Land Registry Office will check the buyer against the relevant restrictions (outlined above). If none of these restrictions affect the buyer, the Land Registry Office will turn its inquiries to analysis of the property’s location. The Land Registry Office inquires with the relevant military authorities whether the property is located within a military or special zone. If the military authorities advise the Land Registry Office that the property is in a military zone, the buyer will need to apply for a permit to purchase the property.
When the Land Registry Office inquires with the military authorities about the property’s location, the buyer must pay the circulating capital fee. This fee is for the map prepared by the Cadastre Directorate. The buyer and seller may agree to share the cost of this fee, which is common in the daily practice.
The Land Registry Office will inform the buyer of the outcome of their checks. If the buyer is not restricted from purchasing the property and it is not located within a military or special zone, the Land Registry Office will give the buyer an appointment time for transferring ownership.
The length of time between the parties’ application and receiving the Land Registry Office’s decision will depend on the correspondence between the Land Registry Directorate and the military authorities. In some instances, this may take more than a month. If the Land Registry Office declines the foreigner’s application to buy the property, this decision can be appealed to the relevant Regional Office of the Land Registry Directorate.
b. Title transfer at the Land Registry Office
Once the Land Registry Office approves the buyer to purchase the property, both the buyer and the seller (or their proxies) must visit the relevant Land Registry Office to perform the sale transaction.
The buyer and seller should have agreed on the terms of the purchase before visiting the Land Registry Office. If either party authorizes a proxy to act on their behalf in the sale or purchase of real estate, the proxy must be issued by a Notary Public in the form required by legislation.
Where a legal entity is selling the property, a representative may conduct the sale procedures on behalf of the legal entity. However, the representative must submit his/her authorization certificate to the relevant Land Registry Office in order to perform the transaction.
For the sale of real estate between the parties to be legally valid, it is compulsory that:
(i) Both the seller and the buyer are present at the Land Registry Office (or represented by a proxy); and
(ii) The parties enter a sale agreement in the required official form while they are at the Land Registry Office.
If a sale agreement is not compliant with the Land Registry Office or the Notary Public’s document requirements, the document will be null and void in Turkish law.
➢ Fees and costs involved in purchasing real estate
The acquisition of real estate takes effect only after it is duly registered at the relevant Land Registry Office. Once the title has been transferred, the buyer must pay the sale price and the seller must allow the buyer to have occupation of the property. To prevent tax avoidance, the sale price cannot be less than the market price determined by the relevant Municipality. The sale price is noted on the formal Title Deed document and the Title Deed Fee is calculated based on this amount.
In addition to the sale price, there are certain financial obligations which arise during the purchase of real estate in Turkey. These are outlined in the table below and VAT is discussed briefly as given below.
➢ VAT Regime for the sale of real estate in Turkey
If the seller generates a commercial income from the sale of real estate, the sale transaction will also be subject to Value Added Tax (“VAT”). The ratio of VAT depends on the net area of the real estate.
In principle, the VAT payer is the seller. However, since VAT is a tax which can be passed on to the other party, in practice the seller generally adds the VAT amount onto the sale price to create one combined sale price. This effectively results in the buyer paying the VAT amount.
As explained above, the acquisition of immovable property in Turkey is possible for foreign real persons, but is subject to certain limitations. In addition to these limitations, in order to avoid issues arising from the lack of knowledge of the legislation and practice in Turkey, foreigners should take into consideration the above-mentioned matters before any acquisition. The most important of these matters is compliance with the official form requirement and registration. Moreover, it is advisable for foreign real persons to check the land registries before the acquisition in order to see if there are any pre-existing mortgages or any obstacles to the sale of the immovable property.