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.

Subject to complying with the requirements of the register of foreign entities, investors are able to own, sell, charge and lease real estate in Turkey without any legal restrictions. A number of alternative structures are available for direct or indirect investment in real estate in Turkey. The decision as to how best to structure an investment is likely to be dictated by tax considerations, and it is important to ensure that appropriate tax advice is sought, taking into account both Turkish tax legislation and that of the investor’s own jurisdiction. There are, however, a number of advantages and disadvantages to each structure, which may also prove critical depending on the investor’s particular objectives.

Absolute ownership

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 using 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.

 We provide high-level expertise in all types and stages of real estate transactions, including

• Researches & Investigations 
  • Does the property have ‘clean’ title? Is the seller authorised to sell, sometimes there can be many owners. Ensure there are no legal issues.
  • Are there any debts attached to the property?
  • Has the building been constructed legally?
  • Is the property construction free from any defects?
  • Are any other particulars being advertised true?
  • Does the property have a full title, rather than a restricted title? Does it have the “kat irtifaki tapu”?
  • Is the property a cooperative property where the cooperative has not been completed? The Tapu can’t be transferred until all the site is complete. and you will be expected to continue paying the cooperative which can be substantial.
  • Is the property on or near an archaeological site?
  • Does the property belong to the government? If so special procedures apply.
  • Is there any evidence of fraud connected to the property or owner? If so, the property could end up being seized or auctioned off before you get the tapu.
  • Is the property built in an military zone? You probably won’t get the Army clearance to transfer the tapu.
  • Is the existing planning status of the property clear?
• Purchase / Sale of Immovable Property
• Property Management
• Tax Related Matters
• Coordination of Agents, Notaries

We work with our clients to understand their objectives, bring solutions and proactively prevent future risks. We are committed to delivering efficient and cost-efficient legal services focusing on clear and transparent communication, immediate responsiveness and attention to detail. 

Stages

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.

Restrictions

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.

Taxes payable when purchasing/selling a property in Turkey

Turkish Property Transfer taxes (Emlak Alim/Satim Vergisi) at 2% are payable by both parties (the buyer and the seller) on the sale of a property. These fees (i.e. 4% in total) are based on the evaluation report of the property by an expert. Local experts and companies are available and the cost is generally paid for by the buyer. The evaluation report, which is valid only for three months, should be submitted to the title deed office. This value will then be the declared value of the property. However, the declared value of the property cannot be lower than the ‘tax value’ determined by the local municipality, which is also used as the base of the local property tax.

If the property is a building then Natural Disaster Assurance (DASK) is obligatory.

The two further 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.

Visible Information

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. 

Turkish Citizenship

Foreigners who acquired a real estate worth a minimum of USD 400,000 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 h​ave 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.

Independent lawyer

You are strongly recommended to obtain the services of an independent lawyer before committing yourself to purchasing property or paying a deposit or the property’s full costs. We define “independent lawyer” as one who has no connection with either the seller or an agent of the seller: an agent can be an estate agent or anyone acting on behalf of the seller.