Latest amendments on acquisition of real property in Turkey by foreigners
Diyadin YakutThe acquisition of land and other real properties including limited real rights by foreign nationals and foreign legal entities has long been an inherent part of inter-state affairs due to its diplomatic, economic and political significance and long-lasting implications for any sovereign country seeking to secure a place in the constantly evolving power politics of our rapidly globalizing world.
That is why acquisition of real properties and limited real rights by foreigners is heavily regulated by literally all sovereign nations within the confinement of elaborative legal frameworks that mostly subject the act of acquisition to draconian barriers and conditions, most popular and easiest-to-apply of them the so-called diplomatic criterion of “reciprocity” to stem the efforts and attempts of foreign actors aiming to undermine economic sovereignty and independence via mass purchases of land.
In Turkey too, acquisition of real estate and limited real rights has been traditionally dealt with in articles 35 and 36 of the age-old Land Registry Law No. 2644.
Although the acquisition of property by foreign nationals and legal entities has always been a delicate topic of national agenda through much of the Republican era, the government has embarked on a major amendment that ultimately amounted to substantial facilitation in terms of complicated legal procedures required to fulfill before buying a property due to various novel internal and external dynamics and circumstances such as betterment in national mood and confidence, the steep rise in the interconnectedness and “embeddedness” of national economies through globalization and most importantly, the heavy reliance of Turkey’s economy on the flow of foreign direct investments.
The reform initiative that radically lowered the barriers erected before potential foreign investors willing to put their money in the Turkish real estate market was finally realized on May 18, 2012, with the enactment of Law No. 6302 that embraced comprehensive and dramatic alterations to articles 35 and 36 of Land Registry Law.
According to amended versions of articles 35 and 36 of the Land Registry Law, the prohibitive “reciprocity” criterion is abolished altogether and foreigners are granted eligibility to buy all kinds of property provided that they satisfy certain quantitative and legal limitations and conditions they are subjected by the relevant provisions of the above-mentioned articles.
On the other hand, it is critical for the government to have enough room to maneuver to control, or at least mitigate, the detrimental effects of ill-intended mass purchases in the absence of a conventional and effective protective tool such as “reciprocity criterion.” Drawing on that need, the Council of Ministers is vested with the authority by the provisions of the amended version of article 35 to determine the list of the countries whose citizens are given eligibility to buy property in Turkey.
Foreigners that are granted with the legal right to acquire real property and limited real rights without being subject to reciprocity condition in Turkey are classified into three categories: namely “foreign individuals,” “foreign companies” and “Turkish companies partially or wholly owned/controlled by foreigners,” in accordance of envisaged quantitative and legal conditions.
Accordingly, each category of foreigners is subject to different conditions and limitations to be able to purchase real property and limited real rights as below:
Restrictions for individuals
- In total, foreign individuals are allowed to buy maximum 30 hectares of property and limited to real rights in Turkey.
- Foreign individuals cannot acquire properties within military forbidden zones and security zones.
- The total area of property or limited real rights permitted to be purchased by individuals with foreign nationality cannot exceed 10 percent of the total area of the district/town that the property is located.
- The restrictions mentioned above do not hold in the establishment of mortgages for foreign individuals.
To prevent any possible abuses by foreigners in acquiring properties in Turkey, the properties purchased by foreign individuals are subject to liquidation in the following cases:
- If the properties are acquired in violation of laws;
- If the relevant ministries and administrations identify that the properties are used in violation of the purpose of purchase;
- If the foreigners do not apply to the relevant ministry within time frame in case the property is acquired with a project commitment;
- If the projects are not materialized within the allocated time frame.
Foreign firms and domestic firms with foreign capital
It is stated in the Article 35 of the Land Registry Law that foreign companies that gain legal personality according to the jurisdictions of their respective countries of origin are eligible to acquire property solely through the special provisions of certain laws such as the Petroleum Law, Law on Encouragement of Tourism and Law on Industrial Zones. Similar to real foreign persons, these companies are not subject to any quantitative limitations in terms of establishing mortgages.
Domestic companies (those that gain their legal personality according to Turkish laws) partially or wholly owned/controlled by foreigners also have the legal right to buy property in Turkey in accordance with Article 36 of the Land Registry Law. Domestic corporations are deemed “companies with foreign capital” if at least 50 percent of their shares are controlled, individually or collectively, by foreign investors or, in case the foreign investors do not have any shares of the said companies, foreign investors have the right to assign or remove the managers of these companies. The day-to-day implementation of that right enjoyed by domestic companies with foreign capital is regulated elaborately in the Decree on Acquisition of Property and Limited Real Rights by Companies and Corporations within the Context of Article 36 of the Land Registry Law.
*Diyadin Yakut is a tax inspector at the Finance Ministry