Turkey carries its position of attraction from the foreign direct investments despite the temporary volatility from time to time. In line with the trends different sectors shine out and consequently different instruments attract investors. Real Estate sustainably carries its prominent investment instrument position due to functions and consistent yields.
Real estate ownership rights are differentiated depending on the nationality of the real and/or legal persons under the Turkish Law.
Foreign real persons who are citizens of countries which are determined by the Council of Ministers may acquire real estate with certain limitations due to the bilateral relations and national interests required by the Turkish Government.
Companies which are established in foreign countries according to the laws and regulations of the foreign jurisdiction cannot directly acquire real estate in Turkey without establishing a legal entity in Turkey. These companies may only acquire real estate within the framework of special laws namely, Tourism Incentive Law, Petroleum Law and Industrial Zones Law.
Legislative Framework
The process to acquire real estate by companies with foreign capital has been subject to various amendments from past to present and the latest change has been made under Article 36 of the Title Deed Law No. 2644 (the "Law””) amended by Law No. 6302 dated May 18th, 2012.
A set of secondary legislation has been issued in line with the latest amendment. The Ministry of Economy has determined the process of acquisition of real estate by issuing a Regulation.1 Consequently, the Ministry of Environment and Urbanization and Ministry of Customs and Trade have issued Circulars regulating the same subject.2
Provisions For the Acquisition of Real Estate by Legal Entities Incorporated in Turkey with Foreign Capital
In principle, a company established in Turkey with foreign capital and falls outside the scope of the Article 36 of the Law is deemed to be a Turkish entity and is granted with the same rights and obligations that a company incorporated with a 100% Turkish shareholding is subject to.
According to the Law, the (i) foreign national real persons3, (ii) legal entities established under the laws of foreign countries, (iii) international organizations, which have 50% or more shares or have the authority to appoint or dismiss the majority of the persons with the management authority of a legal entity established in Turkey, may acquire real estate ownership in Turkey to carry out the activities specified in the articles of association.
The Regulation sets forth a separate legal procedure for the above mentioned persons and entities in cases when they own:
- the ultimate ownership rate of the foreign investor is exceeding 50% or more, or
- the majority of the voting rights to appoint or dismiss the majority of the persons having the management authority of the legal entity with the foreign capital.
or acquire the same rights and ownership mentioned above in an existing company incorporated with a 100 % Turkish shareholding owning a real estate in Turkey.
Real Esate Acquisition Approval Process
The companies falling under any of the abovementioned conditions must apply to the governorship where relevant real estate is located together with the required documentation required under the Regulation and Circulars to obtain a governorship approval before acquiring the title before the land registry. The respective governorship notifies the Turkish General staff and the City Police Department to check if the real estate is located within the scope of military security, prohibited zone or special security zone. Upon making the relevant evaluation, if the real estate is determined to be located out of the abovementioned zones or it is not inconvenient for the national security, the Turkish General staff and the City Police Department provide clearance consequently the governorship provides an approval (valid for six months) and informs the relevant Land Registry Office.
If the application result is negative, the governorship notifies the company and provides the reason, proper judicial remedy and the relevant reclamation period. If the company fails to apply to the Land Registry Office for registration of the title of the real estate within this 6 (six) months of application period, such application shall be renewed.
1. the "Regulation on Real Property Acquisitions and Limited Real Rights Acquisitions by Legal Entities and Their Affiliates in accordance with Article 36 of the Title Deed Law numbered 2644", published in the Official Gazette dated August 16th, 2012 and numbered 28386.
2. The Circular No. 2012/13 dated September 17th, 2012 (the "Circular") on the acquisition of immovable property and limited real rights by the Legal Entities with Foreign Capital issued by the Ministry of Environment and Urbanization for the attention of General Directorate of Land Registry and Cadastre. Circular dated September 3rd, 2012 with regard to the rearrangement of the principles related to the license certificates issued by the Trade Registry Offices (“Circular for the License Certificates”) issued by the Ministry of Customs and Trade to the attention of the General Directorate of Domestic Trade.
3. (Except for the Turkish citizens and people within the scope of the Article 28 of the Turkish Citizenship Law No. 5901 who lost Turkish citizenship by obtaining the permission to leave).
By Vefa Resat Moral, Managing Partner, Filiz Piyal Cayırpare, Senior Assıociate, Duzgu Bozkurt, Associate, ELIG Gürkaynak Attorneys-at-Law
