General Review of Real Estate Acquisitions in Turkey

Introduction
 
Real estate acquisitions by foreigners had been a subject matter of some restrictions for a time in Turkey.  In conjunction with Articles 35 and 36 of Land Register Law dated 1935(1), it became possible for foreign real persons to gain the property right of an immovable property under the “principle of reciprocity”.  However, Articles 35 and 36(2), which render the principle of reciprocity compulsory, were abolished from the Land Register Law as of 3 May 2012.  Thereby, a foreigner and a Turkish Citizen became equal on acquiring an immovable or the right in rem.  Although the principle of reciprocity was abolished, there are some main restrictions within the Land Register Law, which are mentioned below.
 
Innovations of Amended Articles 35 And 36
 
a.       Article 35 of the Land Register Law:
 
Pursuant to Article 35 of the Land Register Law; foreigner real persons may acquire immovable properties and rights in rem in Turkey complying with the following terms and conditions:

-          International bilateral relations,
-          Country benefits,
-          Foreign countries’ citizens which are determined by Council of Ministers of TBMM.(3)
 
By the new Article 35 of the Land Register Law, the total area that foreigner real persons may have the right to acquire and rights in rem is 10% of surface area of the district subject to private property and 30 hectares per capita in country wide.  Before the amendment, it was provided that the maximum total area which a foreigner real person could acquire per capita was limited to 2.5 hectares within the scope of the principle of reciprocity.  In addition to this, Council of Ministers is entitled to double the acquirable total per capita.  Should the country’s need arise, Council of Ministers is also entitled to determine, limit, detain or prohibit, in whole or in part, the acquisitions of immovable properties and rights in rem by foreigner real persons- and also legal entities- as “country”, “person”, “geographical region”, “time”, “number”, “rate”, “type”, “qualification”, “surface area” and “amount”.
 
i.                    Obligations of the Foreigner Real Persons within the scope of real estate acquisition:

The new Article 35 provides a set of obligations such as follows:

·         The foreigner real persons are obligated to submit their projects concerning the acquired immovable property to the approval of the related Ministry within 2 years.  Foreign real persons, who fail to submit their projects to the approval of the related Ministry within 2 years, have to liquidate the immovable within 1 year.  In case of failing to liquidate the immovable within 1 year, Ministry of Finance will fulfill the liquidation and the cost of the immovable will paid to the owner of the right as a conclusion.
·         The foreigner real persons who breach this Article 35, use their projects against the purpose of the acquisition of the immovable and fail to fulfill their projects in due of time shall also be subject to the same enforcement as we mentioned above.
·         The immovable and the rights in rem that are acquired by inheritance and that are over 30 hectares, i.e. in breach of the Article 35, shall be subject to liquidation.
 
ii.                  Ministry’s Role during the Acquisition:
 
·         Confirming the purpose of the acquisition of the immovable propertiesor the rights in rem,
·         Determining the starting and the end time of the Project,
·         Accepting/ denying the Project,
·         Sending the affirmed Project to the Directorate of Land Registry that the immovable exists,
·         Following-up the Project whether it is fulfilled.
 
iii.                Military Zones:
 
Pursuant to both Articles 35 and 36; the area on which the immovable property located is determined whether it is in Military forbidden zones, military security zones or strategic zones in Turkey.   Reserving the provisions of other private laws(4); the requests to acquire the immovable propertiesexisting in Military Zones are subject to approval of the relevant Ministry. 
 
b.      Article 36 of the Land Register Law:
 
Pursuant to Article 36 of the Land Register Law and concerning the companies that are established in Turkey: In case 
-          The shareholders of these companies are foreign real persons(5),
-          their shareholders of theseCompanies who are foreign legal entities incorporated under to the laws of the foreign countries and international institutions- directly or indirectly have 50% or more shares or the power to appoint or discharge the majority of right to manage, then such persons may acquire immovable properties or rights in rem in order to perform the main activity of the company provided that the companies shall perform their subjects of activity stated in their Articles of Associations.
 
On the other hand, immovable properties acquired by the banks for the debt collection or credit transactions within Banking Law cannot be enforced within the scope of this Article 36.
Accordingly, immovable properties or rights in rem acquired and used against this law shall be subject to liquidation by the Ministry of Finance and the cost of the immovable will be paid to the owner of the right as a conclusion of the liquidation.
 
The above summarised arrangements made it much easier for foreign real persons to acquire immovable properties in Turkey and the real estate acquisition by foreign persons are publicly welcomed.  The arrangements have been continuously having positive impact on the Turkish real estate sector.  Foreign investment on real estate sector in Turkey has been increased significantly especially from the Gulf countries.