In Turkey, companies with foreign capital and foreign real persons can purchase immovable properties (i.e., real estate) as long as they comply with certain legal limitations brought forth by the Land Registry Law No. 2644 (“Law”).
Articles 35 and 36 of the Law, in this respect, establish certain restrictions and requirements on foreigners who wish to acquire real estate in Turkey.
- Foreign companies
As per Article 35 of the Law, commercial companies that are treated as legal persons and that are established in a foreign country in accordance with the local laws of that country, are allowed to acquire property and restricted real rights in Turkey, so long as they fall under the scope of a certain specific legislation (i.e., Law No. 6326 on Petroleum, Law No. 4737 on Industrial Zones, and Law No. 2634 on Incentivizing Tourism).
Consequently, foreign companies, other than the ones contemplating the acquisition of property as per the Law on Petroleum, the Law on Industrial Zones, and the Law on Incentivizing Tourism, would not be able to acquire property in Turkey.
Article 35 also grants the Council of Ministers the right to determine, limit, partially or entirely cease or prohibit the acquisition of immovable property or limited real rights by foreign companies in rem, with respect to country, person, geographical area, duration, number, proportion, qualification, area meter, and quantity.
- Foreign-controlled companies
Article 36 states that Turkish companies with 50% or more direct or indirect foreign shareholding or Turkish companies in which foreign shareholders, directly or indirectly, have the right to appoint ‘the majority of seats with management rights’ (“Foreign-Controlled Companies”) are allowed to acquire real estate in Turkey to carry out the activities mentioned in their Articles of Associations. Other companies with foreign capital, which do not fall under this definition (e.g., companies with less than 50% foreign shareholding), would be subject to the same process for real estate acquisition as a company with domestic capital.
The acquisition of real estate within or near military zones or military security zones, as defined by the Law No. 2565 on Military Forbidden Zones and Security Zones (“Military Zones”), are subject to the approval of either the Turkish Armed Forces General Staff, the Provincial Directorate of Security, or the Provincial Gendarmerie Command (collectively, “Security Authorities”) or the relevant Governor’s Office.
The secondary legislation of the Law, (i.e., the Regulation Regarding the Acquisition of Immovable Property and Restricted Real Rights by Companies within the Meaning of Article 36 of the Land Registry Law No. 2644 (“Regulation”), sets forth a clearance mechanism for Foreign-Controlled Companies who wish to acquire real estate in Turkey. As per Article 4 of the Regulation, to acquire a real estate property, Foreign-Controlled Companies shall first apply to the relevant Governor’s Office with the documents listed under the same article. Upon application, the Governor’s Office will request information from the relevant Security Authorities as to whether the immovable property in question is located within a Military Zone (except for Special Security Zones) and, if so, whether the Foreign-Controlled Company’s acquisition would pose a threat against national security. The Governor’s Office will then determine whether the immovable property is located within Special Security Zones and, if so, whether it can be acquired by the Foreign-Controlled Company. If the immovable property in question is not within or near Military Zones or Special Security Zones, the Governor’s Office will permit and notify the Foreign-Controlled Company to register this acquisition with the relevant title deed.
This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in June 2017. A link to the full Legal Insight Quarterly may be found here.