Turkey: Acquisition Of A Real Property In Turkey By A Turkish Company With A Foreign Shareholding

Last Updated: 3 March 2009
Article by Guner Law Office


The acquisition of a real property in Turkey by a Turkish company with a foreign shareholding (a Foreign-Owned Company) became confusing by a decision of the Turkish Constitutional Court on 11 March 2008. This decision repealed Article 3(d) of the Foreign Direct Investments Law No. 4875 (FDIL), which allowed a Foreign-Owned Company to buy real property in Turkey on the same basis as Turkish companies with a Turkish shareholding. The decision became effective on 16 October 2008.

Following this decision, on 3 July 2008 Turkish Parliament passed Law No. 5782 (the Amending Law). The Amending Law amends Article 36 of the Title Deed Law No. 2644 (the Title Deed Law) and sets forth the principles under which a Foreign-Owned Company can buy real property in Turkey. It became effective on 15 July 2008.

Article 36 of the Title Deed Law (as amended by the Amending Law) sets out the following general principles:

1.1 Limit On Use Of Property By A Foreign-Owned Company

  1. A Foreign-Owned Company may buy real property in Turkey only in accordance with the scope of business set out in its articles of association. The same principle applies if a foreign individual/entity buys a share in a Turkish company which holds real property.
  2. If the relevant government authorities decide that a Foreign-Owned Company has breached this principle, this company must sell the relevant real property within a period of time determined by the Ministry of Finance.

1.2 Military/Security Zoning Approvals

  1. The Amending Law sets out certain checks/procedures if a real property to be acquired by a Foreign-Owned Company is located in a "military forbidden zone", "security zone", "strategic zone" or "special security zone".
  2. If a Foreign-Owned Company wants to buy a property in a "special security zone", this is subject to the approval of commissions to be set up in provincial governorships.
  3. If a Foreign-Owned Company wants to buy a property in a "military forbidden zone", "military security zone" or a "strategic zone" (each a Military Zone), this is subject to the approval of Turkish General Staff or any other commissioned military command (the Military Authorities).

The Amending Law also states that government will introduce a regulation setting out how authorities can carry out these principles.

On 17 July 2008, the General Directorate of Land Registry and Cadastre issued a circular, a small part of which relates to Article 36 of the Title Deed Law. The circular states that provincial governorships will set up commissions to assess/approve ownership of Turkish real property by Foreign-Owned Companies. It also confirms the statement in the Amending Law that a future regulation will set out the details of the procedures and clarify other uncertain issues in Article 36.


On 12 November 2008 the regulation referred to in the Amending Law and the circular was published in the Official Gazette and came into force on the same day (the Regulation). The Regulation covers the topics mentioned in 2.1 to 2.5 below.

2.1 Application And Decision-Making Process For A Foreign-Owned Company To Buy Real Property In Turkey

The diagram at the end of this note illustrates the application and decision-making processes for the "Acquisition of a real property by a Foreign-Owned Company". This is also verbally described in paragraphs 2.1.1 to 2.1.3 below.

2.1.1 Application To Provincial Governorship

If a Foreign-Owned Company wants to buy real property in Turkey, it must apply to the Provincial Planning and Co-ordination Directorate of the relevant provincial governorship and present certain information/documents mentioned in the Regulation (e.g. letter of application; the names, identification documents and addresses of the Foreign-Owned Company's managers etc.)

2.1.2 Processing Of Application By Provincial Governorship

Following the application, the relevant provincial governorship shall liaise (as necessary) with:

  1. the Provisional Directorate of Industry and Commerce;
  2. the Military Authorities; and
  3. the General Directorate of Security.

2.1.3 Decision-Making Process

Following (a) and (b), the table below sets out the potential scenarios and decision-making process as follows:



Military Authorities decide the property is not located in a Military Zone.

Made by the governorship.

Military Authorities decide the property is located in a Military Zone but allow the acquisition.

Military Authorities assess the application from the perspective of national security and tell the governorship of their opinion. If Military Authorities approve the acquisition then the governorship finalises the process.

General Directorate of Security decides the real property is located in a "special security zone".

A Commission set up by the governorship (for further information see paragraph 2.3 below) will decide whether the acquisition is permissible.

2.2 Investigation On Foreign Acquisition Of Shares

Under Turkish law if:

  1. a 100 per cent Turkish-owned company becomes a Foreign-Owned Company (due to the acquisition of shares by a foreign individual/entity); or
  2. a new foreign individual/entity buys shares in a Foreign-Owned Company,

the relevant company must report this to the Undersecretariat of Treasury within one month following the date of the change in shareholding.

Following this notification, the Undersecretariat of Treasury will report this to the General Directorate of Land Registry. The General Directorate of Land Registry will liaise with the relevant provincial governorship to decide whether the Foreign-Owned Company can continue to hold its real property.

The relevant provincial governorship will make this determination by following the processes described in 2.1.2 and 2.1.3 above.

2.3 Commissions And Their Continuing Investigative Powers

2.3.1 Commissions

Under the Regulation, the governorships will set up commissions (each a Commission) to assess/approve ownership of Turkish real property by a Foreign-Owned Company. Article 36 of the Title Deed Law (as amended by the Amending Law) and the circular also mention this. The Regulation provides that a Commission will:

  1. decide whether an acquisition that is located in a "special security zone" is permissible (see paragraph 2.1.3 above); and
  2. carry out further investigations on a Foreign-Owned Company to check that it is using the property in accordance with its scope of business (see paragraph 2.3.2 below).

The representatives from several institutions (including the Army, Directorate of Cadastre, etc.) will compose a Commission.

2.3.2 Continuing Investigations By A Commission

As mentioned above, a Commission can carry out further investigations on a Foreign-Owned Company to check whether it is using the real properties in Turkey in accordance with the scope of business set out in its articles of association. A Commission may begin such an investigation upon an application or on its own initiative (through the powers granted to it).

A Commission will tell a Foreign-Owned Company if it believes that this company is not using its real property in accordance with the scope of business set out in its articles of association. If, following a continuing investigation, a Commission decides the use of the real property is in breach of the laws, then paragraph 2.4 will apply.

2.4 Sanctions

If the authorities decide a Foreign-Owned Company acquired a property, breaching the principles set out in Article 36 of the Title Deed Law (as amended by the Amending Law) and the Regulation, it must sell the property within six months. The Ministry of Finance may extend this period once by up to another six months.

The Ministry may also sell the property on behalf of the Foreign-Owned Company if this company does not sell the property within the relevant time period. It will deposit the earnings less the expenses in an account of the relevant company.

2.5 Application And Decision Making-Process For A Foreign-Owned Company To Acquire A Limited Right In Rem

The Regulation specifies a relatively simple application procedure and a decision making-process for limited rights in rem (such as easements, mortgages, occupation rights, construction rights and "usufruct rights"). To acquire a limited right in rem, a Foreign-Owned Company must first apply to the Provincial Planning and Co-ordination Directorate of the relevant provincial governorship and present the following information/documents:

  1. letter of application showing the purpose of the application and information concerning the relevant real property;
  2. certificate of authorisation clarifying the Company is permitted to acquire real property and appointing the Company's representative;
  3. information on the Company's registered tax number and the tax office at which the Company is registered; and
  4. document, issued by the relevant trade registry within the last one month preceding the application, that shows the scope of activities, the names or titles of its shareholders, their nationalities and shareholding structure in the Company's articles of association.

Following an application, the relevant governorship seeks clearance from the Provincial Directorate of Industry and Commerce whether the application for the real property acquisition complies with the scope of activities of the Company (reply to be given within seven days). On receiving the Provincial Directorate of Industry and Commerce's response, the governorship will give its definite decision on the permissibility of the acquisition. Once the governorship has approved the acquisition (by providing an approval document) the acquirer of the right in rem can then finalise the acquisition at the relevant Land Registry.

2.6 Exemption For Establishment Of Mortgage In Favour Of A Foreign-Owned Company

On 2 December 2008 the General Directorate of Land Registries and Cadastre issued a circular in relation to the acquisition of mortgage rights in rem by companies subject to the FDIL (including banks and other financial institutions). The aim of this circular is to simplify the approval process for Foreign-Owned Companies which will need to establish a number of mortgage rights at the same Land Registry.

The circular provides that companies subject to the FDIL need only go through the governorship application process once in relation to a relevant Land Registry. For example, if an international bank wishes to obtain a mortgage right at the Besiktas Land Registry, the bank will only need to obtain one approval document from the relevant governorship (which will be addressed to the Besiktas Land Registry). When that bank wishes to obtain another mortgage right at the same Land Registry it only has to provide a certified copy of the approval document that it originally obtained from the relevant governorship.


In our view, there are still the following confusions in Article 36 of the Title Deed Law (as amended by the Amending Law) and the Regulation:

  1. Indirect Ownership

    It is not clear whether Turkish companies that are indirectly owned by foreign investors (i.e. Turkish companies that have foreign shareholders) are subject to the restrictions in Article 36 (as amended).
  2. Listed Companies/Companies With Bearer Share Certificates

    It is not clear how the Land Registry Offices will deal with companies that are listed on the stock exchanges or other Turkish companies which have bearer share certificates or bearer temporary share certificates.
  3. Timing Of Application/Investigation Process

    It is not clear how long the entire process for an application for acquisition of real property by a Foreign-Owned Company will take (even though the Regulation refers to certain time limits). It is also not clear how long a Commission investigation will take.

We expect the principles and procedures on the acquisition of real property in Turkey to become clearer when the Regulation is digested and applied in practice by the Land Registry Offices. What is clear, however, is that Foreign-Owned Companies must draft the scope of business section of their articles of association carefully to allow for or anticipate the acquisition of real property in Turkey.



1. If the acquirer wishes to acquire a limited right in rem (such as easements, mortgages, occupation rights, construction rights and "usufruct rights") it does not have to provide the information/documents in sections (e), (f) and (g) and the relevant governorship will not request clearance from the Military Authorities and General Directorate of Security. Please also note the exemption in relation to multiple acquisitions of a mortgage right in rem as set out in paragraph 2.6 above.

2. We recommend that any acquirer expressly discloses to the Land Registry that it is a Foreign-Owned Company (FOC) to avoid any future compulsory sale risk. If the Land Registry has no evidence from the documents provided to it that the acquirer is a FOC, it will require the acquirer to sign a statement to the effect that: "the company acquiring the real property below is not a FOC. It is aware that if it were in fact a FOC the real property shall be subject to a compulsory sale under Article 36 of the Title Deed Law". This statement is recorded in the relevant official title transfer documents and signed by both the acquirer and the seller.

Guner Law Office was established in 1996 and has since grown into one of the major corporate, M&A, banking, litigation, energy and TMT practices in Turkey. Guner Law Office is headed by Ece Guner and works with international law firm Denton Wilde Sapte.

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.

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