REAL ESTATE LAW October 2017
REAL ESTATE ACQUISITION IN TURKEY BY FOREIGN INVESTORS
Acquisition of real estate by foreigners is regulated under Land Registry Law. Until 2012, Turkey requested reciprocity form the foreigners’ state of origin to allow their citizens to acquire real estate in Turkey. With the amendment in the said law in 2012, due to the increasing demand on real estate investments, provided that legal limits under specific legislation are applied with, citizens of 183 states are entitled to acquire real estate in Turkey without taking reciprocity rule into consideration.
The states, for which no reciprocity rule is requested, are determined by the Council of Ministers in accordance with the amended law. Although reciprocity rule is abolished, there are legal limitations under the law such as total surface of the area that foreigners can require and prohibitions or additional rules for acquisition of military and security zones. Neighbour states’ citizens are subject to stricter legal requirements than other states’ citizens.
The state citizens listed in the Council of Ministers list are also categorized into several groups. Some of the state citizens are entitled to acquire only residences and workplaces but not agricultural areas where some states’ citizens have to apply to Ministry of Interior for additional approvals.
According to the relevant legislation, the Council of Ministers has the right to stop, even prohibit the acquisition of the real estate of specific states with a decree to that end.
Citizens of the states which are not listed in the Council of Ministers Decisions are subject to the Reciprocity Law which sets forth that these foreign investors can only acquire real estate in Turkey provided that Turkish citizens are entitled to acquire real estate in the state of origin. Despite this general rule, some states’ citizens, such as Syria, are prohibited from acquiring real estate or in rem rights on real estate.
Under the light of the foregoing, we recommend to potential investors to check the Council of Ministers list before commencing to acquisition of any real estate in Turkey.
The Land Registry Law also determines rules for legal entities which are established in accordance with the legislation of the origin country. The Law only allows commercial enterprises to acquire real estate, i.e. the foundations; unions, trusts etc. are excluded from the right to acquire real estate or in rem rights on real estates. Turkish real estate rules are dispersedly regulated, thus apart main legislation on real estate acquisition; sector specific regulations have to be reviewed to check whether there are additional limitations for foreign investors.
Commercial entities with foreign capital established in Turkey can only acquire real estate in order to fulfil their commercial activities set out under the entity’s articles of association. This limitation does not apply to (i) establishing mortgages; (ii) acquiring real estate by converting mortgages; (iii) real estate acquisition by mergers and acquisition transactions; (iv) additional rules set forth under specific regulations such as organized industrial areas.
According to Article 2 of the Foreign Direct Investments Law, the foreign investors can be (i) real persons who are citizens of foreign countries, (ii) Turkish citizens residing abroad, (iii) foreign legal entities which have been established in accordance with the laws of foreign countries and (iv) international institutions such as financial institutions.
Pursuant to the Foreign Direct Investments Law, in case of share purchases which were not carried out at the stock exchange, the purchase of a single company share by any of the above-mentioned foreign investors is sufficient for the classification of the relevant company as a company which is subject to the Foreign Direct Investments Law.
Apart general rules applying to the foreign investors, in practice there are no procedural difference between foreign and Turkish investors applying to real estate acquisition transactions.
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EGE Hukuk Bürosu