Due to Turkey's rapid financial growth and increasing population, the real estate market has been developing gradually, for the last five years. Main factors in this development are the increasing number of new real estate projects, growing demand on housing and workplace due to the population in big cities, infrastructure investments such as Marmaray, third Bosphorus Bridge and Third Airport project in Istanbul. Amendments in Turkish Land Register Code and related regulations introduced in 2012 are very significant in this respect, especially with regard to the "equality principle" applied for foreign direct investments and property acquisitions.
Definitions of "Foreign Company" and "Foreign-Capital Company"
A company incorporated in Turkey and registered with the competent Trade Registry Office by foreign real person or legal entity shareholders or with foreign capital, is regarded as a Turkish Company, in principal.
On the other hand, Foreign-Capital Companies are accepted as the companies incorporated in Turkey where foreign investors hold 50 % or more shares individually or collectively or where they are entitled to appoint or remove the managers on condition that the said company has a legal personality in Turkey,
The terms "Foreign Company" and "Foreign-Capital Company" stand for different meanings in Turkish legislation. A "foreign company" represents any company established abroad.
Foreign companies are entitled to acquire real estate and limited property rights in Turkey under special laws such as the Petroleum Law, Law on the Encouragement of Tourism and Law on Industrial Zones.
As an important note, we should emphasize that foreign foundations and associations cannot acquire real estates or limited property rights in Turkey yet.
Legal Reforms and Amendments until Today
With regard to the real estate purchase of foreign-capital companies, Turkish Land Register Code and the "Regulation on Real Estate Purchase and Acquisition of Real Property Rights by Foreign-Capital Companies" (the "Regulation") come to the fore.
Within the frame of adaptation of Turkish Law to the EU Acquis, essential amendments and reforms have been made with respect to foreign direct investments and real estate purchase of foreigners in Turkey. On this basis, important amendments have been introduced to the Turkish Land Register Code and the Regulation in 2012. Within the new principles, the procedures have been accelerated for the minimization of bureaucracy and limitation of the required documents. In previous regulations; time limits, definitions and the required documentation were not clear enough, which was causing the related procedures to be longer and more difficult.
The Principles of Real Estate Purchase of Foreign-Capital Companies
Foreign-Capital Companies mentioned above can acquire ownership of a real property or in rem rights only if such acquisition is in relation to the scope of activities stipulated in their Articles of Association. However, acquisition of a real property or limited rights in a Military Restricted Zone, Military Security Zone or a Strategic Zone is subject to the approval of the commanderships, which are authorized by the General Staff. The acquisition is also subject to the Governorate's approval where the immovable is located, if such location falls within a special security zone.
Limitations stipulated in Article 36 of the Land Registry Law do not apply in the following situations:
- mortgages established in favor of companies incorporated with foreign capital;
- acquisition of a property as a result of a foreclosure;
- transfer of a property or a right in rem as a result of a merger or demerger;
- acquisition of property or limited rights in special investment zones such as Organized Industrial Zones, Industrial Zones, Technological Development Zones and Free Trade Zones; or
- transactions made by banks that are deemed as "credit transactions" in accordance with the Banking Law No 5411 or when a real property is acquired within the scope of debt collection procedures of a bank, provided that the obligation to dispose such real property remains within the context of related laws.
According to a Circular issued by the General Directorate of Land Registers, the company which applies for acquisition of real property rights shall state in its application, if such company can be deemed as a Foreign-Capital Company, defined in the first Paragraph of Article 36 of Turkish Land Register Code.
Foreign-Capital companies which are not included in the definition of the above mentioned Foreign-Capital companies ("Companies incorporated in Turkey where foreign investors hold 50 % or more shares individually or collectively or where they are entitled to appoint or remove the managers on condition that the said company has a legal personality in Turkey") may acquire real estate and real property rights within the same procedures and principles applied to Turkish companies, since companies formed under Turkish laws by foreign shareholders are deemed to be Turkish companies as a rule, as mentioned in the Definitions section hereof.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.