Real estate and foreign ownership
Turkey maintains an attractive position in terms of foreign direct investments despite temporary volatility from time to time. Different sectors rise to the top, in line with trends, and thus different instruments attract a variety of investors at different times. Real Estate, however, carries a sustainable attraction due to its versatility and consistent yields.
Real estate ownership rights vary depending on the nationality of real and/or legal persons under Turkish law. Foreign real persons who are citizens of countries determined by the Council of Ministers may acquire real estate with certain limitations based on bilateral relations and the national interests of the Turkish state.
Companies based in foreign countries and subject to the laws and regulations of that 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 the Tourism Incentive Law, Petroleum Law and Industrial Zones Law.
The process to acquire real estate by companies with foreign capital has been subject to various amendments over the years. The latest change was made under Article 36 of the Title Deed Law No. 2644, amended by Law No. 6302 on May 18th, 2012.
In August 2012, another piece of legislation - the Regulation on Real Property Acquisitions and Limited Real Rights Acquisitions by Legal Entities and Their Affiliates – was introduced by the Ministry of Economy to regulate the acquisition of real estate. Shortly afterward, the Ministry of Environment and Urbanization and Ministry of Customs and Trade issued circulars updating their own procedures, including the acquisition of immovable property, the limited real rights of legal entities with foreign capital, and the rearrangement of principles related to license certificates issued by the Trade Registry Office.
Provisions For the Acquisition of Real Estate
In principle, a company established in Turkey with foreign capital which falls outside the scope of Article 36 of the Title Deed Law is deemed to be a Turkish entity and is granted the same rights and obligations as a company incorporated with 100 percent Turkish ownership.
According to the law, foreign national real persons (excluding Turkish citizens and those who voluntarily surrender citizenship), legal entities established under the laws of foreign countries, and international organizations which have 50 percent or more shares owned by a legal entity established in Turkey or have the authority to appoint or dismiss the majority of the persons with management authority 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 ownership of the foreign investor exceeds 50 percent, the persons have the majority of voting rights to appoint or dismiss the majority of the persons having management authority, or acquire the same rights and ownership mentioned above in an existing company incorporated with a 100 percent Turkish shareholding owning real estate in Turkey.
Real Esate Acquisition Approval Process
The companies falling under any of the abovementioned conditions must apply to the governorship where the relevant real estate is located together with the required documentation under the Regu- lation and Circulars to obtain approval before acquiring the title. 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, prohibited, or special security zones. If the real estate is determined to be located out of the abovementioned zones or its sale does not contravene national security, the Turkish General Staff and the City Police Department provide clearance to the governorship which then 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, including proper recourse to 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-month period, such applications shall be renewed.