The easiest way to buy a real estate in Turkey is by granting a power of attorney to one of our lawyers (solicitors, advocates) to conclude the deal on your behalf. This saves you time, means you do not need to come or stay in Turkey while the purchase is going through, and ensures your purchase will be as smooth as possible without any hitches or hiccups. Our legal team consist of qualified and highly recommended attorneys.
Turkey is offering endless opportunities for businessmen, professionals, students, and retired individuals to come and invest in its real estate with the promise of giving second citizenship or renewable short-term residence permits. If you’re interested in buying real estate in Turkey, we’ve created this ultimate guide that takes you through the ins and outs of investing in Turkish real estate.
The most common way to obtain ownership in Turkey real estate under Turkish Law is in the form of absolute ownership. Pursuant to statuary law, absolute ownership extends to the land and to any buildings or other structures that are firmly built on the land, as well as to (immovable) fixtures and fittings and (movable) accessories.
Ownership of real estate can be acquired either by way of an asset deal (purchasing the real estate directly from the seller) or by way of share deal (purchasing the company that owns the real estate). It is currently common to purchase the total shares in the property owning company as this does not trigger real estate transfer tax.
In Turkey, land may be owned absolutely by:
- Individuals or
- Corporate entities.
Having the “ownership” gives a permanent right and interest in land, and this cannot be challenged by any third parties (including the State) save in exceptional circumstances, the most common of which is pursuant to “compulsory purchase” powers subject to the authority paying the owner appropriate compensation.
The right of using land
Another less common way is to obtain the right of using land for a period of time (land allocation). Whilst an investor might expect to buy a freehold, sometimes this may not possible, and it is just as acceptable to buy a long lease (for a term of between 49 and 99 years). Under Turkish Law, the right of using land is the right to erect or maintain a building on a plot of land, usually in return for payment of a regular so-called ground rent for a certain term.
The right of using land can be sold and transferred as well, however most likely the underlying uding land rights agreement with the owner of the land will stipulate a consent requirement and a pre-emptive right in the landowner’s favour. Upon expiry of the term of the right of using land, the land is transferred back to the landowner.
One stop shop
A real estate broker, which is a sister company, is involved to find and secure the investment object of choice. Affiliated technical and our legal advisors are carried out a due diligence process to assess and evaluate the risks of the investment in the early stages of the transaction.
Our legal advisors will advise on such things as the legal title to the building, the current tenants and income stream, and any rights or obligations that may affect a new owner. They will also be involved in drafting the necessary legal documentation and assisting in the completion and closing of the acquisition. Usually each party bears the costs of their advisors.
In Turkey, acquiring real estate is usually a two stage process: the parties first exchange the sale contract and secondly complete the sale by means of a transfer deed. Generally both happen simultaneously.
Simply signing a contract does not make it binding. The contract does not contain representations and warranties. The seller is not obliged to provide a statutory warranty for the title to the property. Preliminary real estate contracts, issued by notaries or entered into by natural persons in writing, do not confer transfer of property per se. They only serve as a commitment for the transfer of ownership; the property in question does not change hands by means of such instruments.
There is also no requirement for a developer to provide a warranty for the quality of the building structure, or the state of the property (however, it is common that such provisions are negotiated under the contract if buying directly from a developer). The contract deals with the mechanics of the sale and how income is apportioned at completion.
A contract concerning the promising transfer of ownership in real estate in the form of an asset deal must be in the form of a notarial deed. Any ancillary agreements (written or oral) outside of the deed that amend the deed may result in the entire sale and acquisition agreement to be invalid. The notarisation requirement however does not apply for certain share deal scenarios if a property is acquired by purchasing the shares in a company that owns the real estate.
There are no restrictions on foreign ownership or occupation of real estate in Turkey, although various tax, anti-money laundering and other regulatory matters must be complied with. The purchaser might either be a natural person or a legal entity and be of any nationality. For foreign purchasers certified and apostilled powers of attorney will be required for notarisation of the sale and acquisition agreement.
The two main taxes to be considered when investing in Turkey real estate are real estate transfer tax (Tapu Harcı -TH) and value added tax (VAT). There might be many more taxes applicable depending on the parties, structure and objective of the transaction. In some cases, the acquisition of real estate located in Turkey is exempt from VAT. However, in certain scenarios, the contracting parties may opt for VAT to be added to the purchase price so that the purchaser may claim for input VAT regarding the expenses related to the real estate.
Every property in Turkey is recorded in the land register of the governor and sub-governor, which gives a State guarantee of title. To complete the transfer of ownership, the new owner must be registered in the respective land register. The register will disclose rights and encumbrances on the title, the price paid by the buyer, any security registered against it, leases to which it is subject and any restrictions that may need to be complied with in future dealings. Any third person especially the prospective purchaser of the real estate may rely on the contents of the land register. The purchaser can rely on the correctness of the land register. As long as the purchaser does not have knowledge to the contrary, he can acquire ownership in good faith.
Burdens such as mortgages, liens, and similar types of restrictions that may exist with regard to the relevant property that would prevent the sale thereof should be checked prior to the initiation of procedures at the respective land registry.
Inquiries about properties may be made online at parselsorgu.tkgm.gov.tr, where specific details of the city, district, quarter/village, map section, and plot may be used to look up the property. Basic information on the real estate property, including its current status, is thus accessible online from anywhere in the world. However, personal information of the owner remains inaccessible.
Payment of the Purchase Price
Large-scale investments by foreign investors are usually secured by additional contractual mechanisms to secure interest of both parties. In particular, such sale and acquisition contracts can include detailed escrow mechanisms, such escrow accounts are held by our lawyers. This provides an additional layer of security for the parties.
It is usual for the buyer to pay a deposit of 5 % or 10% of the purchase price on exchange of the contract. That is then held by the seller’s lawyers in escrow until the sale is completed. The contract sets out how this is dealt with.
Transfer of Title to the New Real Estate Owner
The title of ownership is not transferred directly when signing the purchase agreement. Several outstanding issues regarding the sale must be checked by our lawyer after signing first (e.g. that no pre-emption right (önalım) is exercised). Once there are no outstanding issues, the new owner can be registered in the land register. The change of ownership is effective from the date of registration. Deviating agreements in the purchase agreement are only limited to the internal relationship between the parties of the purchase agreement. Legal title to the property does not transfer to the buyer until it has been registered at the Land Registry.
Land Registry fees are equally payable by both parties, but are relatively small.
Existing Rental Agreements
If the acquired property (commercial or residential) is let to a third party the lease agreement will transfer automatically with all its rights and obligations to the new property owner. The new property owner is then bound by the lease agreement and its term. The new property owner has a right to terminate the rental contract within one month starting from date in which the title is transferred to the new owner.
As the income from tenants is key to the capital value of a building the lease terms must be scrutinised carefully. On should note that residential leases are subject to considerably more regulation.
Foreigners who acquired a real estate worth a minimum of USD 250,000 or equivalent foreign currency or Turkish lira with a title deed restriction on its resale for at least three years, are eligible for Turkish citizenship.
Turkey Residence Permit
Foreign nationals do not need to have a residence permit as a pre-condition to acquire real estate in Turkey. In addition, foreigners who acquire property in Turkey are granted renewable short-term residence permits.
If you have any questions, would like additional information, or are interested in Bıçak’s services, please contact us.