Real estate acquisition by foreign investors

Real estate acquisition by foreign investors is regulated by article 35 of the Land Registry Law number 2644, which was modified by article 19 of law number 4916 on 3 July 2003. This amendment introduced new regulations concerning real estate acquisition in Turkey by foreign investors as well as companies which have legal rights and which were established in foreign countries according to the laws of those countries. Article 36 of the Land Registry Law was repealed and its content was added to article 35. In addition, article 87 of Village Law number 442 was repealed.The revised article 35 of the Land Registry Law states: “With the condition of reciprocal terms and complying with legal restrictions, foreign investors and companies that were established in foreign countries according to the laws of those countries can acquire real estate within the boundaries of the Republic of Turkey. In implementing the reciprocity principle, it is essential that real estate acquisition rights given by a foreign country to its own citizens and to companies established in foreign countries according to the laws of those countries are also given to the citizens and companies of the Republic of Turkey.

Real estate that is acquired through legal inheritance by citizens of a country that does not have reciprocity with Turkey or that is located in areas subject to legal restrictions is converted to its cash value.

Real estate acquisition of more than 30 hectares by foreign investors or by companies established in foreign countries according to the laws of those countries is subject to permission from the Council of Ministers.This provision does not apply to inheritance. Real estate acquisition of more than 30 hectares by foreign investors through transactions depending on death with the exception of legal inheritance, is also subject to permission from the Council of Ministers. If permission is denied, anything over 30 hectares is converted to its cash value through liquidation.

If real estate rights are limited in favour of foreign investors or companies established in foreign countries according to the laws of those countries, the reciprocity principle does not apply. In matters of public interest and state security, the Council of Ministers is authorised to determine where this article will not be implemented.”

Reciprocity principle

The Council of Ministers clarified the reciprocity principle in its decision dated 29 May 1940 and numbered 2/13394. In addition to legislative regulation of the reciprocity principle, its practical application is also required.This means that reciprocity must take place both in law and in practice. According to this principle, if a foreign citizen or company can acquire real estate in Turkey, the citizens and companies of the Republic of Turkey should also have the right to acquire real estate in that particular country.This right must be accepted by law and must be put into practice. The new regulation stipulates that the rights given by a foreign country to its own citizens or companies should also be given to the citizens and companies of the Republic of Turkey.

Legal restrictions

Foreign investors buying real estate in Turkey have to comply with certain legal restrictions. These are as follows:

• According to regulations listed in the Military Forbidden Zones and Security Zones Law number 2565, which restricts real estate acquisition by foreign investors in Turkey, it is not possible to sell, transfer or rent real estate located within Military Forbidden Zones and Security Zones to foreign investors.
• According to article 35 of the Land Registry Law number 2644, foreign investors cannot acquire real estate of more than 30 hectares in Turkey without permission from the Council of Ministers. Legal inheritance is exempt from this rule.
• Since article 87 of the Village Law number 442 was replaced by a new regulation, it is possible for foreign investors to acquire real estate in villages.

Real estate acquisition by lawyers acting on behalf of foreign investors

The amendment in article 35 of the Land Registry Law gave the right to acquire real estate in Turkey to all foreign companies on the condition that this was reciprocated and that it complied with legal restrictions. Whether there is reciprocity between Turkey and another country in terms of companies is determined by consulting the Ministry of Foreign Affairs.

Provisions that are valid for foreign investors in terms of legal restrictions are also valid for foreign companies. Furthermore, the rule which states that reciprocity will not be applied when a limited real estate right is registered in favour of foreign investors also applies to foreign companies.

Real estate acquisition by foreign capital companies

The term “foreign capital companies”is often confused with “foreign company”. Foreign capital companies are established according to the provisions of the Turkish Trade Law and are enrolled on the Turkish Trade Register. In other words, these countries are subject to the legal provisions of the Republic of Turkey, although all or part of their capital belongs to foreign investors or investors whose lawyers are acting on their behalf.

The Law for Encouragement of Foreign Capital number 6224, introduced in1954, was repealed by Foreign Direct Investment Law number 4875, dated 5 June 2003. New provisions were implemented to encourage and increase foreign direct investment, to protect the rights of foreign investors and to transform the permission and ratification system.

Through Foreign Direct Investment Law number 4875, foreign investors are subject to the same treatment as domestic investors; permissions and ratifications such as investment permissions and company establishment permissions have been removed. Moreover, foreign companies that have legal rights in Turkey are allowed to acquire real estate or limited real estate rights in the same areas as Turkish citizens.

Companies established according to the repealed law number 6224 or that will act according to law number 4875, which concerns the activities of foreign capital companies in Turkey, are treated in the same way as companies of the Republic of Turkey. For this reason, real estate acquisition and other issues concerning the land registry of foreign capital companies that either obtained permission according to the repealed Law for Encouragement of Foreign Capital or that will act according to the Foreign Direct Investment Law number 4875 are permitted by relevant Land Registry Offices applying the same methods and rules as for companies established according to Turkish Trade Law. This takes place after examining authorisation documents given by the Trade Register Authorities that indicate the competent person and the company’s competence in real estate acquisition.

Transfer

Revenue earned from real estate acquired by foreign investors with or without the exchange of foreign currency can be transferred through banks and private financial institutions.

Authority of applications

Article 26 of the Land Registry Law number 2644 states that the duty and authorisation to regulate contracts concerning property and real estate rights excluding property are the responsibility of Land Registry Offices. Foreign investors who want to acquire real estate or benefit from rights other than property should make their applications to the Land Registry Office where the real estate is located. Detailed information is provided by the General Directorate of Land Registry and Cadastre.

Required documents for application

There is no difference between Turkish citizens and foreign investors in terms of required documents for application. The following documents are required:

• Title deed of the real estate if available, or a document indicating the location of the real estate, or a verbal statement from the owner.
• Identity card or passport issued by the investor’s country of birth and two small photographs.
• If a representative makes an application on behalf of the purchaser, the representative should have power of attorney, a photographic identity card and two small photographs of the purchaser.

In terms of lawyers buying property on behalf of investors, the following documents are required:

• Companies established according to Foreign Direct Investment Law number 4875 need to show a competence document provided by the Turkish Trade Registry and a signatures certificate
• Foreign companies established in foreign countries according to their laws are required, in compliance with the legislation of their country, to provide a document from the relevant authorities stating that the company is legally capable.

There is no difference between foreign nationals and citizens of the Republic of Turkey with regard to the charges and taxes that need to be paid during the course of transactions. However, when asking the relevant military post to determine whether the real estate requested by foreign investors or lawyers acting on behalf of foreign investors is located in Military Forbidden Zones and Security Zones, a fee is charged if the location of the real estate has to be marked on a map. The map must have a scale of 1/25,000.

Biography

Mr Sabri Ates is the President of the Istanbul Chamber of Real Estate Commission Agents, which he established in 1999. Being the first organisation established in this field in Turkey, the Chamber has 8670 members and provides consultancy and expertise services to private and public institutions on real estate matters. Mr Ates is also the President of FIABCI Turkey.