Foreign Real Estate Acquisitions in Turkey
Real estate and limited real rights acquisitions by foreign nationals, either natural person or legal entity, are regulated by Land Registry Law numbered 2644. In this regard the Land Registry Law article 35 and 36 has a great importance for foreign nationals who wish to purchase real estate within the borders of Turkey. The Turkish government was working on a draft law which amends the current articles concerning the foreign acquisitions.
As a result of the government’s motion the Turkish parliament has enacted the aforementioned draft law on May 3rd, 2012 which makes immovable acquisitions easier by foreign nationals. The previous form of the law used to restrict the foreigners by reciprocity principle and by the real estate’s acreage. Namely, a foreign national had to be a citizen of a country which should have reciprocity with Turkey and secondly the acreage of the real estate should have an acreage up to 2,5 (two and a half) hectares. Particularly, the reciprocity principle’s rigid practise caused a great deal of obstacles for foreigners and therefore foreign nationals had to find solutions such as establishing companies in Turkey whose only reason for establishment is to purchase a single real estate. These obstacles caused time and money waste for both seller and buyer and additionally discouraged the foreign investors to invest on the Turkish real estate market.
The Ministry of Environment and Urban Planning (“Ministry”) sent a circular to Regional Directorate of Land Registry and Cadastre (“Regional Directorate”) to set out the details for implementing the Law based on the latest amendments.
B. THE CURRENT STATUS OF FOREIGN PROPERTY ACQUISITIONS IN TURKEY
Foreign Natural Persons
The new form of article 35 does not mention reciprocity principle anymore and grants an authority to Council of Ministers to determine the countries whose natural person citizens can purchase real estates in Turkey. In this way the Council of Ministers has decided on the country list (“List”) whose nationals can acquire immovable properties and limited real rights. There is no need to have reciprocity between these countries in the List and Turkey; the only important point to be considered is Turkey’s national interests which seem to be an easier requirement to be met when compared with the reciprocity principle.
The second significant amendment is made on the total acreage of the immovable and limited real rights that a foreign natural person can acquire. As it is indicated in the above paragraphs foreign natural persons can only acquire real estates and limited real rights country-wide up to 2, 5 hectares. This restriction is changed by the New Law and the limitation is increased up to 30 (thirty) hectares; thus now a foreign real person can acquire country-wide real estate or limited real rights up to 30 hectares. Council of Ministers may decide on to double this acreage limitation; namely they may increase it up to 60 (sixty) hectares when it is deemed necessary from the point of national interests.
Foreign Legal Persons
Foreign companies established in foreign jurisdictions can only purchase real property in Turkey subject to certain provisions of Tourism Promotion Law (No 2634), Petroleum Law (No 6326) and Industrial Areas Law (No 4737). Foreign companies shall obtain the documents required under these laws from the relevant authorities and submit it to the Land Registry Office. The Land Registry office examines the documents and completes the transaction if the application is found appropriate.
Establishing pledges for the benefit of foreign natural persons and companies established in foreign jurisdictions shall be executed by the Land Registry Office and shall not be subject to the restrictions and provision of article 35 of the Land Registry Law.
Foreign Capital Companies
Foreign Capital Companies are Turkish companies having foreign shareholders. Article 36, as amended by the New Law, stipulates that in the event a foreign commercial company incorporates or become a shareholder having more than 50 (fifty) % (per cent) of the total shares or have administration rights in a Turkish incorporated company then the restrictions in article 36 shall apply on such Turkish companies for their real property and limited real rights acquisitions.
“Foreign national real persons, excluding persons within the scope of Article 28 of Turkish Citizenship Law dated 29.05.2009, no. 5901, legal entities incorporated in accordance with legislations of foreign countries and legal entity companies incorporated in Turkey, fifty percent or more shares of which are possessed by international institutions, or the assigning and releasing rights of the majority of the persons with management rights for which are granted to international institutions, may acquire and use immovable property or limited right in rem in order to conduct the operations set under their articles of associations.”
The communique, published on the Official Gazette on August 16th 2012, has defined the rules regarding the real estate acquisition by foreign capital companies. According to this communique foreign capital companies needs to get approval from the relevant Governorship to acquire real estates. The communique has listed the documents required to be submitted. The Governorship shall make its decision regarding the applications in maximum of 30 days. This maximum period to reply such applications will be 3 days for real rights in rem acquisitions.
The recent developments on Real Estate Acquisition by Foreign Persons are publicly welcomed and they are likely to have positive impacts on the Turkish real estate sector. Since, these amendments ease the way to acquire immovable or limited real rights by foreigners it is expected to increase the foreign investments and cash inflow into Turkey.
The New Law has been published on the Official Gazette on May 18th, 2012 and it is enforceable. The country list, which has been prepared by the Council of Ministers, states the countries whose citizens are allowed to purchase real estate in Turkey.
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.